AUSTIN, Texas – The Texas Sunset Advisory Commission is expected to recommend several reforms to credit union rules to, among things, bring broad disclosures of financial statements, bylaws and executive compensation to the average member.
The recommendations, as written in a draft of a staff report that will be formally voted by the state’s Sunset Commission later this year, would require the 217 state chartered credit unions to provide ready access over a website to financial information, the names of directors, new and existing bylaws, and the compensation of top executives.
Some of that information, especially financials and executive compensation, is submitted to the Internal Revenue Service annually by the Texas CU Division in aggregate for all credit unions and is virtually impossible for the average credit union member to break out the information for their own credit union. Credit unions are required to make the information accessible to members, but few members know of the requirement.
The disclosures would be in a similar fashion to those required for publicly owned companies, which must send each stockholder a regular financial statement and disclosures on executive compensation, bylaw amendments and other key ownership information.
The staff report also recommends that credit unions notify members on their website or in their newsletters where to file a consumer complaint about their credit union.
The proposal comes amid numerous battles in recent years between credit unions and some members over internal disputes such as financials, executive compensation, bylaw amendments and even the identity of board members.
Credit union executives have been resisting NCUA’s efforts to require greater disclosure of pay and have successfully stalled several disclosure proposals made by the federal regulator.
Compensation to directors is a closely guarded secret, as some states, including Texas, allow credit unions to pay their board members.
Harold Feeney, head of the state’s CU Division, said the division is planning to discontinue making the annual report to the IRS, which is required for all tax-exempt organizations, including credit unions. He said the annual reporting is time consuming and expensive and would be better done by individual credit unions. Current rules require a credit union to make the information available at one of their sites, but many members do not live near a live site these days, Feeney told The Credit Union Journal yesterday.
The staff report would increase the powers of the state regulator to assess civil money penalties for credit unions that violate state rules and to fine credit unions for submitting late operating fees. It also would give the regulator power to cite phony credit unions, those entities using the term credit union in their names, by issuing cease and desist orders.
Feeney said the state agency is supporting the staff recommendations, which are scheduled to be reviewed in a Sept. 23 public hearing, before the Sunset Commission votes on the proposals in December.
The recommendations would have to be enacted by the legislature.
