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NAFCU sent members a Regulatory Alert Thursday to break down the NCUA’s proposed rule to make changes to member expulsion procedures bylaws of federal credit unions (FCUs).

The proposal, announced during the NCUA Board's September meeting as part of implementation of the Credit Union Governance Modernization Act, would develop a policy through which an FCU member may be expelled ‘for cause’ by a two-thirds vote of a quorum of the FCU’s board of directors.

Of note, NAFCU is supportive of the rule and seeks to ensure that the final rule is cognizant of the varied nature of credit unions and avoids a one-size-fits-all approach to member expulsion.

Through the Regulatory Alert, NAFCU highlights the following:

• ‘for cause’ reasons of expulsion would include a substantial or repeated violation of membership agreement, substantial or repeated disruption to credit union operations, including dangerous or abusive behavior, or fraud, attempted fraud, or other illegal conduct;
• the rule would give a member 60 calendar days from the date of receipt of a notification of a pending expulsion to request a hearing from the board of directors of the FCU;
• FCUs would not be required to provide an in-person hearing – a virtual hearing that provides the opportunity for the member to orally present their case would be sufficient; and
• the rule would retain the limitation of services policy as a tool to be used in tandem with the new expulsion policy.

The Regulatory Alert also includes questions for credit unions to consider when providing feedback.

Of note, NAFCU Senior Regulatory Affairs Counsel Aminah Moore recently discussed the proposed rule with American Banker stating that the rule would allow FCU board of directors to “deal with discrepancies more promptly than before and protect other members from potential physical and financial harm.”

Comments in response to the proposal are due to NAFCU Nov. 4 and can be submitted through the alert; comments are due to the NCUA 60 days after publication in the Federal Register. Subscribe to receive Regulatory Alerts in your inbox.