ALEXANDRIA, Va. — Following arguments over bylaws between members and management of credit unions considering mutual savings bank conversions, NCUA's policy of relying on the state court system to clear things up proved to be less than desirable.
As a result, NCUA is seeking to re-incorporate the Federal Credit Union Bylaws into its regulations by reference to provide the agency a full range of options for handling these situations. In particular, $1.8 billion DFCU Financial caused a huge stir when it declined a special member meeting despite a petition meeting its bylaw requirements to do so when it was seeking to become a mutual savings bank.
"Re-incorporation of the bylaws will once again assure the members that the bylaws do mean something and someone will be held accountable for enforcing them," NCUA Chairman JoAnn Johnson stated.
NCUA Staff Attorney Elizabeth Wirick added, "We used the exact same language and section number [as before deregulation]." Prior to 1982, the bylaws had been included in NCUA regulation, but as part of an overall deregulation effort, they were removed.
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At that time, NCUA took the position that state corporate law, as consistent with the Federal Credit Union Act and NCUA's regulation, should govern bylaw enforcement. "As a result of the deregulation of the bylaws, NCUA's ability to enforce the Bylaw, absent a safety and soundness reason has become problematic…" NCUA's Board Action Memorandum read. "While this approach worked fairly well for the most part over the years, recently, NCUA has learned of cases where members have been unable to use the judicial system to enforce rights granted by the bylaws. While NCUA continues to maintain members can enforce the B9 m ylaws as a contract, the Board recognizes that, in certain circumstances, this remedy may not be practical or provide adequate relief due to circumstances such as timing and cost."
Currently, NCUA has said its only remedy is charter suspension or revocation, which are extreme and not beneficial to the members. The proposal would permit NCUA to enforce compliance through less harsh measures, such as letters to the credit union.
NCUA also emphasized that the change would impose no new regulatory burden on credit unions and they would still be permitted to seek approval for customized provisions. Additionally, the proposal included a provision to streamline the process for credit unions to adopt bylaw amendments already approved by the agency for another federal credit union.
As part of this change, NCUA also addressed another bylaw issue codifying legal opinion in regulation clarifying the responsibility of the Supervisory Committee to assume the responsibility of the board of directors if for any reason an entire board is simultaneously removed or unable to serve.
Wirick emphasized, "This proposal does not mean NCUA will become involved in every bylaw dispute."
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