Time For NCUA To Do Some (FOM) Explaining

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NCUA has some explaining to do.

They need to explain to their stakeholders, as Chairman Dennis Dollar likes to refer to credit unions, lawmakers and the public, about the process by which the agency approved the controversial charter conversions for the three large Utah credit unions fleeing the state tax battles.

Such controversial decisions, which involved two of the biggest credit unions in the country, $2.6-billion America First CU and $1.4-billion Mountain America CU (as well as $260-million Goldenwest CU), should be, and usually are, conducted in open forum during the NCUA Board's monthly meeting. But this time the federal regulator used a recently adopted rulemaking process to dodge the normal open review and thus, public accountability.

It worked this way.

Tooele FCU, a $160-million Utah credit union known outside of Utah until recently as the credit union once run by former NCUA Board Member Bob Swan, had applied for a six-county community field of membership (FOM) surrounding Salt Lake City more than a year ago. Because of the broad swath, the six-county request, which encompasses as many as 1.6-million of the state's 2.5 million residents, required a full review by the NCUA board in open meeting.

Then, along came the three other Utah credit unions fed up with the constant legislative battles in Utah, two of which (America First and Goldenwest) requested the same precedent-setting six-county FOM sought by Tooele FCU. In the past, such groundbreaking FOM requests, if similar, were all reviewed together before the NCUA board during an open meeting. This has happened on several occasions; with three New York credit unions applying for a large FOM in the middle of the state, and with two Florida credit unions looking to serve all of greater Miami, among other applications.

But NCUA chose a different strategy this time, apparently to minimize the controversy surrounding the Utah conversions. Under new FOM rules passed just two months ago, the NCUA board is able to delegate authority to one of its six regional directors to approve such large, potentially controversial FOMs if it has already been approved for another credit union.

So, instead of hearing all of the controversial Utah applications in public, NCUA approved the record-setting FOM for Tooele FCU on its own. This allowed the agency's Region Six office to secretly review and approve the very same groundbreaking application for the two Utah credit unions, then approve the applications less than a week later. This dodge has gotten the bankers fired up-again. And they are not only threatening a court challenge, but are also lobbying Congress.

The bankers slammed the process and NCUA Chairman Dollar for what they called the Tooele FCU "stalking horse" for the other Utah applications. Dollar, who while a member of the Mississippi state legislature was a sponsor of that state's own "sunshine law" requiring public disclosure of a broad range of government documents, declined opportunities to respond to the bankers. But he issued this prepared statement: "Any time a regulatory agency makes a compliance decision there are those who agree with it and those who disagree. I have never engaged in verbal jousting with credit unions who are directly affected by our compliance decisions when they disagree with them, so I have no intention of engaging in a public debate with someone who only feels he is impacted by an NCUA decision because of his competing financial interests.

"Critics come with the territory and they are entitled to their opinions, but I have no question about the solid legal and regulatory grounds upon which NCUA approved these charter conversion applications. The credit unions complied with every federal law and regulation and exercised their rights under the dual chartering system, just as some federal credit unions have done in converting to state charters in recent years."

It may be legal, but that doesn't make it right.

The four credit unions involved in this process are all innocent, as they are merely taking advantage of the process.

But there are many good reasons why these kind of groundbreaking issues should be reviewed in public. The most important, of course, is that the credit unions and stakeholders of NCUA should be able to see the decision-making at NCUA to determine for their own purposes the parameters NCUA is setting. That's why the NCUA board conducts its monthly meeting before the public. For instance, there may be other credit unions seeking similar FOMs that want to see how NCUA might view their requests.

Another reason is that other interested parties, even constant antagonists like the bankers, should have the right to witness the decision-making process, too, at least for such important matters. If it's legal, then NCUA should have nothing to worry about.

At least that's how they do it at all the other federal agencies I have covered.

It remains to be seen whether NCUA will make public the information pertaining to the three Utah credit unions, now that the applications have been approved. The agency has been fighting to keep the information secret throughout the application process. Several Freedom of Information Act requests filed by The Credit Union Journal have been denied. But the outlines of the applications are slowly becoming known through drips and drabs.

It may require the intervention of the federal courts, as the bankers are threatening, to learn the whole story behind these controversial actions by NCUA.

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