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CASTLE ROCK, Colo. – Marvin Umholtz, credit union consultant and membership director of Coalition For Credit Union Charter Options, a banker led group which seeks to promote credit unions’ ability to convert to mutual banks, is concerned that credit unions may not be paying enough attention to the NCUA’s proposed changes to the standard bylaws. The agency proposed the changes to the bylaws, which will be available to all federal credit unions, at the June board meeting and the comment period for the proposed changes will end on October 13. So far the agency reports having received nine comments, none of which addressed the problems Umholz included in his September 15 letter. Commenting to the NCUA specifically on the part of the proposal which would change 12 CFR Chapter VII, Article IV Meetings of Members Section 4, Umholtz expressed concern about the proposed bylaw which would mandate that all members’ motions must be recognized at an annual or special meeting. “Every disgruntled FCU member, crackpot, leftist or right wing political extremist or antagonistic agitator will be empowered to waste the FCU’s other members’ time and resources, discouraging future attendance,” said Umholtz. “Control of the membership meeting agenda, procedures and timetable should be only subject to the board of director’s good judgment as duly elected representatives of the membership.” Umholtz said he made his comments as a credit union consultant and not speaking for the CCUCO but said that the CCUCO would “probably” have a similar opinion of the proposed bylaw changes. In its explanation for the proposed change, NCUA said in part: “In preserving the democratic process in FCUs as member-owned institutions, NCUA also has long recognized that members have the right to move for a member vote to recommend board action. If a member has followed the rules of order chosen by an FCU and moves for a membership recommendation to the board, the chair must recognize the motion even though the board is not bound to adopt the recommendation. This process avails members the opportunity to voice any issues, concerns or suggestions they may have for management and becomes part of a meeting’s record.” Umholtz argued that the Federal Credit Union Act authorizes a credit union’s board of directors to have most of the responsibility for running the credit union and contains no “definitive” language that “articulates an individual credit union members’ specific right of ownership of the institution or any part of the institution’s equity.” Umholtz also argued that the requirement that credit unions recognize their members’ motions would unnecessarily add annual meeting costs, lengthen the time needed for meeting and open the floor to “crackpots” or bankers. “Community chartered FCUs with large geographical fields of membership may also find their annual meeting will be attended by a new type of agitator” he wrote. “Many community bankers are eligible to join these credit unions. These bankers could attend in force and make motions that the FCU voluntarily pay state and federal income taxes and voluntarily subject itself to the Community Reinvestment Act.” Even “savvy” investors, anxious to get a hold of a credit union’s equity, could show up at a meeting to push for a liquidation of the credit union, Umholtz argued, adding “If the `mandatory member motion recognition’ bylaws change is approved, it will once again demonstrate that NCUA places its desire to derail credit union conversions to mutual savings banks ahead of the business decisions made by each FCU’s leaders.” Both CUNA and NAFCU have said they plan on drafting a comment letter about the bylaws and CUNA explained that its letter would likely focus not on Umholtz’ concerns but on the broader picture around the bylaws. Mary Dunn, associate general counsel for CUNA praised the agency for reviewing the bylaws in order to help keep them update to changes in the marketplace and the fields of legality and corporate governance. But while the agency was right to draft bylaws that some credit unions, particularly smaller ones, could simply adopt, it also needed to recognize that other credit unions might want an easier path to drafting bylaws which better fit their needs, she explained. “In general, we believe credit unions need a more streamlined process and greater flexibility when drafting bylaws that could better meet their individual circumstances,” she said. She pointed out, for example, that NCUA should reconsider making credit unions go through the bylaw approval process for a bylaw that the agency has already approved for another credit union. “NCUA has been generally opposed to one-size-fits-all regulation for a few years now,” Dunn said. “and we believe that approach needs to be extended to bylaws as well.” . -

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