CUNA is urging credit unions to submit comments to NCUA on a recent regulatory proposal intended to protect credit union members from exploitation in the event of a conversion to a mutual savings bank charter.
At its June 22 open meeting, the National Credit Union Administration (NCUA) issued a proposal that includes strict disclosure requirements so members will be aware when a merger is in the works, and other safeguards designed to prevent such a transition becoming a financial bonanza for managers.
Before its vote, the agency said in a statement that it supports the right of a credit union to change its charter, but noted that such a shift was drastic and raised important questions about member ownership rights.
CUNA is asking credit unions to send comments on the NCUA's extensive proposal by August 14 and specifically encourages comments on issues such as:
* Whether the NCUA has identified appropriate channels for disseminating public notice of a board meeting for the purposes of voting on a conversion proposal by requiring it to appear in local newspapers, on the credit union's Web site, and in its offices.
* Should the proposal retain current disclosure language that, after conversion, a member may experience adverse changes in rates?
* Should NCUA amend the rule to permit credit unions to accept member ballots electronically, in addition to receiving them by mail and in person?
Among other questions, CUNA also seeks credit union opinion on whether offering incentives to members, such as entry to a prize raffle, to encourage participation in a conversion vote detracts from the fairness of the vote?
All three NCUA members voted to put the proposal out for a 60-day public comment period, and NCUA member Gigi Hyland said the proposal would clarify an area that "has become fraught with controversy over the last several months."
While CUNA believes that the credit union charter currently provides the best vehicle for serving the financial needs of consumers, the group supports the right of member/owners to exercise their democratic control of their credit unions.
CUNA encourages credit unions that are considering conversions to make their decisions based solely on the best interests of their members, and maintains that full, plain language, disclosures are essential to furthering the democratic process.
CUNA also supports the concept that the net worth of the credit union belongs to the members and should remain with them: there should be no unjust enrichment to directors and senior management upon later conversion to a bank.
