August 06, 2020

NAFCU-sought bill to improve CU governance policies, protect members introduced

capitolHouse Financial Services Committee members Tom Emmer, R-Minn., and Ed Perlmutter, D-Colo., have introduced a NAFCU-sought, bipartisan bill that would improve existing language in the Federal Credit Union (FCU) Act related to expulsion in order to protect credit unions, members, and employees.

"NAFCU applauds Representatives Tom Emmer and Ed Perlmutter for introducing bipartisan legislation that will help protect credit unions and their members from abusive, fraudulent, and criminal activity," said NAFCU President and CEO Dan Berger. “Credit unions must have the ability to address those engaging in illegal or threatening behavior at their institutions to ensure they can safely and soundly serve their members and local communities.

"We appreciate both the House and Senate having introduced this NAFCU-sought legislation, and we will continue to advocate for Congress to pass these important reforms," added Berger.

As proposed, the Credit Union Governance Modernization Act of 2020 would allow credit unions to adopt an expulsion policy to expel members who engage in abusive or illegal behavior, while allowing for an appeal process that would provide due process for the accused member.

The legislation would also provide parity with several state-chartered credit unions' model or standard bylaws, which often have a "for cause" provision or board-adopted policy for expulsion.

In a letter, sent Wednesday, NAFCU Vice President of Legislative Affairs shared the association's support of the bill, highlighting that it will help protect credit unions and their members.

"Credit unions have an obligation to ensure their cooperatives act in the best interests of their members and local communities, and this bill would make it easier for them to remove bad actors engaging in illegal behavior from their membership," wrote Thaler.

"Currently, credit unions can only expel a member of their community by a two-thirds votes of all members and only if the behavior they are engaged in is illegal," he added.

Similar legislation was introduced in the Senate earlier this year by Senate Banking Committee members Tina Smith, D-Minn., and Ben Sasse, R-Neb.

NAFCU has long heard from credit unions that current expulsion regulations make it difficult to expel members who are physically or verbally abusive, and engaged in fraud or other illegal activities.

The NCUA in September finalized a rule that clarified several bylaw provisions but took a strict reading of expulsion under the FCU Act and declined to broaden the definition of nonparticipation.

NAFCU will monitor the bill as it moves through the legislative process.