NCUA Chairman Todd M. Harper speaks during a meeting of the NCUA Board in Alexandria, Virginia.
As Prepared for Delivery on July 20, 2023
Thank you, Rachel, for your presentation and for your work on finalizing this statutorily mandated rule on federal credit union member expulsion procedures. While I will vote in favor of today’s final rule, I continue to believe credit unions should use these new powers sparingly. In other words, credit union member expulsion should be the exception and not the rule.
The Credit Union Governance Modernization Act requires the NCUA to develop a policy by which a federal credit union may expel a member for cause. It is, however, important that credit union boards balance this expulsion power with the member’s rights. That’s because credit unions must remain true to their mission of promoting access to safe, fair, and affordable financial services — especially to those of modest means.
The final rule we are considering today strikes a balance between addressing the legitimate concerns over providing services to violent and disorderly members and providing due process rights to credit union member-owners. These rights include proper disclosures, hearings, and appeals processes.
As noted earlier, the final rule retains the proposed rule’s provisions on the limitation of services. Keeping these measures in place provides flexibility to a federal credit union’s board of directors to address member behavior. Additionally, the final rule clarifies what constitutes “a member not in good standing” to match the disorderly behaviors listed in the Credit Union Governance Modernization Act.
Additionally, the final rule states that a federal credit union may expel a member only if the credit union has provided, in written or electronic form, a copy of the expulsion policy to each member. This notice can be provided as part of a credit union’s membership agreement or account terms and conditions. Regardless of the delivery method, it’s vital that member-owners know the grounds for their expulsion and their due process rights.
That brings me to my first question. Rachel, can the behavior of a member outside of or unrelated to the credit union be a factor in the member’s expulsion? For example, if a member hacks into a credit union’s website but causes no material damage, could that member be subject to expulsion?
Thank you for clarifying that point. Now, what if a member commits a crime outside of and not directed toward a credit union, like stealing a car? Would the member be subject to expulsion under this final rule?
Thank you for explaining that the rule doesn’t include committing crimes or disorderly behavior unrelated to a credit union’s activities.
The final rule also allows credit union members being considered for expulsion the ability to request a hearing. Hearings could be conducted in person — assuming there are no safety concerns — or virtually. Hearings, however, must only address the behavior explicitly outlined in the notice provided to member.
Let me emphasize the importance of fairness and due process to credit union members. Hearings should be held in a fair, reasonable, and consistent manner. Also, a credit union must vote on an expulsion within 30 calendar days after the hearing or 60 calendar days after receipt of the notice if there is no hearing.
That brings me to my next question about a member’s rights after an expulsion vote. Rachel, what rights does a member have to appeal or challenge an expulsion vote?
Thank you for your response and for noting that members can file complaints with the NCUA if the dispute cannot be resolved directly with the credit union or through independent legal action if the federal credit union does not provide fair and reasonable hearing procedures.
Finally, Rachel, how will the NCUA track the number of expulsions to determine if there is a disparate impact on members and communities? Can you also explain the record-keeping requirements credit unions will have in expulsion cases?
Thank you for clarifying that point. The powers granted in the Credit Union Governance Modernization Act must not be used as a tool to facilitate financial exclusion. In implementing its member expulsion policies, a federal credit union must remain on watch for the potential for discrimination, including disparate impacts on and arbitrary treatment of members. While the NCUA will review these policies and resulting expulsions during examinations, each federal credit union should also periodically review its expulsions to ensure there is not a disparate impact created by the credit union’s policy.
Lastly, this final rule and the Credit Union Governance Modernization Act are not pathways to remove potential problems. Both the statute and this final rule clearly state that credit union members cannot be expelled due to or in retaliation for their complaints filed with the NCUA, any other regulatory agency, like the Consumer Financial Protection Bureau or the Federal Trade Commission, or law enforcement. And, employees or former employees who are credit union members cannot be expelled for any protected whistleblower activities.
That concludes my remarks. I now recognize Vice Chairman Hauptman.