This has been a busy year for credit unions converting to mutual thrifts, but if the National Credit Union Administration gets its way, the pace of future conversions could slow considerably.
The administration proposed a requirement Thursday that credit unions seeking to become mutual thrifts supplement their disclosure material with a series of statements - which the NCUA has drafted - warning members of the harmful consequences that could follow a conversion.
The agency approved the disclosure statements of the 24 credit unions that have converted since 1996. But it now maintains that many of them did not tell members how much it would cost to become a for-profit mutual savings bank nor inform them of the effect such a change would have on their ownership rights and their institution's loan and deposit rates.
JoAnn Johnson, the NCUA board's chairman, said in a press release announcing the proposal that credit union members "have a right to be informed of the consequences" of a conversion to a mutual savings bank "in an open and transparent manner."
In its 13-page report, the NCUA said it would expect fewer credit unions to convert under the proposed rules.
The proposal's critics, including two banking trade groups, are calling it a blatant attempt to sway members' opinions and keep credit unions from leaving the fold.
"I think that is the deliberate intention," said Alan D. Theriault, a consultant in Portland, Maine, who advises credit unions that are considering mutual conversions. "NCUA's focus is to keep credit unions in the credit union corral."
Diane Casey-Landry, the chief executive officer of America's Community Bankers, ripped the proposal as "un-American."
It "makes conversion almost totally impossible," she said in a press release shortly after the NCUA's announcement. "The NCUA's anti-charter choice position displays a blatant disregard for the rights of credit union members."
It is not clear how much support the proposal will receive from the credit unions. Several submitted comment letters opposing the agency's last amendment to the conversion rules. (The amendment, which took effect in February, requires converting credit unions to inform their members whether or not they planned to issue stock following a conversion.)
John Zimmerman, a spokesman for the National Association of Federal Credit Unions, said Thursday that it "strongly supports clear disclosures." But he also said it would not take a position on the proposal until it has had an opportunity to consult with its members.
Officials at the Credit Union National Association, too, said they needed to talk to their members before announcing their position. But Dan Mica, its president, said the comments by Ms. Casey-Landry were out of line.
"This issue is one for credit unions and their regulator to determine, not the banking industry," he said.
Edward Yingling, the executive vice president of the American Bankers Association, said the four disclosure statements the NCUA has drafted all suggest "negative outcomes" for conversions.
"It stacks the deck against conversion," he said.
Richard Garabedian, a Washington, D.C., lawyer who has handled a number of credit union conversions, said he did not think the disclosures would put an undue burden on credit unions.
"For institutions that need to convert for strategic reasons, this won't be a deterrent," he said.
The proposal is probably a response to the attempt by Columbia Credit Union in Vancouver, Wash., to convert this year, Mr. Garabedian said. Columbia's members voted in favor of a conversion, but the credit union later abandoned its plans after a group of members challenged the vote. Among their complaints: The disclosures they had been provided were incomplete and misleading.
This year two credit unions have converted to thrifts, and four are in the process of converting.
The NCUA's proposal also mandates that the member vote required before a conversion be conducted by secret ballot and counted by an independent proctor.
The agency will accept comments on the proposal for 60 days.
