It was recently reported that 75% of all credit unions are under some form of administrative action from the NCUA. Administrative action includes documents of resolution, letters of understanding and agreement and cease and desist orders. It seems that documents of resolution, in particular, have become a routine and frequent NCUA enforcement tool. For many credit union leaders, you are getting your first experience with this regulatory treatment. If you are seeing a DOR for the first time, don't panic. It is important that you make every effort to fully understand the NCUA's objectives before signing.

From a practical perspective, credit union boards and management should view a DOR as a contract between their organizations and the NCUA. The NCUA Examiner's Guide mentions concepts like agreement and acceptance. The guide instructs examiners to reach an agreement with the credit union on the DOR. A contract is an agreement between two or more parties to act or refrain from an action.

To form a valid contract, the transaction should contain some essential elements. An enforceable contract includes an offer, an acceptance and consideration (which is also called a bargained-for-exchange.) The most challenging element for NCUA enforcement is the mutual assent element. This is the area where I believe credit unions should focus their attention before accepting a proposed DOR.