Joyce Moed | Business Samples

NCUA Board Final Ruling
By Joyce Moed, Reporter

ALEXANDRIA, Va.– The Sept. 27th NCUA Board final ruling, which standardized and clarified member inspection rights regarding FCU books, records and minutes, leads credit-union leaders to predict what this means looking forward for the credit-union industry.

The final rule permits approximately 1% of an FCU’s members, upon petition and when it affects members’ financial interests, to inspect the non-confidential portions of the credit union’s books, records and minutes. Petitioning members must agree to reimburse the FCU for locating and duplicating costs. This regulation supersedes existing NCUA legal opinions that state member inspection rights are determined by state corporation law where the FCU is located.

"This is one of those rules that we’ll have to see how it works in practice," said Carrie Hunt, senior counsel and director of regulatory affairs for the NCUA.

"We had asked for the rule to be withdrawn. We feel NCUA has already addressed this. NCUA has looked at the issue of member access in general. We thought there needed to be a better balancing of democratic purpose," continued Hunt, adding that they wanted to make sure people can ask to inspect records only when necessary.

Looking forward, Hunt said, it is the NCUA’s hope that credit unions can easily work within this ruling.

"But we will be watching to make sure there is no abuse," she said. "We want to make sure everybody is going about it in the right way. We hope it’s not burdensome for credit unions."
Jim Blaine, president of State Employees’ Credit Union in Raleigh, N.C., and co-founder of the National Center for Member Trust, said he "very much supports the changes."

"Transparency in credit-union operations is always a positive approach for a member-owned cooperative," he said.

Blaine said he is not expecting the ruling to cause "much of a burden to the majority of credit unions."

"I believe the potential for abuse by disgruntled members has been well controlled within the regulation," he said. "For those who object to the regulation, the potentially dangerous question that will be asked is: ‘What have you got to hide?’"

CUNA acknowledged that the NCUA board made several changes in the proposal, in response to concerns leagues, credit unions and CUNA expressed during the ruling’s comment period.

"For example, NCUA has clarified what documents, etc., must be available to members for inspection, has increased the upper number limit of member signatures needed to petition for inspection from 250 to 500, and has provided examples of how the petition requirements should be implemented," said Mary Dunn, senior vice president of regulatory affairs and deputy general counsel for CUNA. "The final rule also requires the member petitioners to name one representative and alternative as the contact person for the credit union to deal with, which is useful. In addition, the final rule permits the credit union to copy and deliver documents without members’ physical inspection of the materials first."

"Nonetheless, we continue to maintain a number of provisions in the final are too broad or potentially onerous," Dunn said.

Dunn cited four provisions that CUNA views as problematic:

"The final clarifies that ‘minutes of proceedings at all meetings’ of credit union board members and committees that must be made available upon request via a member’s petition would include not only the formal summary of the meetings but any recordings, documents, reports, studies, visual aids or other information considered by the meeting participants," Dunn said.

The second provision Dunn mentioned is that while the final rule has been changed regarding the time frame for response to members’ petition has been modified, it still requires the FCU to respond to petitions in 14 days and inform the petitioners that it will either provide the materials and when, or inform petitioners what is being withheld and why.

The third provision CUNA expressed concern about is that although FCUs may charge the petitions for direct costs of providing the materials, is there is a dispute and the petitioners refuse to pay, the FCUs recourse is a suit against the involved members for breach of contract.
"This seems very impractical for a number of reasons," Dunn said, "including the fact that the litigation will likely cost the credit union more than the expenses of providing the materials."
The fourth provision Dunn said CUNA views as problematic is appeals of a regional director’s decision when there is a dispute between the petitioners and CU about the materials requested is not allowed.

"The supplementary information to the final rule states, ‘The regional director’s decision will be NCUA’s final agency decision and any party that believes itself injured by that decision may, if it desires, pursue judicial action," Dunn said.

As the rule has now been adopted, CUNA believes the board should commit to FCUs that it will formally review its implementation at an NCUA board meeting in one year, Dunn said. "Including the extent to which credit unions may have experiences problems in complying," Dunn said. "We will be following up with the board members on this request."

The new rule is effective 30 days after publication in the Federal Register.