The
The National Credit Union Administration insists it can continue operating with just one board member, noting it has been done before. But legal experts and industry groups say that NCUA rules require at least two members to move any substantive rulemaking. Todd Phillips, an assistant professor at Georgia State University, fellow with the Roosevelt Institute and a former attorney with the FDIC, says the NCUA has left room for legal challenges from consumer advocates or even the banking industry, which has long claimed credit unions enjoy regulatory and tax advantages.
"If [Hauptman] wants to violate NCUA regulation [by taking regulatory action alone] and no one sues, no one's going to stop him," said Phillips. "But if his actions are challenged by either credit unions or by [community bankers] that could pose problems."
Following the termination of two of its three board members, the National Credit Union Administration sought to reassure stakeholders Friday that it retains the authority to operate under the leadership of a single board member.
"Please be assured that the NCUA has precedent and standing delegations of authority in place to continue performing all operational and statutory requirements under the authority of a single Board Member," according to the NCUA statement, which was attributed to the board rather than Hauptman personally. "It is the NCUA's long-held view that a single Board Member constitutes a quorum when there are no other Board Members."
The NCUA cited the example of former Chairman Dennis Dollar, who in 2002 served as the sole board member during the George W. Bush administration for roughly two months. During that time, Dollar conducted board meetings, cast votes and made administrative and operational decisions on his own — actions the agency now frames as a precedent for its current position.
Still, the agency has not publicly outlined the specific legal basis for operating with a single board member, leaving open the possibility of legal challenge. Notably, Kyle Hauptman — the NCUA's lone remaining board member — has not technically made any direct public statements. All official communications have instead been issued under the name of the agency, a move that some see as a sign of legal caution.
While the credit union trade group America's Credit Unions
"Using his tenure as guidance, certain Board-level functions may continue under a one-member Board, particularly administrative, supervisory, and delegated actions," an America's Credit Unions answer to a frequently asked question stated. "However, new regulations, amendments to existing regulations, or rescission of existing regulations may remain constrained."
In this case, NCUA regulations — outlined in 12 CFR § 791.2 — that states without a quorum of at least two members, the agency's ability to take new official actions may be limited.
"New regulations, amendments to existing regulations, or rescission of existing regulations may remain constrained by the requirements of 12 CFR § 791.2 (requiring the agreement of at least two of the three Board members) as former Chairman Dollar did not approve or rescind any rulemaking during his tenure as sole NCUA Board member," America's Credit Unions said in their FAQs. "According to regulation, the sole remaining member, as Chairman, cannot unilaterally issue regulations — formal rulemaking by the agency would require at least a two-member Board vote."
America's Credit Unions' President Jim Nussle, in a call with reporters on Monday, said while the NCUA has provided an initial rationale, he left the door open for that to change in the future. Nussle also said he does not consider the firings executive overreach at this time and said he believes the firings are legal.
"[The NCUA] will be hanging their hat on the precedent set in 2001 and 2002, involving the most recent or previous time when there was a single chair and their position [is] that they can proceed in conducting a certain amount of business," he said. "We don't know what that will mean just yet, and that interpretation still is likely to evolve over the next days and weeks."
Phillips says even the wording of the existing quorum requirement on the board could be subject to litigation. He argues the NCUA's initial statement as attempting to calm stakeholders without providing any clarity, making litigation likely.
"The statute says a majority of the Board shall constitute a quorum. What does that mean? I'm not exactly sure," said Phillips. "A court might read it to say that you need two of the three total votes, or a court might read it to just say you need a majority of the members [currently] in office. I read that statement as being very hand-wavy, to try to just assure commentators and credit unions that everything would be OK but without providing specifics."
The Supreme Court is currently considering a case involving the termination of two Democratic members of the National Labor Relations Board, a case that could challenge the legal basis for independent agency structures generally. If courts ultimately uphold the president's authority to remove board members from independent agencies, it could set a precedent allowing future administrations to swap out entire boards and reshape regulatory agendas with every change in administration. That kind of instability, warned Nussle, could leave financial institutions vulnerable to constant shifts in oversight.
"Financial services companies appreciate consistency and predictability and so anything that makes that difficult … can be problematic," Nussle said. "Sometimes that will occur in a way that people will like and sometimes it will happen in a way that people may not appreciate. That is the reason why [ACU supports] an independent agency for the NCUA and a full contingency of board members. Historically [that] has helped to alleviate that kind of back-and-forth changes that might interrupt or might cause a lack of consistency, or a lack of certainty."
The legal ambiguity around whether NCUA Chair Kyle Hauptman can act alone could further embolden the Independent Community Bankers of America and other bank advocates, who have long argued that credit unions enjoy unfair advantages. If Hauptman moves unilaterally, it could increase the incentive for groups like ICBA to sue.
This tension comes as credit unions have more than
"Prolonged instability at the NCUA board raises serious questions about the regulator's ability to rein in billion-dollar credit unions," Mickey Marshall, regulatory counsel for the Independent Community Bankers of America told American Banker. "Large credit unions represent just 10% of the industry but now control nearly 80% of assets, fueled by continued exploitation of their federal tax exemption and rapid acquisitions of community banks. It's critical that the NCUA hold these nonprofit giants accountable and ensure they return to their congressionally mandated mission of serving people of modest means united by a common bond."
