NCUA is calling on Congress to extend the statute of limitations for bringing charges against officers and directors of failed credit unions. What's troubling is the proposal calls for applying the new rule retroactively. This is a dangerous precedent and arguably an affront to the Constitution.
A statute of limitation law specifies the maximum time that may pass before legal action regarding the conduct is allowed. The public policy justification for having statutes of limitation is so citizens will know when a threat of legal action will expire.
We are a nation of laws. In order for laws to work, the citizenship must understand what is to be expected from them. When laws change, citizens should have an opportunity to change their behavior. This concept applies to laws for statutes of limitation.
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When a law is enacted, it usually applies to future behavior. Laws that have a retroactive application are called ex post facto laws. In criminal cases, ex post facto laws are unconstitutional. The U.S. Supreme Court made this determination in a 1798 case. The court cited Article I, Section 9 of the Constitution, where it provides "no ex post facto law shall be passed." There remains a legal debate about the ex post facto ban for civil cases. Still, a law may have an ex post facto consequence without Supreme Court recognition. Generally, ex post facto laws are seen as being contrary to the rule of law for a democratic society.
There is more to this argument than an egghead, academic approach. There is basic injustice in retroactive lawmaking. Most of us want to see bad behavior punished. However, applying new rules of conduct to a person after the fact seems fundamentally unfair.
This turn of events could have a detrimental effect on credit union governance. How are credit union boards expected to perform when there is an ever-present threat that new rules can be applied retroactively? Retroactive application of laws will produce a chilling effect on boards to take reasonable risks.
Maurice R. Smith
President
Local Government FCU
Raleigh, N.C.
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