Corporate Failures Must Give Members Six Months Notice
ALEXANDRIA, Va. – NCUA said this morning that all corporate credit unions–including the three major failures seeking a rehabilitation–must give their members not wanting to participate in a recapitalization at least six months written notice before termination of their membership.
NCUA’s notification comes as the agency is reviewing recapitalization proposals from all corporates, including WesCorp (Bridge) FCU, Members United (Bridge) FCU and Southwest Corporate (Bridge) FCU, which were liquidated amid billions of dollars in losses last fall. Representatives of the three corporate failures are seeking to raise almost $400 million in new capital under plans to resuscitate the institutions, albeit at a much smaller scale. The three corporate failures have all expressed plans to combine, WesCorp and Members United with each other, and Southwest Corporate with Georgia Corporate CU.
NCUA said it is reviewing plans by each of the corporates that would require them raising and reaching the agency’s new 4% minimum capital level by October 20. Those capital plans will be shared with corporate members by May 31.
Member credit unions that opt out of purchasing perpetual contributed capital in a corporate credit union must receive at least a six-month written notice of changes related to membership, pricing and services, Scott Hunt, director of NCUA’s Office of Corporate CUs, said in a Letter to CUs issued this morning. Additionally, a corporate or bridge corporate credit union may, in no instance, terminate membership, change pricing or alter access to services prior to October 20.
The distribution of capitalization plans to a corporate credit union’s members will assist credit unions in deciding whether to continue to support their current corporate credit union, join another corporate credit union, or seek services from another entity. NCUA’s new rules specifically allow for the conditioning of membership, services or pricing on a member’s ownership of perpetual contributed capital in a corporate credit union. As a result, he said, credit unions should carefully consider their options before making any business decision.
NCUA encourages credit unions seeking to leave a corporate credit union to begin searching for a new provider as soon as possible to minimize service disruptions. Such credit unions should also inform the bridge corporate credit union of their plans in an effort to facilitate the transfer of any records or files to the new service provider, including check images.