A group of congressmen angered over NCUA's treatment of conversion votes at credit union giants Community CU and OmniAmerican CU introduced a bill last week that would prevent the credit union regulator from blocking the controversial conversions to mutual savings banks.
"Our central aim with this legislation is to protect the rights of our constituents to choose a financial institution that fits our needs," said Rep. McHenry, (R-NC), the chief sponsor of the so-called Credit Union Charter Choice Act, who referred to NCUA actions in the two credit union cases last month as "re-freaking-diculous." McHenry was joined as co-sponsors of the bill by Reps. Sam Johnson (R-TX), whose district includes Plano, home of Community CU; Edolphus Towns (D-NY); Paul Gilmore (R-OH) and Peter King (R-NY).
The bill would roll-back some of NCUA's recently enacted rules on conversions by limiting what NCUA could require converting credit unions to disclose to members on future plans, including those to sell the institution to the public in a stock offering and the potential for insider enrichment through stock grants and options for directors and officers.
It would also bar NCUA from disapproving a ballot after it has already been approved-such as was done in both the Community CU and OmniAmerican CU cases-unless the ballots contain a knowingly false statement that affects the outcome of the vote. And it prevents NCUA from requiring a new vote--as it is doing in the two Texas cases-unless there is fraud or "reckless disregard for fairness" during the voting period.
And, in an unusual twist to a legislative proposal, the bill would apply to all conversions pending when the law is enacted-meaning that it could block NCUA''s efforts in the Community CU and OmniAmerican CU cases if those two conversions are drawn through the courts, as appears likely.
NCUA, which has been caught in a political maelstrom over its actions in the two cases, tread carefully last week after the introduction of the bill.
"NCUA looks forward to the opportunities ahead to work with Representative McHenry and other members on this important issue," said Nicholas Owens, spokesman for the agency. "Congress has an important role in this process as does the NCUA in ensuring the full credit union member and consumer protections. In this era of corporate governance and transparency, full disclosure is a vital element to credit unions fulfilling their fiduciary responsibilities to their members. NCUA is confident the current regulatory framework in which the agency ensures a fair and accurate conversion process is soundly in place."
CUNA last week expressed opposition to the McHenry bill. "While McHenry is claiming this is a pro-consumer bill, we see it as depriving consumers of a lot of the information they need in making this decision (to convert charters)," said CUNA lobbyist Gary Kohn.
Though prospects for the bill are slim, Kohn noted the co-sponsors, who are members of the House Financial Services Committee, could seek to attach it to a broader bill, such as the one being drafted for regulatory relief, or even the CU Regulatory Improvements Act, known as CURIA.
The congressman drafting the regulatory relief bill, Rep. Jeb Hensarling (R-TX), organized a letter from 22 Texas House members to NCUA criticizing the agency's actions in the Community CU case. Kohn said CUNA has made it clear to leaders of the Financial Services Committee, that the inclusions of the conversion provision in regulatory relief could complicate matters and dampen CUNA's enthusiasm for the bill.
