Member Expulsion Final Rule Approved by NCUA Board

In a 3-0 vote, NCUA board members approved the agency’s final rule on member expulsion Thursday, which officially amends the federal credit union bylaws allowing credit union leaders to oust a member for cause by a two-thirds vote by a credit union’s board of directors.

NCUA Board Chair Todd Harper said, “The final rule we are considering today strikes a balance between addressing the legitimate concerns over providing services to violent and disruptive members and providing due process rights to credit union member-owners. These rights include proper disclosures, hearings and an appeals process. The powers granted in the Credit Union Governance Modernization Act must not be used as a tool to facilitate financial exclusion. What’s more, a federal credit union must ensure its implementation of the authority to expel members for cause is consistent and does not violate anti-discrimination laws or regulations.”

The NCUA had until Sept. 15 of this year to adopt the rule after Congress passed the Credit Union Governance Modernization Act of 2022 in March 2022.

Harper added the new rule “and the Credit Union Governance Modernization Act are not pathways to remove potential problems. Both the statute and this final rule clearly state that credit union members cannot be expelled due to or in retaliation for their complaints filed with the NCUA, any other regulatory agency, like the Consumer Financial Protection Bureau or the Federal Trade Commission, or law enforcement. And, employees or former employees who are credit union members cannot be expelled for any protected whistleblower activities.”

Virginia Credit Union League President/CEO Carrie Hunt applauded the work done by the NCUA board on this issue. In a statement, Hunt said, “Although credit unions would never take the expulsion of a member lightly, the reality is that in certain cases, it is a necessary step to ensure the safety and security of credit union staff, members and the institution itself. We appreciate the careful consideration of the board and agency staff in crafting a rule that provides a regulatory framework through which to address these cases.”

Hunt continued, “The credit union system advocated for a more-streamlined expulsion process for years, and we’re grateful to lawmakers and our regulators for getting us to this point. We’ll urge (the) NCUA to continue its evaluation of the expulsion process as agency examiners have the opportunity to review these cases. We expect those reviews and industry feedback will prove instructive on whether the rule is working as intended or is too complicated to implement.”

The final rule will take effect 30 days after it’s published in the Federal Register.

NCUA Budget Updates

During the seventh NCUA board meeting of the year, the agency’s CFO gave members a midsession budget update and stated the NCUA is estimated to have a $5.1 million surplus in its Operating Fund.

One budget recommendation, approved by a vote of 3-0, involved $737,000 to fund four new cybersecurity support positions and two positions to assist with the agency’s field-of-membership and charter-expansion efforts.

Hood’s Career ‘Enters a New Season’

Board Member Rodney Hood closed out Thursday’s meeting to address what might be next for him as his term on the NCUA board is set to expire in August.

Hood was sworn in April 2019 as the 11th board chair of the NCUA.

Hood said, “And I certainly hope as I sit before you some four-and-a-half years later that I have lived up to that commitment I made here in this board room by demonstrating a fidelity to the tenants of safety and soundness, while also striving to provide financial access and inclusion for the nearly 135 million of our country’s credit union system.”

“In the coming weeks, there will be another season that I will be beginning in my life as my term on the NCUA board comes to an end,” Hood said.

Hood said he is excited to work with Harper and the White House “to ensure a seamless transition as the NCUA prepares to welcome its next board member.”

The NCUA board does not meet in August and will gavel in again for the next meeting scheduled for Sept. 21, 2023.