State credit union regulators plan to sue the federal government over a rule that will restrict the governance of the industry's liquidity centers.
The National Association of State Credit Union Supervisors charges that a National Credit Union Administration regulation limiting shared management between trade groups and corporate credit unions preempts state laws.
Twenty-six of the country's 43 corporate credit unions are chartered by states; but 22 of those are federally insured.
"It's not right for NCUA to tell state-chartered corporates what to do," said Douglas F. Duerr, president of the state regulators group. "That's what state regulators are for."
He said the association had no quarrel with how the NCUA chooses to regulate federally chartered corporates.
The group's board, which voted on Jan. 6 to sue, plans to file its lawsuit within 30 days, Mr. Duerr said.
The state regulators group is the second organization to threaten NCUA with a lawsuit over the controversial corporate regulation, which was approved last November. The Credit Union National Association voted to sue the NCUA last month, claiming that the federal regulator lacked authority to dictate governance structure.
About half of the corporates are closely tied to CUNA.
NCUA Chairman Norman E. D'Amours said the state regulators have a right to challenge the federal regulator's oversight of state-chartered corporates. But he said he was "disappointed" that the trade group did not say whether the substance of NCUA's regulation is appropriate.
"I don't see why as fellow regulators they can't bring themselves to say whether we're taking the proper regulatory approach," he said. "Anytime I raise that, they hem and haw and say they don't want to address that."
Mr. Duerr pointed out that some states allow interlocks between corporates and trade groups and others don't. The decision should be left to the appropriate regulator, he said.
"The referee closest to the action is the one that drops the flag - that's us," Mr. Duerr said. He likened NCUA to a "guy in the announcers' box."
The association's board authorized a $20,000 war chest to pay for the lawsuit and voted to create a legal fund and solicit contributions.
