ALEXANDRIA, Va. -
The proposal, prompted by recent incidents at would-be credit union converts to banks where members petitioned to recall the board of directors, would allow NCUA to enforce a federal credit union's bylaws by issuing administrative orders, such as cease and desist or prohibitions. The proposal was issued for a 60-day public comment.
The proposal comes as members of Lafayette FCU, angered over the $330-million credit union's ill-fated conversion to a mutual savings bank, are fighting to enforce a credit union bylaw that requires 750 members sign a petition asking for a special meeting to recall the board for its failed conversion. The credit union has disqualified more than 200 names on a petition, which includes 820 signatures, and organizers of the petition drive are threatening to go to court to get the bylaw enforced.
In this and similar cases in recent years NCUA has ruled it will not intervene in bylaw disputes unless it involves the safety and soundness of the credit union.
But members at other credit unions, state chartered DFCU Financial and Columbia CU, have spent hundreds of thousands of dollars in legal fees seeking to have similar bylaw disputes resolved, but the state courts in Michigan and Washington have been reluctant to enforce the bylaws in both instances-also involving efforts to recall directors over failed conversion attempts.
NCUA Chairman JoAnn Johnson, who recommended the enforcement of bylaws, said she believes it is important for credit union members to know there is an enforcement mechanism.
"The issue is members want the bylaws to mean something and that there will be someone who will enforce them," said Johnson.
NCUA had enforced bylaw disputes until 1982 when it ceased doing so as part of a deregulatory move.
Under the new proposal, FCU bylaws would be incorporated into the agency's rules and regulations.
Other Actions Taken
In a separate move, the NCUA Board issued for comment a proposal to clarify its community chartering rules, which were muddled in March when the board was forced to reject a request by Del-One FCU to serve the entire state of Delaware, even though the state's 800,000 residents are far fewer than many community charters approved by NCUA.
A single political jurisdiction would continue to qualify as a community.
But, the new proposal would require for broader, vague areas that a federal credit union demonstrate the proposed community is part of a "core-based statistical area" used by the White House Office of Management and Budget, of at least 10,000 people; and that the area contain a dominant city, county or equivalent containing a majority of the jobs in the CBSA.
Once the community is certified by NCUA another credit union could automatically use that community for its own chartering application for a period of five years.
The proposal also includes a new definition for rural district, for the purpose of determining a community field of membership. A rural community must have no more than 100 people per square mile and no more than a total of 100,000 residents.
The attempt at redefining community parameters comes as the number of federal credit union with community charters has soared over the past decade from 8% of all federal charters to a third, but also as the conversion to community charters is slowing. NCUA approved only two new community charters last month, down from an average of 15 in a month in recent years.
