Congressman Seeks GAO Study of NCUA Conversion Policies; CUNA Requests Study be Expanded

WASHINGTON – One of the things facing credit unions in 2006 may be a study of NCUA’s policies regulating conversions of credit unions to mutual banks. In what appeared to be a coordinated move with America’s Community Bankers, Congressman Jeb Hensarling (R-Texas) has requested just such a study from the Government Accountability Office, predating a letter from America’s Community Bankers asking that he do so. The ACB requested Hensarling seek just such a study on Dec. 14, one day later than his Dec. 13 letter to GAO. In his letter, Hensarling asked the GAO to examine whether the NCUA’s actions conform with, or exceed the Federal Credit Union Act which grants NCUA the authority to oversee the methods and procedures of a conversion vote. He asked as well for the GAO to examine whether NCUA’s rules and guidelines for conducting a conversion are “no more or less restrictive than that applicable to charter conversion by other financial institutions,” and whether the behavior of the NCUA in overseeing conversions acts as an undue hindrance on the ability of credit unions to convert. “Recent articles in several financial services trade publications have given the impression that a bias against credit union conversions may exist at the NCUA,” Hensarling wrote, “and could lead the administration to intentionally or unintentionally obstruct the ability of credit union members to decide freely or fairly the future of their credit union.” Robert Schmermund, spokesman for the ACB, confirmed that the group had been talking to Hensarling’s office prior to Dec. 14 but denied that the association had coordinated the request with his office or with the $1.8 billion DFCU application to become a bank which was filed on Dec. 14 as well. “As you are well aware, Congress passed the Credit Union Membership Access Act of 1998, and that states credit unions have a right to convert to a bank charter if their members vote to do so,” Diane Casey-Landry wrote to Hensarling in a Dec. 14 letter. “Since it remains unclear how NCUA will treat credit union conversion applications in a consistent and fair basis, we urge you to formally request a GAO study on the NCUA’s treatment of these applications, both current and past, as well as going forward. After the study is finished you may want to consider a committee hearing to review the GAO’s findings,” she added. CUNA reacted swiftly to news of the Hensarling letter, writing the Texas Republican to ask that the GAO expand its study. CUNA asked that the investigation include not only the conversions in Texas, but all conversions since the most recent statutory changes in 1998, as well as the extent to which members received adequate disclosures of the differences between credit unions and mutual savings banks. The report should also look into whether institutions, which had changed from credit unions to mutual savings banks, took the next step of converting to stock institutions and who benefited from such changes; the extent to which boards of directors at converting credit unions adequately fulfilled their fiduciary duties to the member-owners of the credit union; and whether statutory changes are necessary to fully protect the interests of credit union members throughout the conversion process, CUNA said. As of press time, the GAO had not received any follow up letter from Hensarling asking for the study to be broadened and, according to a GAO spokesman, had not yet decided whether or not to take on the study. According to the spokesman, GAO evaluates congressional study requests according to a tiered priority system. Highest priority is given to those studies which are mandated by statute, followed by studies which congressional committee chairmen request, followed by those which individual committee members request and, finally, by those which individual lawmakers seek to have done. Since Hensarling is a member of the House Committee on Financial Services, his request appeared to fall into the third tier. But the spokesman would only confirm that the organization had received the letter and that it would take up the request at the next meeting at which the staff set the research agenda for the coming months. “It’s not a given that we will take it on,” the spokesman said. Should the GAO accept the request, the study may not be completed until the third quarter of next year depending on how many other research topics the organization has to complete. -