Make Your Mother Proud And Write To Your Regulator Now

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Your mother may have raised you to send thank you notes, and for that you should send her a thank you (those online e-thank yous not only don't count, they're almost anti-thank yous). But even the most responsible and productive thank-you note-writers among you likely never send a card to NCUA, and not just because Hallmark has yet to create its Federal Regulatory Agency collection. Still, you should.

The reason is that at long last the agency has proposed it get back into the business of enforcing credit union bylaws. That's important, as if there's one thing we've learned (and some members have learned painfully) it is that when boards refuse to enforce the credit union's own bylaws, the only recourse is for members to turn to...well, um, OK, er...somebody? Anybody? And ultimately, nobody.

What's at issue here is the rights of ALL members, and especially those at credit unions that attempt to convert to banks. In several cases these conversions attempts have been met by undermanned but passionate groups of members who oppose the conversion plan, get themselves a copy of the credit union's (likely dusty) bylaws, take time to bone up on the provisions related to signatures needed to petition the board or take some other action, manage to get more than the necessary number of signatures to do just that, and then proudly and defiantly present those member signatures to the board. This is the credit union equivalent of dumping tea into Boston Harbor, Martin Luther nailing the 95 Theses to the door, Californians recalling Gray Davis. This is that ballyhooed member democracy in action! And the response? We've seen more action from the guest of honor at a wake.

At least two credit unions - DFCU Financial and Lafayette FCU - where members met bylaws requirements to force a recall of board members, the board simply chose not to answer. Recall, schmecall. We'll pretend it didn't happen. What are you going to do, sue us? Members did, but the courts couldn't seem to decide who had jurisdiction. And the regulators' positions, especially NCUA? This is between CU members and their boards, and the agency can only get involved if the matter involved safety and soundness. For members at those two credit unions it was some bizarre Twilight Zone where the game has rules, but no referees or officials. You've heard the phrase, "Nowhere to Turn." Some members have been living it.

Now NCUA has put out for comment a plan under which it would enforce bylaw disputes at federal credit unions (you can read more in the May 28 issue of the Credit Union Journal, or subscribers can search the archive at

It's about time. This is a safety and soundness issue-every CU's safety and soundness. After all, what about the safety of a member's ownership interest, which disappears with no compensation in these conversions? What about the safety of your wallet in general? No credit union converts with a promise to cut loan rates or reduce fees. There's always some vague promise of undefined "improved products and services," not that it's ever been demonstrated.

But here's the real reason you should write a thank you note. This move by NCUA doesn't just apply to those credit unions that have converted or are seeking to convert-it applies to you. After all, what greater safety and soundness issue is there than the very soundness of the credit union system? An industry, a community, or a country without a rule of law and a means of enforcing those laws is not long for this Earth. A credit union community in which the members' fundamental interests cannot be protected suddenly brings (unfortunate) new meaning to being "underserved."

This isn't just true of credit unions. The Securities & Exchange Commission says that the core of its mission is this: to protect investors. The SEC recognizes that without investor protections, there are no securities to exchange, there are no markets.

Of the new NCUA proposal, NCUA Chairman JoAnn Johnson said, "The issue is members want the bylaws to mean something and that there will be someone who will enforce them."

Certainly over the next 60 days or so we'll be hearing from credit unions that don't want to see NCUA getting into the business of enforcing bylaws. That will certainly include comment from some of the lawyers and conversion consultants who cash in on these charter changes to banks. For NCUA, by the way, its proposal is actually a little Old School Regulation. The agency had enforced bylaws disputes until 1982, when it ceased doing so as part of a deregulatory move. Johnson may be a Republican appointee, but this is one piece of re-regulation that will actually strengthen an industry.

Many credit unions will be in Las Vegas this week for CUNA's America's Credit Union Conference. A few of the 800-plus folks expected may even gamble while there-you expect that in a place that has slot machines in the restrooms. Few will give much thought to the fact inattention to this matter is gambling with their very futures. No credit union member should ever have to fear for even a moment that the rules and bylaws at their own CUs are as dependable as a roulette wheel.

Now, put down the dice, start writing those thank-you notes and make mom proud.

Frank J. Diekmann is Publisher of the Credit Union Journal and can be reached at fdiekmann

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