WASHINGTON -
This issue has been festering for the last 18 months, as members at two credit unions have launched petition drives-as specifically set out in their credit union's bylaws-to call a special meeting where they would vote on a recall of the board. In both cases, DFCU Financial in Dearborn, Mich., and Lafayette FCU outside Washington, members are angry over attempts by the boards of directors to convert the CUs to mutual savings.
But members at other credit unions are also seeking enforcement of bylaws, like last week in Iowa City, where members of University of Iowa Community CU had petitioned the board for a new special meeting to recall a name change to Optiva.
NCUA Chairman JoAnn Johnson said she was moved by those cases to get the federal regulator back into the business of enforcing bylaws, when warranted. NCUA stopped enforcing bylaws in 1982 when the standard federal credit union bylaws were separated from NCUA's rules and regulation. As a result, the only things NCUA can do in the case of a bylaw violation are the extreme remedies of charter suspension or liquidation.
By re-incorporating the bylaws back into NCUA rules and regulations, the agency could use less drastic measures to enforce bylaws, like cease and desist orders, civil money penalties, or even prohibitions.
Johnson told attendees at CUNA's Governmental Affairs Conference last week she has instructed NCUA staff to draw up rules that would once again have the agency as arbiter in bylaw disputes.
"We have never said NCUA lacks authority to enforce bylaws based on the FCU Act, but rather opted to leave much bylaw enforcement to members and federal credit unions," said Johnson, who explained later NCUA sees bylaws as a contract between the credit union and its members. She also sees it as an issue of consumer protection, with bylaws a pact with its consumers/members.
In recent years, NCUA has been reluctant to intervene in bylaw disputes, leaving members to seek enforcement from the courts. But at DFCU, the case has dragged on for more than a year at significant expense to both the CU and members, with no resolution in sight. In a similar dispute over a conversion to bank, since abandoned, Columbia CU in Vancouver, Wash., spent millions of dollars in legal fees in court fights over its bylaws.
"Let me assure you, the last thing NCUA wants to do, or frankly is able to do, is to get involved in every technical violations of the bylaws," said Johnson. Even when NCUA could intervene, it rarely did, she added.
"But incorporating the bylaws into NCUA regulations unambiguously gives NCUA the authority to intervene when we believe a violation warrants intervention. And it does so without imposing any new regulatory burden on federal credit unions," Johnson said.
Johnson said she expects the NCUA staff to draft enabling regulations and submit the proposal for public comment, before it is enacted.
