CUNA supports NCUA’s proposed rule to amend federal credit union bylaws regarding member expulsion but asks NCUA to examine ways to streamline and simplify the rule, it wrote to the agency Friday. The proposal would implement the CUNA-League-led Credit Union Governance Modernization Act (CUGMA), which was signed into law in March.  

The bill requires NCUA to develop a policy by which a federal credit union member may be expelled for cause by a two-thirds vote of a quorum of the FCU’s board of directors.

“We agree with the NCUA that the expulsion of members is an extreme remedy that may have the effect of denying individuals access to financial services,” the letter reads. “Further, we support the statement in the legislative history that use of the authority under CUGMA should be ‘rare and saved for egregious examples of member behavior.’ However, as addressed below, it is vital that this new authority be promulgated through regulation in a manner that makes it possible and practical for a federal credit union to utilize in practice.”

The enacted legislation allows a federal credit union’s board to vote to expel a member for cause by a two-thirds vote of a quorum. If the credit union board votes to expel a member, the member must be notified of the pending expulsion, along with the reason for such expulsion.

CUNA asks NCUA to consider how the rule can be simplified and/or streamlined to reduce the chances of confusion and increase its usability, particularly in instances where a federal credit union attempts to utilize the rule’s flexibility in a time of possible stress.

NCUA should consider supplemental guidance to aid federal credit unions if unable to simplify the regulatory text of the rule.

CUNA also supports the approach of maintaining the “member in good standing” concept in federal credit union bylaws that allows a federal credit union to restrict member activity under a limitation of services policy.