Legislation Introduced to Make It Easier for Credit Unions to Expel Members

Two House members said it should not take a meeting of the full membership of a federal credit union to expel a member.

Reps. Tom Emmer (R-Minn.) and Ed Perlmutter (D-Colo.) have introduced legislation that would update the expulsion process while ensuring a fair procedure for reinstatement.

In introducing the bill, the lawmakers said current law requires a federal credit union to hold a membership vote before it can expel a member who “engages in egregious, dangerous or illegal conduct.”

The legislation would allow credit unions to adopt a policy to expel members who engage in such conduct and provide for a process for membership reinstatement. Some states already have adopted policies for state financial institutions.

Similar legislation was introduced in the House and Senate during the last Congress.

“My home state of Minnesota has already taken steps to adopt a similar, important measure,” Emmer said. “It’s critical we make credit unions safer for both employees and their members.”

“Credit unions in Colorado and across the country should have the ability to address threatening or illegal behavior when necessary,” Perlmutter said.

In 2019, the NCUA adopted amendments to its credit union bylaws, but at the time, credit union officials said the changes regarding expulsion did not go far enough. And they said if legislative changes were necessary, the NCUA board should seek changes from Congress.

“As a credit union, we would like a way to expel an abusive member, a member who has caused a loss, or a member who may be involved in illegal activities without holding an expulsion meeting,” one credit union president told the agency at the time. The official said that credit union may limit some services that members may access, but that occasionally has not been sufficient.

NAFCU officials said they have heard from credit unions that current rules make it difficult to expel a member and that when the agency adopted its updated bylaws rule, the NCUA took a “strict reading” of expulsion and did not change the meeting requirement.

CUNA President/CEO Jim Nussle said the legislation represents an important modernization of the Federal Credit Union Act.

“CUNA, Leagues and credit unions look forward to advancing this, and other, much needed Federal Credit Union Act modernizations to ensure credit unions can meet the needs of 21st century consumers,” Nussle added.

“Ensuring credit unions have the ability to address illegal activity or threatening behavior at their institutions is paramount so they can continue to safely and soundly serve their members and local communities,” NAFCU President/CEO B. Dan Berger said.