"This board has been very cognizant that credit unions are member owned institutions," NCUA Board Member Gigi Hyland stated. However, she also recognized the fact that this philosophy must be weighed against credit unions' need to be able to conduct

their day-to-day operations, which she said the rule tries to balance.

NCUA Chairman JoAnn Johnson pointed to another benefit. She observed, "The regulation is aimed at standardizing and clarifying, really, existing member rights." In a practical sense as well, the courts may not act quickly enough to be able to remedy member concerns anyway.

The final rule requires a petition of 1% of the membership with no less than 20 and up to 500 to gain access to more clearly defined books and records. The proposal had capped the number of signatures at 250, but several commenters said this was not nearly enough for larger credit unions. "We consistently asked NCUA to change that because we felt for larger credit unions, it's not a representative number," NAFCU Senior Counsel and Director of Regulatory Affairs Carrie Hunt explained.

But it is a step in the right direction, she and CUNA General Counsel Eric Richard said. "We'll have to see how it works."

Some commenters were concerned that the petition process could be used to gain access to information that could be used to hurt the credit union or violate the privacy of credit union members and employees or cause disruptions at the credit union. NCUA has moved the explanation of "a proper purpose" for an inspection petition from the preamble, as it was in the proposal, to a definition within the rule. Additionally, the sharing of sensitive documents provides protection against releasing those that could cause "predictable and substantial financial harm."

CUNA's Richard said it is hard to judge at this point whether the safeguards in place are enough to protect the sensitive information, but that the dispute resolution procedures, for which the preamble to the final version provides the regional

directors guidance, was an improvement over the proposed regulation.

A huge win for many commenters was NCUA's removal of the disclosure of executive compensation from consideration in this rule. Instead it will become part of a separate, broader consideration of executive compensation disclosure. "We are glad NCUA is giving it more contemplation," Hunt said.

Richard said that credit unions might find that they prefer to have a regulatory procedure in place to guide member access to credit union information rather than relying on the "uncertainty" of the state courts. On its own, the rule is not that burdensome, he noted, but taken in the whole scheme of regulatory obligations, it is just one more regulation heaped on credit unions.

"If there are abuses taking place, we'll certainly be the first ones coming back to the agency," Hunt stated. She added that NAFCU is not opposed to transparency for credit union members, but that the technical procedures work appropriately.

Expanding Horizons

Community charter conversion approvals that reach the board level have slowed in the midst of NCUA's two-year-long legal battle with the American Bankers Association and NCUA's decision to no longer allow non-multiple common bond credit unions to adopt underserved areas. However, at NCUA's Sept. 27 meeting, two were approved.

Consolidated Federal Credit Union of Portland Ore. was approved to serve the nearly 1.6 million residents of Multnomah, Washington, and Clackamas Counties in Oregon. The credit union demonstrated interaction through shared health facilities and schools, as well as 65% of the employers in the area being located in Portland. The credit union did have to give up serving new members in South Carolina, which was a key branch of its former primary sponsor, under current NCUA rules. Upon approval, Consolidated planned to increase its marketing budget 350% in the first year and hire a community development officer to get the word out on their expansion and credit union services.

In Region II, Connects Federal Credit Union was approved to convert from a multiple select employee group credit union to a community charter serving 806,313 potential members. The $63 million credit union currently serves 14,806 members out of a potential field of membership of 17,100 for a penetration rate of 87%. Hood called the expansion a "valuable strategic move on their part."

In both instances, Board Member Hyland asked pointed questions of the regional staff about whether any information contrary to approval was taken into account as is

being challenged in the ABA vs. NCUA lawsuit. They had considered other factors that were not favorable both times, but that information was countered with other data.

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