ALEXANDRIA, Va. – NCUA said last week corporate credit unions may not pay lower dividend rates on member capital accounts owned by members that gave their three-year notice for withdrawal.
The ruling was provided to Credit Union of Vermont, which asked the regulator to intervene in a dispute with Maine’s TriCorp FCU. After CU of Vermont notified TriCorp of its intent to withdraw its $110,000 investment, the TriCorp board decided to cut dividends on all on-notice member capital shares to just one basis point.
The $26 million credit union took the matter to NCUA in August and, in a letter sent last Wednesday, Office of Corporate CU Director Scott Hunt sided with the credit union. "The practice of paying lower dividends on MCA on notice may be supportable due to the additional cost to a corporate credit union to maintain required regulatory capital levels," Hunt wrote. "However... if an MCA account on notice is to be paid a lower dividend than other MCAs, that term or condition must be disclosed in the initial disclosure statement and annually thereafter."
Hunt also nodded to the report, previously confirmed by TriCorp, that other corporates were following the same practice. In the letter, he told CU of Vermont that his office plans on informing all corporates of the decision.
CU of Vermont has asked TriCorp to retroactively apply its previous dividend rate.
