Federal credit union bylaws clarifications, updates proposed by NCUA

The federal credit union bylaws created by credit unions’ federal regulatory agency would be updated, clarified and simplified under a proposal issued for notice and comment Thursday.

The NCUA Board issued a request for comments on the federal credit union bylaws during its Oct. 18 open meeting. The board also delayed risk-based capital requirements until Jan. 1, 2010.

Meeting in open session, the National Credit Union Administration (NCUA) Board voted 2-0 to approve issuance of proposed changes to update and conform the bylaws to legal opinions issued by the NCUA Office of General Counsel “and/or provide greater flexibility” to federal credit unions (FCUs), the agency said. The board is also proposing other changes to remove outdated or obsolete provisions.

The proposal includes an extensive discussion regarding a credit union’s ability to limit services to a disruptive or abusive member. Also addressed are issues related to members’ share accounts; annual and special membership meetings; nominations and voting in credit union board elections; credit union board director emeritus and associate director positions; failure to attend board and committee meetings; and more.

In addition, the proposal sets a 90-day calendar day deadline for NCUA’s Office of Credit Union Resources and Expansion (CURE) to reach a decision on a bylaw amendment. (CURE is the primary office handling bylaw amendments.) If CURE doesn’t approve the amendment within that deadline, the rule treats that as a denial, after which the credit union can appeal to the board.

About the FCU bylaws: Section 108 of the Federal Credit Union Act (FCU Act) requires the NCUA Board to periodically prepare a form of bylaws to be used by FCU incorporators and to provide that form to FCU incorporators upon request; incorporators must submit proposed bylaws to the NCUA as part of the chartering process. Once NCUA has approved an FCU’s proposed bylaws, the FCU must operate according to its approved bylaws or seek agency approval for a bylaw amendment.

The FCU Bylaws were last incorporated into the NCUA regulations to address concerns regarding bylaw enforcement. NCUA notes that the FCU Act provides only two mechanisms for correcting bylaws violations: (1) suspension or revocation of an FCU’s charter or (2) placing an FCU into conservatorship. To briefly recap, the board determined that having them in the regulations facilitates the use of other tools, such as a cease-and-desist order, to address material noncompliance.

The FCU Bylaws are in Appendix A to part 701 of NCUA’s regulations. Comments on the proposed rule will be due 60 days following its publication in the Federal Register.

In other action Thursday, the board voted 2-0 in adopting a final rule delaying implementation of the agency’s risk-based capital rule until Jan. 1, 2010.

Federal Credit Union Bylaws, Proposed Rule – Draft Notice for Federal Register

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