This story updated based on Federal Register notice July 26.
A final rule giving federal credit union (FCU) boards authority to expel a member for cause was approved July 20 by the National Credit Union Administration (NCUA) Board and is set to take effect Aug. 25.
The final rule, adopted unanimously by the three-member NCUA Board, revises the agency’s standard FCU bylaws under a statutory provision enacted last year. Proposed as a way to deal with violent or abusive members, it permits an FCU’s board to expel a member on a two-thirds vote of a quorum of the institution’s board of directors.
There were a couple modifications from the proposed rule in response to commenters:
- The board added a “catchall” category of “for cause” behaviors under the final rule that may be grounds for expulsion (or limitation of services, another option already available under the bylaws). The agency said that under the final rule, any conduct that is dangerous or abusive and related to a credit union’s activities, regardless of the location of the conduct, may be grounds for limitation of services or expulsion. “The catchall category would not include violent crime or dangerous or abusive behavior that is unrelated to the credit union’s activities,” according to a summary in the draft final rule notice. “The Board believes conduct that is unrelated to credit union activities should not be grounds for limitations of services or expulsion and is more appropriately handled through law enforcement.”
- The final rule includes a clarification that limitation of services does not require a notice or hearing, according to the summary.
Invoking the agency’s Advancing Communities through Credit, Education, Stability and Support (ACCESS) initiative, the agency’s draft final rule notice states that the NCUA Board “believes the expulsion of members is an extreme remedy that may have the effect of denying individuals access to financial services. In addition, as financial cooperatives, a credit union’s expulsion of a member-owner is a particularly significant action resulting in financial exclusion. Therefore, consistent with certain statements in the legislative history, use of the authority under the Governance Modernization Act should be rare and used only for egregious member behavior.”
The NCUA’s ACCESS initiative, the notice explains, focuses on expanding credit availability as well as furthering credit unions’ statutory mission “of meeting the credit and savings needs of people, especially those of modest means.”
The agency said its final rule also makes conforming changes to Article II of the FCU Bylaws regarding members in good standing.