ALEXANDRIA, Va. – ASI, the lone surviving private deposit insurer for credit unions, told NCUA its proposal to assess a mandatory “voluntary” corporate system resolution charge to its 150 credit unions in nine states and all non-federally insured credit union corporate members is outside of the federal agency’s legal authority and probably illegal under extortion statutes.
“First and foremost,” wrote Steven Tigges, the Dublin, Ohio, insurer’s outside legal counsel in a comment letter submitted to NCUA, “there is nothing ‘voluntary’ about the requirement that non-FICUs make premium payments to the [corporate fund].” He noted the proposals would compel non-federally insured credit unions to make such “voluntary” payments or face expulsion from their corporate. “Compelling payment on threat of expulsion is hardly ‘voluntary,’” wrote the ASI lawyer.
The ASI position was echoed by dozens of privately insured credit unions and federally insured credit unions, as well as CUSOs and the state leagues, all of whom would be subject to such voluntary assessments under the NCUA proposal. Most commenters noted that assessing CUSOs and leagues for the corporate restructuring would effectively be charging federally insured credit unions, who make up those entities, a second time.
But the most heat is coming from ASI members, all of which are paying their own special assessments to recapitalize the private insurer after its big losses the past two years.
Other privately insured credit unions expressing their opposition are: $500 million Clark County [Nevada] CU; $650 million Credit Union 1, Rantoul, Ill.; $675 million San Francisco Fire CU; $500 million Boulder Dam CU, Nevada; $520 million Christian Community CU in California; $200 million MCT CU, Texas; and, $860 million Los Angeles Firemen’s CU.
“In addition to the legal foundation of this proposal being in question, we are also concerned that this proposal will divide an industry already under challenge and will result in non-federally insured credit unions dropping their corporate membership and moving their business outside to other providers of those services,” wrote Michael Mastro, president of Los Angeles Firemen’s. “This is clearly not in the interest of the credit union system and its affiliates.”
Most of the commenters insisted that the 2009 legislation creating the Temporary Corporate CU Stabilization Fund did so as an extension of the National CU Share Insurance Fund, which has no legal authority over state chartered, privately insured credit unions.
“Federal law,” wrote Mastro, “clearly instructs the NCUA to charge only federally insured credit unions for any assessment due to the TCCUSF.”
Officials with Christian Community CU of San Dimas, Calif., noted that privately insured credit unions such as theirs also lost capital in failed corporate credit unions, so they already are absorbing the costs of the corporate meltdown. Christian Community, a member of WesCorp, said it lost more than $2 million of its capital.
ASI’s lawyer, Tigges, suggested the NCUA proposal may also violate federal extortion laws. “In practical effect,” he wrote, “NCUA is attempting to force non-FICUs to contribute premium payments to the TCCUSF in order to avoid expulsion from their corporate credit unions, even though it is clear...that NCUA des not have the authority to assess these premiums.”
“There is nothing ‘voluntary’ about a payment that is conditioned on a threat,” asserted the ASI attorney.
