NCUA Will Enforce FCU Bylaws

ALEXANDRIA, Va. – Frustrated over the lack of judicial enforcement of credit union bylaws, the NCUA Board yesterday voted for a new regulation that will give the federal regulator enforcement power over federal credit union bylaws. The new rule was prompted by several instances in which the courts refused to enforce credit union bylaws, enabling members to petition for a special meeting to recall directors who had sought to convert their credit union to mutual savings banks. In at least two recent cases, DFCU Financial in Dearborn, Mich., and Lafayette FCU in Kensington, Md., state courts refused to enforce bylaws allowing members to petition for a special meeting to replace the boards. The new rule will allow NCUA to use administrative remedies, such as cease and desist orders, or in more severe case, removal of the board, to enforce violations of bylaws. NCUA previously was authorized to enforce bylaws but gave up the power in the 1980's during an overall de-regulatory move. As part of the new rule, NCUA also clarified the issue of board succession, allowing the supervisory committee to temporarily act as a board of directors if an entire board is recalled by a vote of the membership, as was proposed in the DFCU case. In that case, the DFCU board refused to call a special meeting to vote on the board recall, claiming there was no legal succession provided for under NCUA rules and regulations.