Responding to the National Credit Union Administration's decision to block two Texas credit unions from becoming mutual savings banks, a North Carolina lawmaker has introduced a bill that would limit the agency's powers to regulate the conversion process.
As things stand now, the NCUA, the credit union industry's federal regulator, dictates the disclosures credit unions must make to their members before conversion votes. In January it enacted a rule requiring converting credit unions to inform members that the institution might eventually go public and that the directors and managers would stand to profit if that happened.
Rep. Patrick T. McHenry's bill, unveiled late Tuesday, would prevent the NCUA from requiring disclosure statements "that are speculative with respect to the future operations, governance, or form of organization of the financial institution that will result from the conversion."
On Monday the NCUA had invalidated a conversion vote by the members of the $1.4 billion-asset Community Credit Union in Plano, Tex., because of concerns over how its required disclosure statement was folded in mailings to members.
In a press release issued Tuesday, Rep. McHenry, a first-term Republican, said: "Our central aim with this legislation is to protect the rights of our constituents. … This legislation is not anti-credit union. It is pro-consumer, and once passed will not alter in any way the services offered to constituents or the day-to-day operations of any credit union."
Roughly two dozen credit unions have converted to thrifts.
Bradford Thaler, the director of legislative affairs for National Association of Federal Credit Unions, said the group has not taken a position on Rep. McHenry's bill.
He added that the situation in Texas involving Community Credit Union and OmniAmerican Credit Union in Fort Worth, which is also pursuing a conversion, has prompted Congress to examine the issue more closely than it has in the past.
"I think what happened in Texas played a significant part" in this legislation, Mr. Thaler said. Some lawmakers "think the regulator overstepped its boundaries."
The industry's other big trade group, the Credit Union National Association, indicated that it would fight Rep. McHenry's legislation.
"This is the wrong bill at the wrong time," said John McKechnie, CUNA's senior vice president of governmental affairs, in a statement. "This bill offers no choices to consumer owners of credit unions."
Banking groups applauded the bill. Robert R. Davis, the managing director for government relations at America's Community Bankers, said, "It's clear that this bill is designed to make the regulator follow the law … and stop obstructing the conversion process."
Mr. Davis called the NCUA a "rogue agency" acting to protect its turf.
More than 71% of the Community Credit Union members who voted in its conversion election approved its plans to become a mutual savings bank. On Tuesday the $1.2 billion-asset OmniAmerican said 76% of its members approved its conversion plan. The NCUA, again pointing to the folding of the disclosure statement, has said it would also invalidate OmniAmerican's plan.
House Financial Services Committee chairman Michael G. Oxley has not endorsed the bill.
