CUNA Comment Letter

Share Insurance Appeals and Clarification of Enforcement Authority of the NCUA Board

January 23, 2006

Ms. Mary Rupp
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428

RE:   Interim Final Rule – Share Insurance Appeals and Clarification of Enforcement Authority of the NCUA Board

Dear Ms. Rupp:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the agency’s interim final rule implementing amendments to the Federal Credit Union (FCU) Act made by the Financial Services Regulatory Relief Act of 2006 (Reg Relief Act). Specifically, the interim final rule covers: appealing from an NCUA Board decision relating to any claim for insurance coverage; expansion of NCUA enforcement authority with respect to the termination of the insured status of any insured credit union; and clarification of the NCUA Board’s suspension, prohibition and removal authority. By way of background, CUNA represents approximately 90 percent of our nation’s 8,700 state and federal credit unions, which serve nearly 87 million members.

Summary of CUNA’s Comments

Appeal from an NCUA Board decision relating to any claim for insurance coverage

NCUA’s regulations currently provide that an appeal from a final NCUA Board determination regarding share insurance coverage are to be reviewed by the U.S. Court of Appeals for the District of Columbia or the court of appeals for the federal circuit where the credit union’s principal place of business is located. The interim final rule revises the regulation to state that the appropriate venue for seeking such judicial review is the U.S. district court for the federal judicial district where the principal place of business of the credit union is located.

There are two primary reasons why CUNA is supportive of the change of venue to a lower (district) court. First, as opposed to one court, there are a larger number of U.S. District Courts available to hear such appeals and hear them in a more expeditious manner. Credit unions would have the opportunity to appeal an adverse decision to the appropriate U.S. District Court of Appeals. Overall, this new provision should provide for a more thorough review to ensure due process. Second, this will be more convenient for legal counsel who will not have to travel to represent credit unions in these cases, which will reduce legal costs.

Expansion of enforcement authority

Under the interim final rule, the NCUA Board may terminate the insured status of any insured credit union for violation of any condition imposed by the Board in connection with any action on any application, notice, or other request by the credit union or an institution-affiliated party. In addition, such violations can serve as the basis for cease and desist orders, removal and prohibition orders, and civil monetary penalties. Previously, such actions could only be taken upon a violation of conditions imposed in “the granting of any application or other request by the credit union”.

While the language in the regulation tracking the Reg Relief Act does broaden NCUA’s authority, it does not appear to signal a significant change in the Board’s actual enforcement actions. The Board has long-standing authority to regulate and take enforcement actions as it deems necessary.

However, CUNA encourages NCUA to provide examples or issue guidelines regarding what types of violations the agency would consider so egregious as to serve as the basis of such orders or penalties and rise to the level of termination of insured status. Doing so would provide a fairer, more consistent process in termination action at the administrative level as well as during any subsequent judicial appeal process.

Clarification of suspension, prohibition and removal authority

The interim final rule clarifies the NCUA Board’s authority to issue Orders of Suspension, Prohibition and Removal against institution-affiliated parties regardless of whether: (a) the subject of the Order remains affiliated with any credit union at the time the Order is considered or issued or (b) the credit union at which the individual was an institution-affiliated party at the time of the offense remains in existence at the time the Order is considered or issued.

Section 1786 (i)(1)(A) states that “Whenever any institution- affiliated party is charged in any information, indictment, or complaint, with the commission of or participation in … a crime involving dishonesty or breach of trust which is punishable by imprisonment for a term exceeding one year under State or Federal law, …the Board may, if continued service or participation by such party may pose a threat to the interests of the credit union’s members or may threaten to impair public confidence in the credit union, by written notice served upon such party, suspend such party from office or prohibit such party from further participation in any manner in the conduct of the affairs of the credit union.” These provisions appear to codify current NCUA policy of extending its authority to cover institution-affiliated parties.

CUNA believes this provision is important to protect the integrity and public confidence in the credit union movement. Such parties should be prevented from patronizing former clients for their business endeavors. CUNA supports this broadening of authority as long as the institution- affiliated individual’s rights are protected and appropriate due process is accorded in the administrative and judicial venues.

In conclusion, CUNA again commends NCUA for taking swift action to implement the provisions in the Reg Relief act relevant to the agency and credit unions. We have no objections with the interim final rule as written. Thank you for the opportunity to share our comments. If you have any further questions, please feel free to contact CUNA’s SVP and Deputy General Counsel Mary Dunn by phone at (202) 508-6736 or by e-mail at mdunn@cuna.com or me by phone at (202) 508-6743 or by e-mail at corr@cuna.com.

Sincerely,

Catherine A. Orr
Senior Regulatory Counsel