NCUA Cites Defense CU For Violating Its Field Of Membership To Foster Growth

Credit Union Journal Daily Briefing  |  Tuesday, April 20, 2010
SAN ANTONIO – In a rare supervisory action, Air Force FCU has agreed to divest itself of loans and deposits associated with members that were added to the credit union’s rolls in contravention of its field of membership.

Under a letter of understanding agreed to with NCUA, the $335 million credit union has agreed to divest itself of all unqualified members, to set new documentation on how a member qualifies for membership, and to notify its bond insurer, CUNA Mutual Group’s CUMIS, of the addition of members ineligible to join.

The supervisory agreement is unusual because NCUA rarely monitors for adherence to FOM, and almost never cites a credit union for violating its own FOM. The LOA was signed in November but only made public in recent days as NCUA has expressed a desire to set public examples of its supervisory actions.
According to NCUA, Air Force FCU took “an overly expansive view” of its FOM and accepted deposits and made loans to people unqualified to be members between 2002 and 2009, helping push the credit union’s rapid growth. That meant during those years anyone who used Lackland Air Base facilities at any time – which amounts to almost anyone in the Air Force, was allowed to join. The ineligible members made up a significant percentage of the credit union’s shares and loans, NCUA said.
Under the supervisory agreement, NCUA said it has agreed not take formal administrative action against the credit union as long as it makes a good faith effort to comply with the divestiture order. The LOA was signed by nine of the credit union’s 10 directors.