CUNA Comment Letter

Conversion of Credit Unions to Thrifts

November 26, 2003

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

Dear Ms. Baker:

The Credit Union National Association is pleased to comment on the National Credit Union Administration Board’s proposal regarding increased disclosure requirements for federal credit unions seeking to convert to a thrift charter. By way of background, CUNA represents 90 percent of the nation’s almost 10,000 state and federal credit unions, which serve approximately 85 million members. CUNA’s letter was developed under the auspices of our Examination and Supervision Subcommittee, our Federal Credit Union Subcommittee and our State Issues Subcommittee.

Summary of CUNA’s Position


The National Credit Union Administration Board is proposing to add member disclosure requirements for credit unions seeking to convert to a thrift charter. Currently, a credit union seeking to convert must provide three notices to members – 90, 60 and 30 days prior to the vote of the membership on the conversion. The notices to members must adequately describe the purpose and subject matter of the vote on the conversion. As directed by the Credit Union Membership Access Act (CUMAA), the majority of members who vote decide the issue of conversion. Also, the credit union must submit to NCUA a copy of the member notice, ballot and all other written materials that the credit union provides or intends to provide to its members in connection with the conversion.

As provided by CUMAA, NCUA has limited authority to regulate such conversions. However, if NCUA does not approve the notice procedures or the procedures for the member vote, NCUA may direct the credit union to correct deficiencies in its process; this could include requiring a new membership vote.

The proposal changes the disclosure requirements to direct converting credit unions to include the following information to members in the notices provided prior to the vote.

Credit unions must disclose that:

The notice must also include an affirmative statement indicating whether at the time of conversion to a thrift the credit union intends to:

In CUNA’s view, these disclosure requirements are not onerous or unreasonably costly and will help credit union members have a better understanding of the conversion process.

Nonetheless, while NCUA has developed a positive proposal, we believe the agency has authority to develop a rule that goes further in helping to ensure members are fully informed regarding a potential conversion.

In that connection, we recommend NCUA consider two amendments. One would direct a converting credit union to make disclosures to members about the conversion separate from other financial disclosures or information such as newsletters. We believe this amendment is important because it will facilitate the ability of members to focus on key information about a conversion and not be distracted by other disclosures or materials from the credit union.

The other change we are recommending would require a credit union preparing for a membership vote on a conversion to allow all members to be able to object, in writing, or otherwise file comments prior to the conversion vote from the members. A credit union receiving comments from a member prior to the conversion vote would be required to share that information with the rest of the membership.

In closing, CUNA appreciates the opportunity to express our views on the proposed disclosures for federal credit unions seeking to convert their charter to a mutual thrift. We would welcome the opportunity to discuss our views and recommendations if that would be useful for NCUA Board members or agency staff.


Mary Mitchell Dunn
Associate General Counsel
and Senior Vice President