Credit Unions Look For Answers After NCUA Shake-Up

FAQ on Recent Firing of NCUA Board Members, click here.

WASHINGTON—Do Todd Harper and Tanya Otsuka have legal standing to contest their removal from the NCUA board by President Donald Trump? Has any past president taken similar action? Can NCUA continue functioning without a quorum on its board? Is this the first step toward consolidating federal banking regulators?

In light of President Trump’s decision to remove Democratic NCUA board members Harper and Otsuka, many in the credit union community have expressed concerns and raised important questions. In response, America’s Credit Unions has prepared a detailed Q&A document addressing the implications of the White House’s actions announced on Wednesday.

Below are key takeaways from the document ACU has shared with its members:

President Trump may now nominate either one or two new board members to fill these vacant positions. At least one must be from a different political party, as statutorily required by the FCU Act.

Or, litigation challenging the removal of board members may result. This has happened in response to firings at other independent agencies such as the Federal Trade Commission and National Labor Relations Board, ACU’s document notes.

Road Ahead Uncertain

ACU acknowledged in its document the trade group is uncertain what the removal of Harper and Otsuka means. As CUToday.info reported, Treasury Secretary Scott Bessent recently voiced his opposition to consolidating federal financial regulators. ACU, in its FAQs, said that leaves the Administration’s plans uncertain.

“Any such consolidation would require Congressional action to amend several key statutes, including the FCU Act, National Bank Act, Federal Deposit Insurance Act, and Federal Reserve Act,” the document states.

Questions regarding whether the NCUA board can conduct official business may take some time to be answered, ACU’s document suggests.

“For the board to conduct official business, the Act requires a quorum of a majority of the board. In practical terms, with a full three-member board, at least two members must be present to form a quorum and vote on actions. Decisions and regulations typically require at least a majority vote of the board. Under NCUA regulations (12 CFR § 791.2), this would require a minimum of two votes. With only one member currently on the board, it does not meet the regulatory quorum requirement, and thus the board likely cannot transact official business under normal procedures,” the document reads.

However, the FCU Act does not contain a numerical quorum requirement, stating instead that, “A majority of the board shall constitute a quorum.” It is possible that with only one member on the board, Chairman Hauptman could consider himself a quorum of one, the FAQs note.

Todd Harper

Board Requires Quorum

Can the NCUA still operate if the board lacks a quorum? ACU, in the document, states day-to-day supervision and existing operations will continue, but the NCUA’s ability to take new official actions is severely constrained.

“With only one board member, the NCUA board cannot hold formal meetings or approve new rules because it lacks the required quorum of two. Any pending rules or policy changes will likely be on hold until the  board vacancies are filled. The sole remaining member, as chairman, cannot unilaterally issue regulations – formal rulemaking by the agency requires a board vote,” the FAQs state.

Examinations and supervision will continue, ACU said. “The NCUA’s core mission of supervising credit unions and insuring deposits is carried out by the agency’s staff, and those activities do not require a board vote in each instance. Regular safety and soundness monitoring is largely unaffected in the immediate term.”

What does the law say about removing NCUA board members? ACU notes the FCU Act (12 U.S.C. §1752a) details the appointment and term of NCUA board members, but it does not explicitly state any provision about the President removing board members before their terms end. There is no clause saying “the President may remove a board member for cause” or any similar language in the statute.

Tanya Otsuka

“This silence has led to differing interpretations and uncertainty. This may also lead to a legal challenge of the recent firing of board Members Harper and Otsuka,” the document states.

Impact On Credit Unions

What should credit unions be concerned about?

With only one NCUA board member, the agency cannot issue new regulations or approve actions requiring a board vote, such as field-of-membership expansions or charter approvals, the FAQs state.

“While supervision, examination, and insurance functions continue, major decisions and policy changes are likely paused. Legal challenges could result in reinstatement of the removed members, adding further uncertainty. Credit unions should monitor developments closely and expect delays in board-level approvals,” ACU said.’

For the full document, click here.