ALEXANDRIA, Va. -
The new rule was prompted by several instances in which the courts refused to enforce credit union bylaws, enabling members to petition for a special meeting to recall directors who had sought to convert their credit union to mutual savings banks. In at least two recent cases, DFCU Financial in Dearborn, Mich., and Lafayette FCU in Kensington, Md., state courts refused to enforce bylaws allowing members to petition for a special meeting to replace the boards.
Passage of the new rule came despite an outcry from credit union executives and opposition from CUNA and NAFCU, because it was seen as intrusive and regulatory overkill.
The new rule will allow NCUA to use administrative remedies, such as cease -and - desist orders, or in more severe cases, removal of the board, to enforce violations of bylaws.
NCUA previously was authorized to enforce bylaws but gave up the power in the 1980s during an overall deregulatory move.
As part of the new rule, NCUA also clarified the issue of board succession, allowing the supervisory committee to temporarily act as a board of directors if an entire board is recalled by a vote of the membership, as was proposed in the DFCU case. In that case, the DFCU board refused to call a special meeting to vote on the board recall, claiming there was no legal succession provided for under NCUA rules and regulations.
