ALEXANDRIA, Va.–The NCUA board, meeting for the first time in-person at agency headquarters in 30 months—and with Vice Chairman Kyle Hauptman attending his first-ever in-person meeting—has approved new rules for expelling members from credit unions.
(L-R) Kyle Hauptman, Todd Harper, Rodney Hood
The new NCUA rules—technically Part 701, Appendix A, Federal Credit Union Bylaws, Member Expulsion—were outlined to the board by Rachel Ackmann, senior staff attorney in the Office of General Counsel.
The updated rules follow the March 15th passage by Congress of the Credit Union Governance Modernization Act, which required NCUA to develop a policy by which a federal credit union member may be expelled for cause by a two-thirds vote of a quorum of the federal credit union’s board of directors.
Under the prior rules as part of the Federal Credit Union Act and NCUA regulations, there were only two ways by which a credit union could expel a credit union member: by a two-thirds vote of the membership present at a special meeting called for that purpose, and only after the individual was provided an opportunity to be heard; and for non- participation in the affairs of the credit union, as specified in a policy adopted and enforced by the board.
As CUToday.info reported, the credit union trade groups had been pressing the agency and Congress for greater flexibility in expelling members in certain extreme circumstances, such as to adequately address threats of violent or aggressive behaviors of certain members.
‘Some Reservations’ Expressed
While he OK’d the new rules, NCUA Chairman Todd Harper said, “In moving forward today, I do have some reservations. While there are admittedly times in which the expulsion of a member is necessary to protect credit union members and staff, this is a power that credit unions should rarely use. It is, in my view, an extreme remedy that should be saved for egregious examples of member behavior.”
Harper said his reasoning is the FCU Act exists so "people, particularly those of modest means, can access safe, fair, and affordable financial services. That is the statutory mission of credit unions. So, in acting today, we want to preserve this guiding principle.”
Harper credited Vice Chairman Kyle Hauptman with adding language to the preamble of the new rules that underscore the point CUs should remain focused on financial inclusion by growing their membership and services, not on financial exclusion by expelling members.
Hauptman: Not to be ‘Taken Lightly’
Hauptman called the prior expulsion procedures are so difficult they are impractical for most, if not all, credit unions.
“As an alternative to expulsion, back in 2019, the Bylaws Final Rule allowed the limitation of services to certain members. The final rule also stressed that FCUs are not prohibited from contacting law enforcement to deal with abusive or violent members,” said Hauptman. “While these seem reasonable and effective options, the credit unions told NCUA and Congress that they were not enough.
“While I agree that expulsion of a member – especially in a financial cooperative – should not be taken lightly, FCUs should be allowed every tool possible to protect the safety of staff and other members,” Hauptman continued. “I also agree the board does not want this rule used to deny financial access to individuals. But members who act in an egregious manner are the exception. An FCU should have the ability to deny such a member not only access to services, but also access to its branches and member meetings.
As financial cooperatives, credit unions have member owners, so the notion of expelling a member – as opposed refusing service to a customer – deserves thoughtful consideration from that perspective.”
Hood: I Have Heard the Stories
Hood said he supported the new rules, because he has heard from credit unions stories of members who display violent and aggressive behaviors.
“Today’s proposed rulemaking notes that the NCUA board is focused on improving access to financial services, in part, through its Advancing Communities through Credit, Education, Stability and Support (ACCESS) initiative,” said Hood. “As part of this initiative, the NCUA is working to expand the availability of credit to stimulate economic growth and improve the financial well-being of all Americans. The rule makes it clear that the board believes that the expulsion of members is an extreme remedy that may have the effect of denying individuals access to financial services so the authority under the Governance Modernization Act and codified in today’s proposed rule should be rare and should be reserved for extremely egregious behavior.”
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