ALEXANDRIA, Va. - In regular session April 13 the NCUA Board-dispensing with proposed rulemaking preliminaries because of previously passed prompt corrective action (PCA) purview in the matter-unanimously adopted a final rule permitting the agency to prohibit a credit union from paying principal, dividends, or interest on secondary capital accounts established after August 7, 2000. The rule becomes effective August 7. `The board also passed a final rule, 3-0, amending agency Truth-in-Savings regulation-in keeping with recent Federal Reserve System (Fed) rulemaking-to allow credit unions to deliver agency-required periodic statement disclosures in electronic form, provided the member agrees to the arrangement. It will become effective 30 days after publication in the Federal Register. `And in its final action of the session, the board unanimously-and over regional director objection-granted SEG status to a Pennsylvania dining club whose sole, admitted purpose is the preparation and member enjoyment of fine food, allowing the club to join the field of membership of CACL FCU of Mar Lin, Pennsylvania. NCUA staff had recommended against the Pottsville, Pennsylvania Dining Club's appeal, stating that associational common bond status, according to NCUA's Chartering Manual, is limited to groups whose "members participate in activities developing common loyalties, mutual benefits, and mutual interests." The dining club's gourmet purpose, they explained, was just too parochial to pass this test. In this particular case," NCUA Deputy General Counsel James Engel said, "we do not believe the Pottsville Club is an association that meets the minimum associational requirements for chartering purposes. By its own admission, the club's only objective is dinner. And its members don't participate in activities to develop common loyalties, mutual benefits, and mutual interests....In our view this is too weak to support an associational common bond." Initially, it seemed, NCUA Board Chairman Norman D'Amours agreed with Engel. "I think this is a very difficult case...," D'Amours said. "I think for me the thing that tilts me toward sustaining the regional staff decision here is that I don't know what kind of precedent we're setting for, say, a buyers club. I have difficulty distinguishing this from buyers clubs." D'Amours, however, delayed any decision until he had heard from the other board members. Following D'Amours, NCUA Board member Dennis Dollar said he agreed that the dining club application was "a pretty close call," adding, however, that he was concerned about setting a precedent in another direction. Pointing out that the club did have elections and meetings and that its members did pay a substantial amount for the privilege of membership, Dollar stated, "My concern is that we not fall into the position of beginning to evaluate whether or not associations have a noble enough cause for us to include them in a field of membership...." "Fellowship is a reason, obviously, for quite a few people in this community to be willing to pay $300 to join and $250 a year to stay a part of it. They must be feeling that they're getting some type of benefit from that other than just a meal. They can go to a restaurant to get a meal, and not have to pay $300 to join...." For her part, NCUA Board member Yolanda Wheat-who worried that rejection of the appeal would actually set the precedent of casting a pall over other, already approved dining club SEGs-touted the group's democratic structure and announced she would vote to overturn the region's decision. Ultimately, as an increasingly jovial discussion about food and credit unionism came to a head, the board voted to overturn the region's recommendation, with D'Amours at one point quipping, "I think good food is a noble cause." In the board action on the secondary capital final rule, both low-income CUs with less than 2% net worth and "new" CUs (less than 10 years old with assets less than $10 million) that fail to implement agency PCA mandatory supervisory actions or whose net worth growth falls behind business plan projections can be affected. -
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