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WASHINGTON – Proposed legislative language being circulated on Capitol Hill by Representative Patrick McHenry (R-N.C.) would strip the NCUA of some of its authority to regulate the conversion of credit unions to mutual bank charters, arguing in part that the agency is too involved with credit unions to be trusted to regulate the process in an unbiased way. Copies of the proposed legislative language were being circulated during the week of July 6, and McHenry’s office has said he anticipates introducing the legislation during the week of July 13. Under a draft of the proposed legislation, provided the credit union seeking to convert its charter submits its application and proposed disclosure documents to NCUA and the agency initially approves them, the agency would not be able to later disapprove of the vote or the disclosures. In addition, the NCUA’s controversial “boxed statement” that each converting credit union is forced to include with its disclosure statement would also be removed. That statement also forces a converting credit union to disclose to its members what it’s paying for the different aspect of its conversion effort. But the proposed legislation would preserve the NCUA’s authority to review a converting credit union’s disclosure documents before they are sent to members and include the requirement that the CU use a secret ballot and independent agency to count ballots. In making the case for the legislation, the language makes more than hints that NCUA is too vested in credit unions to be able to regulate the charter conversion process fairly. “The NCUA is entirely funded by annual operating fees paid by all federal credit unions and by fees paid to it by the National Credit Union Share Insurance Fund (NCUSIF), which the NCUA manages,” the measure’s proposed language said. “The NCUSIF is funded entirely by federally insured credit unions. As a result, the NCUA has a vested interest in stopping conversions and it has adopted, interpreted and enforced its regulations at every opportunity to do so,” it added in the language that is currently being circulated. The proposed language also criticizes the agency’s prepared text that all converting credit unions must include, charging that it included “inaccurate statements” about expenses and the effect on rates and services, stock benefits, and director compensation. But the proposed measure does not acknowledge that the statement also requires the credit union to inform members what the proposed conversion costs. Unusual for a credit union or banking legislative proposal, the measure is also officially orphaned. Neither the ABA nor America’s Community Bankers nor the Coalition for Credit Union Charter Options have claimed responsibility for the lobbying for the legislation, leaving sources speculating that the well-known banking lobbying firm of Butera and Andrews has had a hand in it. The Washington-based lobbying firm declined to return calls about the proposed legislation as of press time. NCUA has yet to comment on the proposal and will not until it is formally introduced. CUNA has also declined comment, though its lobbyists know about the language. Bill Donovan, NAFCU’s General Counsel, said his association also knew about the language and had been seeking to have input into it. He praised the proposal’s willingness to spell out clearly what the procedures for charter change would be but said that other parts of the proposal would need a good deal more work. He also refrained from speculating on whether the bill would have any staying power. Jim Blaine, CEO of the $13 billion State Employees Credit Union, headquartered in Raleigh, shares a home state with McHenry. He speculated that the Congressman had only received one side of the story when it came to conversions and that he would welcome the chance to share the other part of the story with the congressman. “If all this was really about just how a piece of paper was folded,” Blaine said, referring to the reason opponents have charged the NCUA has declined to approve the $1.4 billion Community Credit Union’s charter change vote, “then I would be with him all the way, but that’s not what this is about and nobody has bothered to tell him that yet.” McHenry, who represents a district in western North Carolina, is not Blaine’s congressman, but the outspoken CEO said he would be open to meeting him when he comes to Washington for the July 11 debate on credit union-to-bank charter conversions. Blaine will debate the topic with John Garabedian, a lawyer with Washington, D.C.-based law firm of Luse Gorman Pomerenk and Schick at an evening meeting sponsored by the Metropolitan Area Credit Union Management Association. -

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