Commodore Perry Federal Credit Union of Oak Harbor, Ohio, is awaiting a ruling from the NCUA's Supervisory Review Committee regarding an exam appeal that alleges that an NCUA examiner harassed employees and retaliated against the credit union after it complained. The appeal is only the fifth heard by the committee in the past decade. None of the previous four were ruled in favor of the credit union.

The $32 million Commodore Perry FCU elevated its exam appeal after it was denied by Regional Director Herb Yolles in August. Thomas Renz, the credit union's president and chief development officer, and CEO Mike Barr said the male examiner harassed and bullied employees, particularly female employees, to the point where the credit union leaders said they worried their organization was legally liable.

Barr said he contacted the NCUA's supervisory examiner and reported the conduct to her. He said he told the supervisor he didn't want to file a formal complaint but did request that the regulator send another examiner to complete the exam.

Instead, the supervisory examiner, who neither Barr nor Renz would identify, passed the information along to the NCUA's Office of Inspector General, which opened an investigation. The examiner was made aware of the credit union's complaints by his supervisor before the examination was complete, Renz said.

“Not surprisingly, when he finalized the exam and issued the report, we found a lot of things were inaccurate, including scores that were downgraded, which we could see weren't justified,” Barr said.

Adding to the retaliation charge were “inaccuracies and falsehoods” in the exam report that specifically contributed to the credit union's downgrade to its lowest CAMEL score in history, Barr said.

Barr and Renz then submitted an appeal to Yolles in June, stating that they had the documentation to prove the examiner's findings were inaccurate. They received a letter that denied the appeal, although Yolles did promise to send a different examiner to the credit union for its 2013 exam.

“I was very frustrated because we were never contacted by the regional office to discuss the facts,” Barr said. “That's shocking because the entire basis of the appeal is that we can prove the report is untrue. All they did, apparently, was review the examiner's report and come to the same conclusion he did.”

So, on Sept. 9, Barr and Renz submitted a 365-page appeal to the Supervisory Review Committee that included documentation they say proves the exam findings are inaccurate. The two said they also requested to appear in person before the SRC, as is their right, but have not yet received a response from the NCUA.

“This is not a case of a credit union being angry about a bad examination score. This is an extremely clear case of retaliation that clearly demonstrates the problem with the NCUA appellate process,” Renz said.

Documents provided to Credit Union Times reveal the examiner accused the credit union of not detailing a cost-benefit analysis of existing products, services and facilities; not reconciling bank accounts, particularly before a planned system conversion; and paying more, not less, for outside professional services as a result of the conversion. The credit union also provided documentation that it said proved it did, in fact, complete the due diligence in question.

On Aug. 27, Commodore Perry FCU sent a second letter to the NCUA, detailing five exam issues experienced by many credit unions, including the NCUA's presumption that examiners' findings are correct and the resources required to appeal exam findings. The credit union further asked to meet with the NCUA to discuss how it might improve the process. In a letter to Sen. Sherrod Brown (D-Ohio), Renz said the response letter from NCUA said “the appeals process is good enough.”

Barr said despite the frustrating appeals process, the credit union will continue to make its case.

“We remain hopeful that the NCUA Supervisory Review Committee will review our appeal and make a just ruling,” he said.

Renz said while the credit union would like to return to its previous CAMEL score, its primary appeal goal is a “fair and just examination, based upon fact.”

Renz said the credit union has also shared its experience with Sen. Rob Portman (R-Ohio), who this summer signed on a sponsor of the Financial Institutions Examination Fairness and Reform Act, which would allow credit unions to appeal exams to an administrative law judge.

The Ohio Credit Union League's John Florian, vice president of government affairs, affirmed Portman's support of the bill, and added that nine Ohio representatives are also co-sponsors of the House version.

The NCUA's appeals process and high percentage of appeals ruled in the NCUA's favor has created a lack of confidence among Ohio credit unions, Florian said.  

Ohio League Director of Media and Public Relations Patrick Harris said while the trade association has not quantified how many credit unions in the Buckeye State have experienced exam issues, some have expressed concerns.

“I think a lot of that comes from the landscape of Ohio,” Harris said. “Sixty-six percent of our credit unions are $35 million and under in assets, so some of these smaller credit unions are really having difficulty with NCUA transparency and exam consistency.”

As for the NCUA's side of the story, Public Affairs Specialist John Fairbanks said, “We cannot comment on any aspect of any pending appeal.”