NCUA Shoots Down Conversion Bid By Lafayette FCU

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ALEXANDRIA, Va. -- NCUA rejected an application by Lafayette FCU to convert to a mutual savings bank based on incomplete and potentially erroneous disclosures. In a letter sent July 12 to Washington attorney Richard Garabedian, who is engineering the conversion of the $380 million suburban Washington, D.C., credit union, Edward Dupcak, director of NCUA's mid-Atlantic Region Two, said the packet submitted on the conversion falls short of the regulatory requirements in a variety of ways. He notes the credit union proposes to allow members to vote by proxy, which is prohibited by the Federal CU Act; that the packet does not include a plan of conversion or identify a way to obtain one; that it does not support the credit union's claims for a need to expand its customer base; that the disclosures suggest that once Lafayette gets a refund of its 1% NCUSIF deposit it will invest it, when more likely it will need those funds to obtain deposit insurance from the FDIC; that, despite its claims, at 9%, Lafayette is not in danger of falling below regulatory capital requirements. In addition, Lafayette makes claims that deposit and savings rates won't change, which is impossible to project.

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