ALEXANDRIA Va. -- NCUA is considering how it might be able to have a say in some of the bylaw disputes that have begun to crop up between credit unions and their members. NCUA Board Chairman JoAnn Johnson alluded to the interest in the topic during her remarks at a recent meeting of the American Association of Credit Union Leagues and in a later statement said she had directed NCUA staff to conduct a "top to bottom" review of how members relate to the CUs and whether there needs to be a stronger NCUA role in guaranteeing credit unions abide by their bylaws. "The continually evolving debate over credit union conversions, and the nature of member requests pertaining to credit union governance and records, have prompted me to direct Agency staff to conduct a review of the mechanism for resolving federal credit union bylaw disputes," Johnson said in a statement the agency released on Jan. 22. "Specifically, I want a top to bottom assessment of the standards and practices through which a member relates to their credit union, and recommendations for possible changes in their enforceability."
Credit union members who have been involved in some bitter fights with their credit unions, particularly members of the $768 million Columbia Community Credit Union and the $1.7 billion DFCU Financial, have complained that when their credit unions have appeared to abandon their bylaws the only place they have had to go for redress has been federal or state court.
Another similar matter may be looming as the members of the $320 million Lafayette Federal Credit Union who opposed their credit union's most recent attempt to become a mutual bank, have enough signatures on a petition to call a special meeting where one or all the board members could be recalled. Should Lafayette follow the example of DFCU and refuse to hold the meeting that will make the second CU in the country that, in the eyes of some of its members, did not act as its bylaws mandated.
Should the agency decide to take steps that could give it more formal leverage to force credit unions to follow their bylaws, the agency may end up retaking some previously held positions, according to legal sources familiar with the agency and CU regulation.
Steven Bisker, an attorney in Alexandria, Va., and former assistant legal counsel for NCUA, explained that the agency had formally included credit union bylaws, by reference, in its own regulations as a point of law. That meant that violating a credit union's bylaws meant, in effect, also violating an NCUA regulation. While this gave the agency a great deal of power to oversee different bylaw disputes, Bisker said it also embroiled the agency in an "administrative nightmare."
One set of problems was procedural in nature. Since the agency had included the bylaws by reference in its regulations, the laws governing federal regulations would seem to require NCUA to publish them for public comment in the Federal Register. Then there were questions about what to do with bylaw amendments that credit unions adopted themselves and the agency approved. Should those also be included in federal regulation and, if so, should they also be put out for public comment?
Another potential set of problems arose from the approach that potentially would involve NCUA not only in very big and serious bylaw problems, but also relatively small and unimportant ones, and this was deemed to be a waste of both agency and credit union resources. So, the agency decided to deregulate CU bylaws.
But when it did so, the agency did not foresee that there might come a time when the leadership of credit unions around the country might adapt courses of action that, in effect, ignored the CU's bylaws.
"I think there is a recognition on the part of the agency that there are some things, such as election procedures, procedures for special meetings, and the like which need to be addressed by the agency and not by courts as the first recourse," said Eric Richard, CUNA general counsel. Court decisions take too long and are almost always unpredictable, sometimes failing to speak to the real issues that need to be addressed," Richard explained.
In addition, there have been disputes, for example in the DFCU case, about which courts would necessarily have jurisdiction in a bylaw fight between a credit union's leaders and some of its members.
Should the agency decide to incorporate some credit union bylaws into its regulations, Bisker and Richard agree that it would likely only be some of them and the first challenge the agency will face may be deciding which ones to include. Bylaws governing credit union elections, the removal of board members and the calling of special meetings would seem to the obvious ones, but bylaws discussing the roles and responsibilities of credit union supervisory committees might be included as well.
Carrie Hunt, NAFCU senior counsel, stressed that the agency would face a fine line between being seen as too much of a regulator on the one hand and not doing enough to protect credit union members' rights on the other.
It is also unclear how far NCUA's increased bylaw authority might reach. As the regulator for federally chartered credit unions, NCUA's authority would seem pretty straightforward when it comes to FCU's, but it's unclear that the agency would have any authority to regulate state chartered credit union bylaws, particularly those chartered by states that mandate bylaws or bylaw amendments for their credit unions, Richard noted.
Interestingly, according to Bisker, should the NCUA decide to incorporate some federal credit union bylaws into its regulations, it may actually move more into parity with its most similar federal financial regulator, the Office of Thrift Supervision, which also has some provision for enforcing some institutional bylaws, Bisker said. Calls to the agency for an explanation of the precise status of thrift bylaws in its regulations were not returned in time for deadline. --firstname.lastname@example.org