RICHMOND, Va. — Guardian Federal Credit Union had been workingfor months to fulfill audit requests at the behest of the VirginiaDivision of Unclaimed Property, but at the same time CEO ChrisAnuswith did not feel it was proper and got fed up. “They visitedtwo years ago and wanted to go back and look at our dormantaccounts and how we handled them,” Anuswith began. Despite a lot ofman-hours to comply with the requests spanning accounts from1994-2004 with some of the records on paper, microfiche, and othernow archaic modes of storage, the $37 million credit union sortedthrough the paperwork.

Eighteen months later, the division came back to them asking for“a high five figure amount” in dormant account fees the creditunion had collected. Problem was when many of the membersreactivated their accounts, Guardian had returned the fees to theaccountholders. The division said those funds should have beenescheated to the state.

Something did not seem right to Anuswith for a Virginiaregulatory body to be telling a federally chartered credit unionhow and what fees to charge. He also knew that a number of otherfederal and state charters were also in the process of negotiatingsettlements with the division.

Anuswith, chairman of the Virginia Credit Union League'sGovernment Affairs Committee during H.R. 1151, went to his leaguefirst for support. “I spent nine months or better trying to bringthem into it…” he explained. “The league tries not to becontroversial. I've never been shy.”

League President/CEO Rick Pillow said he had not heard from “anoverabundance” of members on the issue and so took “prudentaction.”

Not getting satisfaction from the league's response to hisplight, Guardian struck out on its own. A former banker, Anuswithcommented, “Credit unions always have a white hat on and this wasclearly in the credit unions' interest…The state was stealing mymembers' equity.”

Guardian retained the counsel of attorney E. Andrew Keeney ofthe firm Kaufman & Canoles. Keeney explained, “If someone wassent to Afghanistan or Iraq for several months…then the accountbecomes inactive.” Still the state would not give the credit unionsdiscretion over whether to refund the dormant account fees or not.He called it a “shame” when a member-owned institution cannot giveits members back their money.

Anuswith also raised the issue with NCUA Vice Chairman RodneyHood at a speaking engagement who asked to be more fully apprisedof the situation. Keeney drafted a letter to the division andcopied Hood on it outlining the situation and the credit union'sarguments; legal representation cost the small credit union about$15,000, according to Anuswith.

Hood, in turn, handed the letter over to NCUA's Office ofGeneral Counsel. “I just wanted to do the right thing,” he said,commending NCUA's legal team on the subsequent legal opinion itissued (06-1214) last month. The letter, addressed to VirginiaDirector of Unclaimed Property Vicki D. Bridgeman, stated, “NCUA'slongstanding position is that a state law, which attempts to governan FCU's imposition of account fees and charges, including inactiveor dormant accounts, directly conflicts with ?107(6) of the FederalCredit Union Act (FCUA) and ?701.35 of NCUA regulations and ispreempted by federal law.” NCUA Associate General Counsel SheilaAlbin also noted in the legal opinion letter that the Virginia lawspecifically refers to state charters and that the property atissue was not unclaimed.

Keeney pointed out, “It applies to every single federal creditunions that is headquartered in the Commonwealth of Virginia.”According to the league's Web site, that is approximately 70% ofthe 214 credit unions in Virginia.

While this is a savings to Guardian of tens of thousands ofdollars, he added that others of his clients are saving in the sixfigures, all because of this “David & Goliath” saga. League NowInvolved

While pleased with NCUA's support, Anuswith is still fired upabout the Virginia league's reaction. “I was astounded aftertalking to the league's counsel and Rick Pillow and they didn'twant to pick it up,” he said.

Pillow said, “We applaud Guardian Federal Credit Union forworking through that issue.” At the time, the league did not hear aclamoring from its membership about the unclaimed propertyaudits.

Now the league has retained its own council and is working withthe division as the situation is still up in the air. According toa spokesman for Virginia Attorney General Bob McDonnell, whoseoffice is representing the division in the matter, “We arereviewing the situation and consulting with our clients.” Moreinformation should be available on the state's response later inthe month.

Even with the NCUA's letter, state chartered credit unions arestill seemingly on the hook for any dormant account funds to beescheated to the state, which raises a parity issue betweenVirginia's state and federal credit unions. “That is a major impactfor us,” Pillow said. “We want to make sure with any law that'spassed there is parity.”

Pillow said he was unaware of how the division would proceed orif any settlements had been reached with federal charters, if theyhad been paid, and whether or not those funds could or would bereturned to the credit unions. “That's why we're trying to workwith them to determine how they're going to proceed,” he said.

The league is unaware of the names of the 10-15 credit unionsthat the division has said it is auditing, according to Senior VicePresident of Credit Union Development David Miles, but he also doesnot believe that is privileged information.

Keeney said he believes a couple of Virginia credit unions havealready come forward to help reimburse Guardian for its legalexpenses. –[email protected]