Home Info Newsroom League Supports Implementation of Member Expulsion Rule

League Supports Implementation of Member Expulsion Rule

Authored By: Lewis Wood on 7/20/2023

The Virginia Credit Union League applauds the National Credit Union Administration Board for its unanimous vote today to approve a modernized process for member expulsions, but will look for ways in the future to streamline the process.

“Although credit unions would never take the expulsion of a member lightly, the reality is that in certain cases, it is a necessary step to ensure the safety and security of credit union staff, members and the institution itself,” said Virginia Credit Union League President/CEO Carrie Hunt. “We appreciate the careful consideration of the Board and agency staff in crafting a rule that provides a regulatory framework through which to address these cases.”

“The credit union system advocated for a more-streamlined expulsion process for years, and we’re grateful to lawmakers and our regulators for getting us to this point,” said Hunt. “We’ll urge NCUA to continue its evaluation of the expulsion process as agency examiners have the opportunity to review these cases. We expect those reviews and industry feedback will prove instructive on whether the rule is working as intended or is too complicated to implement.”

The final rule is effective 30 days after publication in the Federal Register. Once enacted, this final rule will amend federal credit union bylaws, providing a process by which a credit union’s board can expel members for cause in three specific circumstances:

  • a substantial or repeated violation of the membership agreement;
  • a substantial or repeated disruption, including “dangerous or abusive behavior;” and
  • fraud, attempted fraud, or other illegal conduct that a member has been convicted of, including insider fraud conducted by employees.

The final rule does include notable changes from the original proposal, including details on required notices; flexibility on the expulsion hearing format; and a limitation to one reinstatement request.

The final rule also does not hinder a credit union’s ability to address member behavior through existing methods such as a suspension of services policy or calling a special meeting of the membership to vote on member expulsions.

The Virginia League was among the organizations that submitted a comment letter on the agency’s proposed member expulsion rule, in which we urged the NCUA to simplify the proposed member expulsion process and provided feedback on several questions posed in the request for comment.

“This final rule is also a testament to the effectiveness of the advocacy work of credit unions and our system partners, who kept this issue and the Credit Union Governance Modernization legislation front-and-center in pushing for its passage last year,” said Hunt, who noted that the NCUA’s final rule incorporated eight of the nine recommendations offered in our comment letter.

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