Nations First Virtual CU Seeks To Block NCUA Closure
ALEXANDRIA, Va. – A federal court tomorrow will hear a plea by Kappa Alpha Psi FCU, the nation’s first online-only credit union, to block an August 3 liquidation order by NCUA.
The tiny Texas credit union, chartered in 2004 by the nationwide African-American college fraternity, claims that NCUA actions, including the ongoing corporate bailout assessments, pushed it to the brink of insolvency, wiping out a mere $27,525 of mid-year net worth it had accrued as of June 30, which would have amounted to a 3.67% net worth ratio of $750,000 of assets at mid-year. NCUA records, changed in the days afer the liquidation order, show the credit union with negative net worth of just $22,496.
“I don’t know where it went. That came after the hearing,” Kenneth Bynum, a Virginia lawyer representing Kappa Alpha Psi FCU, told the Credit Union Journal this morning, referring to a meeting with NCUA officials just days before the liquidation order.
The institution, nominally based in Henderson, Texas, but in actuality the nation’s first virtual credit union, also claims that NCUA refused its request for a technical assistance grant through its Community Development Revolving Loan Fund, or to endorse its request for a $100,000 grant through the Treasury Department’s Troubled Asset Relief Program, either of which would have created enough net worth to put it on track for the ten-year period allotted new credit union charters to become adequately capitalized.
In its court pleadings, Kappa Alpha Psi FCU asserts that its own calculation of 3.67% net worth at mid-year would have qualified it as moderately capitalized under NCUA’s minimum capital rules, known as prompt corrective action, and put it well on track to achieving acceptable capitalization with the allotted ten-year period after chartering.
The credit union “fears that before a show cause hearing can be held, (NCUA) will complete what has already been threatened, and that is to hastily liquidate assets, expend money, enter or break contracts and disrupt the ongoing operations of the credit union,” it charged in its request for a temporary restraining order.