NCUA Pulls Rug Out From Under Tiny African-American CU
WASHINGTON – Lawyers for Kappa Alpha Psi FCU were trying to regroup yesterday after NCUA liquidated the tiny credit union just as they were trying to block the liquidation at a court hearing today.
Robert Cooper, a Washington lawyer representing the $750,000 credit union, said they were proceeding with the case assuming NCUA would wait till after today’s show-cause hearing to finalize the liquidation, hoping at the same time a federal judge would overrule the credit union regulator and save the six-year-old credit union.
“We heard rumors, but we didn’t know for sure that it happened till Monday,” Cooper told Credit Union Journal yesterday of last Friday’s liquidation by NCUA. Cooper, a Kappa brother and a member of the credit union, said he found out for sure when he got home Monday after work and found an NCUA payout in his mailbox returning his deposit with no dividend.
The NCUA move came as the agency was negotiating with Kappa Alpha, the nation’s first Internet-only credit union, on a purchase and assumption merger – for all intents a liquidation – into HOPE Community FCU, a well-known community development credit union in Jackson, Miss. Under the terms, NCUA said it would transfer Kappa’s deposits to HOPE Community and Kappa’s 1,341 members could choose to get their funds returned or continue on as members of the $95 million CDCU. The two sides were debating what would become of the loan portfolio, which consists of 41 loans totaling about $400,000. This would have allowed the nationwide African-American fraternity to avoid the stigma of having its credit union officially liquidated or failed. A federal judge was expected to consider the dispute at today’s hearing.
But NCUA chose to complete the liquidation after Judge Emmet Sullivan told both parties he doesn’t believe he has the authority to stop NCUA from the liquidation.
NCUA said yesterday it completed the liquidation to protect members’ accounts. “Whenever we liquidate a credit union we are mindful of the responsibility to return funds to members in an expeditious manner,” said John McKechnie, chief spokesman for the agency. “In this case, as with other liquidations, we were prepared to do that either by transferring the shares to another credit union or paying them directly to the members. Kappa was unwilling to support a share transfer to another institution, and accordingly NCUA provided the funds directly to the members.”
But Kappa’s Cooper questioned that assertion. “None of the depositors asked for their money back. There was no urgency,” he said.
Kappa’s lawyers will meet today to decide whether to proceed with their case, even as the bottom appears to have fallen out. “There are still other issues at stake here,” said Cooper.