Current rules have no such advance notice requirement, no certification requirement, and mandates ballots be sent with disclosure proposals 30, 60 and 90 days before the final special meeting which ends the voting process.

One of the long standing criticisms of the way conversions have been handled is that, frequently, the CU will not notify members until the first disclosure packet arrives that it is even considering becoming a bank. Critics charge this "gotcha" factor does not serve members well and reduces the opportunity for considered discussion about what is proposed.

For example, in the case of $331 million Lafayette FCU, which has filed to convert its charter to that of a mutual bank, the CU has declined to take calls from the media about the conversions and has not notified its members about the application.

"NCUA's objective in connection with conversions always has been and remains one of ensuring a fair and open process whereby the members, as owners of the institution, can consider all sides of the issue and make their own determination about its future," Johnson said, adding, "The process should be deliberate, not one in which the members are rushed into voting based on one-sided information and with little or no dialogue with the officials who are elected to protect the members' interests."

But the effort to improve member input about the conversion does not end there. The proposed rules will also mandate that a credit union seeking conversion will have to facilitate, at the expense of individual members or groups of members, communication about the proposed conversion.

The communications from the members must be conversion related and proper, the agency said, adding that improper communications include any that are impracticable to deliver, relate to any personal gain or grievance or are otherwise false and misleading in respect to material fact.

In the cases of these communications, the CU member or group of members must provide the CU with an advance payment of the costs of the mailing and the regulations lay out a procedure for resolving disputes about any proposed communications.

"If a credit union's resources are used to promote a conversion, members should have an opportunity to express their views as well, whether for or against the conversion," the agency's regulations said. In other proposed changes, the agency sought to mandate that converting credit unions set the date by which a member is considered a member for the purpose of voting on the charter conversion at no later than 120 days before it first notifies the members about the possible conversion change. This provision is designed to help preserve the process from financial speculators who might join a CU in order solely to take advantage of the conversion. The proposal also tinkers with the boxed disclosure statements that have drawn the NCUA so much criticism. Essentially, the agency proposed leaving the boxed statements alone, but streamlined them and grounded them more deeply in fact, removing the language which critics have charged is speculative and subjective. For example, in the boxed statement, the second point says in part, "ADDITIONAL EXPENSES MAY CONTRIBUTE TO LOWER SAVINGS RATES, HIGHER LOAN RATES, OR ADDITIONAL FEES FOR SERVICES." The proposed language would read:

"RATES ON LOANS AND SAVINGS. If your credit union converts to a bank, you may experience adverse changes in your loan and savings rates. Available historic data indicates that, for most loan products, credit unions on average charge lower rates than banks. For most savings products, credit unions on average pay higher rates than banks."

In the case of the hot-button third point in the boxed disclosures, which currently reads, in part, "EXECUTIVES OF THE INSTITUTION PROFIT BY OBTAINING STOCK FAR IN EXCESS OF THAT AVAILABLE TO THE INSTITUTION'S MEMBERS," the proposed language would read:

"POTENTIAL PROFITS BY OFFICERS AND DIRECTORS. Conversion to a mutual savings bank is often the first step in a two-step process to convert to a stock-issuing bank or holding company structure. In such a scenario, the officers and directors of the institution often profit by obtaining stock in excess of that available to other members." After the measure passed Fred Becker, CEO of NAFCU, expressed satisfaction with it, noting that the agency had adopted some of the suggestions NAFCU made in its white paper on conversions, particularly the notion of notifying members in advance before a CU board votes on a conversion application. "I think this is a strong and targeted set of changes which is designed to improve member awareness and input into charter conversion decisions," Becker said, adding that he thought the proposal sought to incorporate different perspectives on the controversial topic.

The agency will take comments on the proposed rule for 60 days after it is published in the Federal Register. [email protected]