NCUA Plans to Wield the Stick in Bylaw Disputes

WASHINGTON – (2-28-2007) NCUA plans to reestablish itself as arbiter in bylaw disputes at credit unions, after two decades of sitting on the sideline, according to NCUA Chairman JoAnn Johnson. Johnson told some 4,000 attendees to CUNA’s Governmental Affairs Conference yesterday that a number of recent bylaw disputes as prompted the federal regulator get back into the business of enforcing bylaw, something that it largely abandoned in the 1980's, except in case of regulatory or legal violations or financial instability. "We have never said NCUA lacks authority to enforce bylaws based on the FCU ACT, but rather opted to leave much bylaw enforcement to members and federal credit unions," said Johnson. But the past year has seen several instances where credit union boards have refused to enforce bylaws and state courts have been reluctant to step in, she said, referring to recent member initiatives to recall directors after they attempted to convert the credit unions to mutual savings banks.

NCUA staff, she said, is drawing up a rule that will once again incorporate a credit union’s bylaws into NCUA rules and regulations, as it was prior to 1982, making a violation of the bylaws akin to a violation of NCUA rules. That means NCUA could enforce bylaws through a variety of means, including cease and desist orders, prohibitions or civil money penalties. (CU Journal)