RICHMOND, Va. — Guardian Federal Credit Union had been working for months to fulfill audit requests at the behest of the Virginia Division of Unclaimed Property, but at the same time CEO Chris Anuswith did not feel it was proper and got fed up. “They visited two years ago and wanted to go back and look at our dormant accounts and how we handled them,” Anuswith began. Despite a lot of man-hours to comply with the requests spanning accounts from 1994-2004 with some of the records on paper, microfiche, and other now archaic modes of storage, the $37 million credit union sorted through the paperwork.

Eighteen months later, the division came back to them asking for “a high five figure amount” in dormant account fees the credit union had collected. Problem was when many of the members reactivated their accounts, Guardian had returned the fees to the accountholders. The division said those funds should have been escheated to the state.

Something did not seem right to Anuswith for a Virginia regulatory body to be telling a federally chartered credit union how and what fees to charge. He also knew that a number of other federal and state charters were also in the process of negotiating settlements with the division.

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

League President/CEO Rick Pillow said he had not heard from “an overabundance” of members on the issue and so took “prudent action.”

Not getting satisfaction from the league's response to his plight, Guardian struck out on its own. A former banker, Anuswith commented, “Credit unions always have a white hat on and this was clearly in the credit unions' interest…The state was stealing my members' equity.”

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

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

Hood, in turn, handed the letter over to NCUA's Office of General Counsel. “I just wanted to do the right thing,” he said, commending NCUA's legal team on the subsequent legal opinion it issued (06-1214) last month. The letter, addressed to Virginia Director of Unclaimed Property Vicki D. Bridgeman, stated, “NCUA's longstanding position is that a state law, which attempts to govern an FCU's imposition of account fees and charges, including inactive or dormant accounts, directly conflicts with ?107(6) of the Federal Credit Union Act (FCUA) and ?701.35 of NCUA regulations and is preempted by federal law.” NCUA Associate General Counsel Sheila Albin also noted in the legal opinion letter that the Virginia law specifically refers to state charters and that the property at issue was not unclaimed.

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

While this is a savings to Guardian of tens of thousands of dollars, he added that others of his clients are saving in the six figures, all because of this “David & Goliath” saga. League Now Involved

While pleased with NCUA's support, Anuswith is still fired up about the Virginia league's reaction. “I was astounded after talking to the league's counsel and Rick Pillow and they didn't want to pick it up,” he said.

Pillow said, “We applaud Guardian Federal Credit Union for working through that issue.” At the time, the league did not hear a clamoring from its membership about the unclaimed property audits.

Now the league has retained its own council and is working with the division as the situation is still up in the air. According to a spokesman for Virginia Attorney General Bob McDonnell, whose office is representing the division in the matter, “We are reviewing the situation and consulting with our clients.” More information should be available on the state's response later in the month.

Even with the NCUA's letter, state chartered credit unions are still seemingly on the hook for any dormant account funds to be escheated to the state, which raises a parity issue between Virginia's state and federal credit unions. “That is a major impact for us,” Pillow said. “We want to make sure with any law that's passed there is parity.”

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

The league is unaware of the names of the 10-15 credit unions that the division has said it is auditing, according to Senior Vice President of Credit Union Development David Miles, but he also does not believe that is privileged information.

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