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National Credit Union Administration (NCUA)
NCUA Final Rule on Federal Credit Union Member Expulsion
The NCUA Board approved the final rule amending the Federal Credit Union bylaws and allowing the credit union’s board of directors to expel a member for cause with a two-thirds vote of a quorum of the board.
Currently, a credit union could expel a credit union member in two ways: by a two-thirds vote of the membership present at a special meeting called for that purpose, and for non-participation in the affairs of the credit union as specified in a policy adopted and enforced by the board.
The final rule retains the limitation of service policy provisions from the 2019 FCU Bylaws Final Rule but makes changes to the member in good standing provisions. Instead of providing two separate lists of disruptive, abusive, or violent behaviors, the final rule defines a member not in good standing as a member who has engaged in any of the conduct listed in the Governance Modernization Act, as implemented in Article XIV of the FCU Bylaws.
Under the final rule, FCU’s now have three ways to expel a member:
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Call a special meeting of the members, provide the member to be expelled the opportunity to be heard, and obtain a two-thirds vote of the members present at the special meeting;
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Expel the member under the nonparticipation policy given to each member; or
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By a two-thirds vote of a quorum of the directors of the credit union for cause.
A credit union’s directors may vote to expel a member for cause only if the credit union has provided, in written or electronic form, a copy of the new Article to each member of the credit union. The communication of the policy, along with all notices required under the rule, must be legible, written in plain language, and reasonably understandable by ordinary members.
If a member is subject to expulsion, the member shall be notified of the expulsion, along with the reason for such expulsion. The notice must include sufficient detail for the member to understand the grounds for expulsion and cannot include only conclusory statements regarding the reason for the member’s expulsion. The notice must also tell the member that any complaints related to their potential expulsion should be submitted to the NCUA’s website.
A member shall have 60 calendar days from the date of receipt of a notification to request a hearing from the board of directors of credit union. A member is not entitled to attend the hearing in person, but the member must be provided a meaningful opportunity to orally present their case to the FCU board. The member may choose to provide a written submission to the Board instead of a hearing with oral statements. If a member does not request a hearing, the member shall be expelled after the end of the 60-day period after receipt of the notice.
Expulsion or withdrawal does not relieve a member of any liability to the credit union. The credit union will pay all of the member’s shares upon their expulsion or withdrawal less any amounts due to this credit union.
The final rule contains model bylaw language and a model notice to members.
The final rule will be effective 30 days after being published in the Federal Register.
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Consumer Financial Protection Bureau (CFPB)
CFPB Issue Spotlight: Consumer Risks Posed by Employer-Driven Debt
The CFPB released an Issue Spotlight which focused on the use of Training Repayment Agreement Provisions (TRAPs). TRAPS are a common form of employer-driven debt. Companies use TRAP provisions to require workers to agree to pay back the purported costs of training if they leave their jobs before the end of a contractual commitment period. The report identified risks associated with TRAPs that include:
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Workers are rushed through the loan sign-up process: Workers report that employers may coerce employees to incur debts as a precondition of employment. Some employers even use high-pressure tactics, such as leaving workers with the impression that the job opportunity would not be available if they took time to carefully review and consider loan and contract terms.
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Employers use bait-and-switch fine print: When commencing employment, employees are required to sign paperwork that appear to allow the employer or issuer to unilaterally change the terms and conditions of the financial product without worker consent or awareness.
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Employer-driven debt puts up barriers to career advancement and higher wages: Despite it often sold to workers as a way to increase earnings and career mobility, employer-driven debt may be structured in ways that require employees to make large payments upon separation. This can impede labor mobility and dissuade employers from raising wages to retain employees. TRAPs, and other forms of employer-driven debt, can have effects similar to non-compete agreements.
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Federal Reserve Board (FRB)
Federal Reserve Announces that its New System for Instant Payments is Now Live
The Federal Reserve announced that its new system for instant payments, the FedNow® Service, is now live. Banks and credit unions of all sizes can sign up and use this tool to instantly transfer money for their customers, any time of the day, on any day of the year.
To start, 35 early-adopting banks and credit unions, as well as the U.S. Department of the Treasury's Bureau of the Fiscal Service, are ready with instant payments capabilities via the FedNow Service. In addition, 16 service providers are ready to support payment processing for banks and credit unions.
When fully available, instant payments will provide substantial benefits for consumers and businesses, such as when rapid access to funds is useful, or when just-in-time payments help manage cash flows in bank accounts. For example, individuals can instantly receive their paychecks and use them the same day, and small businesses can more efficiently manage cash flows without processing delays. Over the coming years, customers of banks and credit unions that sign up for the service should be able to use their financial institution's mobile app, website, and other interfaces to send instant payments quickly and securely.
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2023 Risk Alert Update
Recently, CUNA Mutual Group went through a rebranding to unify its businesses under a single brand and has now effectively transitioned to TruStage. Risk Alerts and associated links have been updated in InfoSight! Credit unions can access that information from the “Resources” tab and under “Risk Alerts”. Just a reminder that a TruStage user ID and password is required to access the risk alerts and associated content within the Business Protection Resource Center.
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League InfoSight Highlight: Mid-Year Compliance Check Up
As we make our way into the third quarter, it’s a good time to reflect on your compliance goals and course correct, if necessary.
League InfoSight has a full suite of compliance tools created specifically for credit unions that can help your team meet and exceed your goals before the year end!
Compliance Goal: Ensure your team has a clear understanding of federal and state laws and regulations.
It’s difficult to implement a successful compliance program if you or your staff do not fully understand what’s expected. InfoSight explains relevant laws and regulations in easy-to-understand language, and for each topic includes information about the issue, how it affects credit unions, and what credit unions need to do about it.
Compliance Goal: Review all policies and procedures.
Laws, regulations, and the credit union’s operations can change frequently. The credit union’s policies and procedures must keep up with those changes, be reviewed by the board, and be clearly communicated to staff. CU PolicyPro provides over 230 credit union-specific model policies and procedures which are reviewed quarterly and updated if necessary. CU PolicyPro’s content management system offers multiple auditing tools to keep track of changes, and the assignment feature helps ensure that your board and staff stay up to date.
Compliance Goal: Conduct regular internal audits.
It’s important to make sure the credit union’s internal control processes are operating effectively and keeping the credit compliant in all areas. ComplySight includes<> 16 areas of compliance and over 700 compliance factors for self-evaluation and grading to identify any potential areas of non-compliance and take corrective action as needed.<>
Compliance Goal: Create a culture of compliance within the credit union.
Compliance is a shared responsibility that requires ongoing effort and commitment from all team members. Credit union leadership should actively participate in and promote compliance activities, and provide staff members with adequate resources, support, and training. InfoSight and CU PolicyPro subscribers can create an unlimited number of users. Both provide compliance guidance on topics relevant to human resources, accounting, marketing, lending, collections, account operations, the board of directors and more!
Compliance Goal: Be transparent.
Being open with staff, the board, and examiners about your compliance efforts helps build trust and credibility and demonstrates your commitment to compliance.
CU PolicyPro allows you to distribute policies, procedures, and other compliance documentation to all stakeholders. The system’s robust user access levels allow you to control viewing and administrative rights specific to each user.
Whether you are well on your way to achieving your 2023 compliance program goals or you have fallen a little behind, celebrate all that you’ve learned and achieved so far this year! And remember, InfoSight is here to help!
Mary Ann Koelzer
Senior Technology Products Manager, League InfoSight |
