WASHINGTON -- The National Credit Union Administration is considering barring federally insured credit unions from converting to thrift charters if financial gain for management drives the effort.
On June 23, the NCUA board will consider regulations to give it final approval over a charter conversion by any federally insured credit union.
The agency will block any charter switch it believes is motivated by selfish reasons and punish the attorneys and managers leading the attempt, NCUA general counsel Robert M. Fenner said in a Federal Bar Association speech last month.
Conversions Discussed
"If you waste a credit union's money on something that's not going to happen anyway we'll try to make you pay" using the agency's broad enforcement powers, he said in a subsequent interview.
No credit union has attempted a conversion, but some law firms have discussed the process with credit unions. The agency wants to nip this movement in the bud, Mr. Fenner said.
"I wouldn't say we're alarmed, but the fact this is going on at all is disturbing," he said.
The agency is concerned that a distressed credit union might spend time and money trying to escape NCUA jurisdication, Mr. Fenner said. It also believes management might try to switch solely for financial gain.
If any conversion takes place "it would have to be in the best interests of the credit union members," Mr. Fenner said.
Lawyers pushing the conversions said the NCUA is merely interested in protecting its turf.
"An agency wants to keep organizations within its membership and advocate its own position," said Bob Freedman, a partner at Silver, Freedman & Taff. The firm is trying to convert credit unions.
