If you've ever wanted to appeal the results of your creditunion's NCUA examination to someone outside the agency, a billmoving through the House of Representatives would allow you to dothat.

Rep. Shelley Moore Capito (R-W. Va.) and Rep. Carolyn Maloney(D-N.Y.) have introduced a measure that would create an examinationombudsman within the Federal Financial Institutions ExaminationCouncil that would field complaints filed by credit unions andother financial institutions.

A financial institution that is unhappy with the results of itsexamination would have the right to appeal it to an administrativelaw judge who would submit his or her findings to the ombudsman ofthe FFIEC. The FFIEC is made up of representatives of federal andstate regulatory entities. NCUA Chairman Debbie Matz is the council's currentchairman.

Under the measure, which has 14 co-sponsors in the 435-memberchamber, the NCUA and other regulators would have to do a morethorough job of explaining the reasons behind their examinationfindings and give financial institutions more latitude on certaintransactions.

The bill requires federal financial regulators to produceexamination reports within 60 days of an examination's completion.In addition, if the financial institution wants it, the agency mustinclude an appendix to the report listing all the facts that wereused as a basis for the conclusions.

The Capito-Maloney bill also mandates that the NCUA and otheragencies cannot put a commercial loan in nonaccrual status justbecause the collateral has decreased in value. It also requires theregulator to remove a modified or restructured commercial loan fromnonaccrual status if the borrower demonstrates that it canregularly repay the loan.

Capito and Maloney are, respectively, the chairman and rankingDemocrat on the House Financial Services Committee's subcommitteeon financial markets and consumer credit. The panel is planning tohold a hearing on the bill on December 6.

“We have heard significant concerns about the fairness of theexamination process for financial institutions and their ability toeffectively appeal regulator decisions. This legislation providesfinancial institutions with a fair and impartial process to appealexamination reports for federal financial regulators and providingfurther clarity to regulators,” Capito said in a statement.

Truliant FCU President/CEO Marc Schaefer said the NCUA and otherregulators were caught off guard by the financial crisis and insome cases went too far the other way to compensate for theirmistakes. But he expressed concern that trying to solve the problempolitically could have unintended consequences.

“The intent sounds good but you have to be careful about whetherchanges have the unplanned result of making the NCUA or otherregulators weaker. Healthy credit unions want the NCUA to bediligent,” said Schaefer, whose Winston-Salem, N.C-based creditunion has assets of $1.1 billion.

NCUA Director of Public and Congressional Affairs Todd Harpersaid the agency is reviewing the bill and doesn't have a positionon it yet. He noted that in June, Matz wrote in her column in theagency's newsletter that there is an extensive appeals process inplace within the NCUA if credit unions are dissatisfied with theresults of their examinations. She also noted that the agency has astrictly enforced policy that forbids retribution against creditunions that appeal their examinations.

Lobbyists for CUNA and NAFCU praised the measure.

CUNA Senior Vice President Ryan Donovan said there is “much forcredit unions to like in the bill.” He added that giving creditunions more information about the basis for certain examinationfindings and increasing the opportunities to appeal examinationswill be helpful.

NAFCU Vice President Brad Thaler said while they are stillreviewing the bill, there is much in it that will be favorable forcredit unions.

State Employees of North Carolina Credit Union President/CEO JimBlaine said he would like the NCUA and state examiners to givecredit unions more flexibility to offer nontraditional productsthat will help their members. Having more avenues for credit unionsto appeal regulators' decisions might cause examiners to be moreflexible.

“You don't want to do anything that jeopardizes safety andsoundness. But for credit unions to be able to compete with banksthey need to be able to offer nontraditional products because whenit comes to traditional products, banks will always beat us onprice because of scale,” Blaine said. “We want regulators to lookmore favorably upon innovative products.

Blaine's Raleigh, N.C.-based credit union has assets of $22billion.