The NCUA asked a federal judge last week to dismiss a request to halt the conservatorship of the $3.2 million People Trust Community Federal Credit Union.
In January, the founder and former CEO of the North Little Rock, Ark.-based credit union, Arlo Washington, filed an application for relief from conservatorship, arguing the NCUA imposed the action without advance notice or an opportunity to be heard.
"The administrative record upon which the NCUA relied is incomplete and excludes material information regarding vendor failures, examiner conflicts of interest and governance interference," Washington stated. He requested that the court issue an order staying the conservatorship, pending a hearing on his application before the U.S. District Court in Little Rock.
The federal agency placed People Trust Community into conservatorship Jan. 16 because of unsafe and unsound practices. Chartered in September 2022, the credit union opened for business in 2023.
In its Feb. 19 court filing, the NCUA argued that only the credit union itself – through a valid board of directors resolution – can challenge an NCUA action.
"Since Washington filed his application as a member of the credit union but not as the credit union itself, he lacks standing to apply for relief … and his application must be dismissed for lack of subject matter jurisdiction," the NCUA stated.
The federal agency also said Washington's application supports the order of conservatorship because his application noted People Trust Community's net worth ratio declined from 7.06% as of June 30, 2025 to 3.12% by Aug. 31, 2025.
"Based on this rapidly declining net worth, exacerbated by unrecognized costs and liabilities and significant Truth in Lending Act violations, the NCUA issued the order of conservatorship to conserve PTCFCU assets, protect the interest of its members and to protect the National Credit Union Share Insurance Fund," the federal agency stated. "A statutory ground existed for the NCUA's order of conservatorship, and the NCUA did not act arbitrarily or capriciously, so there is no basis to enjoin the conservatorship."
At the end of last year, People Trust Community posted a loss of $927,691 and a net worth ratio of -20.90% compared to a loss of $108,879 in 2024 and a net worth ratio of 7.75%, according to NCUA financial performance reports. In 2023, People Trust Community recorded a loss of $47,571.
People Trust Community's fourth quarter Call Report showed a provision for loan loss of $247,057, while its non-interest income totaled $264,861 and net interest income $71,897.
The credit union also recorded a $1,017,392 loss in non-interest expense, which included office operations expenses of $794,693, employee compensation and benefits of $69,744, office occupancy of $27,077, professional and outside services of $62,642, and miscellaneous non-interest expenses of $22,804, according to the credit union's Call Report.
What also lacked merit, according to the NCUA, was Washington's assertion that the Fifth Amendment's due process right was violated because there was no notice or hearing concerning the conservatorship.
"The appointment of a conservator without prior notice is justified because of the government's interest in protecting bank depositors and the public from unsound practices," the federal agency stated. "Just as the government has an interest in protecting the treasury from unnecessary insurance claims by depositors resulting from bank failures, the same rationale applies to the protection of federal credit unions. Therefore, the order of conservatorship did not violate due process."
READ MORE: NCUA Motion to Dismiss.
Peter Strozniak can be reached at peter.strozniak@arc-network.com.
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