Comments on the proposed rule were due Tuesday.

In announcing the plan, the NCUA said it wanted to strengthen a board of directors' oversight of a credit union's fidelity bond coverage and ensure that there is an adequate period to discover and file bond claims following a credit union's liquidation.

The proposal also would codify a general counsel's legal opinion that permits a credit union's bond to also cover certain CUSOs. And the NCUA plan would clarify that the documents are subject to board approval every ten years.

The plan's objective is to allow fidelity bond coverage to be a business decision made by a credit union's officials based on their own needs, agency officials said.

But Schafer and Mitria Wilson, CUNA's senior director of advocacy and counsel, said the proposed rules create unnecessary bureaucratic requirements.

Wilson said that the NCUA should ensure that the people responsible for bond decisions are people well-positioned to evaluate credit union risks. The new rules do not provide that flexibility, she said.

Schafer said the rule extends a credit union's board oversight by requiring a review of all applications for a bond and the passage of a board resolution with a rotating signatory who is not an employee. Boards review bond coverage annually, she said, adding that there has been a "handful of unique cases" where bond coverage was a problem.

"The proposed rule imposes new requirements on the entire industry, punishing everyone for the acts of a select few," Schafer wrote.

Having a board member who is not an employee does not mitigate risk, since that board member might have knowledge of fraudulent activity, she said.

Instead of imposing new requirements, the NCUA should increase their review of fidelity bond information during its own examinations.

In addition, a requirement that a supervisory committee review bond purchases simply adds an unneeded level of review, she wrote.

And a proposed requirement that bond contracts include a provision that would allow a liquidation agent to purchase an extended discovery period for bond claims could lead some insurers to decide not to issue the credit union bonds, she said.

The remaining insurers then would be able to increase their prices as a result of the decreased competition.

For her part, Wilson also said the plan does not fulfill the objectives of the reform task force.

"Placing the burden to perform an operational task on the volunteers of the credit union is fundamentally inconsistent with the reform agenda's objective to 'effectively reduce the NCUA's involvement in a credit union's operational decisions while remaining consistent with the [Federal Credit Union] Act.'"

Credit union officials should be able to decide whether management or board members are the most qualified to sign bond documents, Wilson said.

Wilson also said that the two-year bond extension would result in increased costs to credit unions.

She urged the NCUA to weigh any cost increases for credit unions with the potential losses to the Share Insurance Fund.