Exam Problems? Know Your Rights

CU Bill of Rights is based on the NCUA Examiner’s Guide.

January 19, 2011

Credit unions have the right to manage risk without being directed by examiners to eliminate it, appeal examiner findings and directives without retaliation from their regulator, and receive respectful conduct from examiners.

These are three credit union “examination rights” the Credit Union National Association (CUNA) outlines in its first edition of “Supervisory Issues and Examinations: Guidance for Credit Unions During the Current Economic Times and Beyond.”

CUNA produced the 64-page booklet in conjunction with state leagues and with direct input from credit unions.

The publication lists 24 credit union “examination rights,” each of which is cross-referenced to sections of the National Credit Union Administration’s (NCUA) Examiner’s Guide—showing specific correlations to written guidance the agency gives examiners for performing examinations.

“A prime objective of this ‘Guidance’ is to assure credit unions they have options in responding to most supervisory issues and when they feel an examiner has overstepped his or her authority,” says CUNA President/CEO Bill Cheney. “Credit union officials are entitled to question an examiner’s findings and directives, suggest alternatives in most situations, and appeal decisions they feel are unwarranted, arbitrary, inconsistent with laws and regulations, or may jeopardize their ability to serve their members.”

The guide also includes sections dealing with general duties of examiners, credit union examination concerns (based on credit union survey results), handling disagreements with examiners, and recommendations—for credit unions and NCUA—for improving the examination process.

“This is the culmination of many months of work by credit union and league leaders,” says Paul Mercer, president/CEO of the Ohio Credit Union League and chairman of the CUNA Supervisory Issues Working Group, which led the work on the volume.

“It’s designed to be an accessible, easy-to-use reference concerning a number of supervisory issues that have surfaced recently among credit unions,” he adds. “Its aim is to provide resources about the supervisory process so credit unions will have a better understanding of their responsibilities and rights, as well as a greater awareness of the proper role of the examiner.”

The booklet is available to all CUNA-member credit unions at no charge on the CUNA website.

Next: 24 examination rights

Twenty-four examination rights

According to “Supervisory Issues and Examinations: Guidance for Credit Unions During the Current Economic Times and Beyond,” credit unions have the right to:

  1. Manage risk without being directed by examiners to eliminate it.
  2. Receive respectful conduct from their examiner.
  3. Be examined by well-trained, competent examiners who understand credit unions’ unique characteristics.
  4. Meet and discuss examiner findings, conclusions, directives, and administrative actions with the examiner.
  5. Question and seek corrections to examiner findings, conclusions, and directives.
  6. Provide alternative and/or additional data, conclusions, and solutions to address problems identified by the examiner.
  7. Know the specific authority or legal basis for an examiner’s directive.
  8. Receive clearly written examination reports, notices, etc., on a timely basis.
  9. Receive exam reports, findings, directives, and administrative actions that are based on all relevant facts.
  10. Be evaluated on their own strengths and weaknesses, not solely on the basis of regulator concerns about trends.
  11. Be evaluated for progress toward objectives that are realistic and achievable, and proportionate to the risk presented.
  12. Receive examination findings and directives that are risk prioritized.
  13. Appeal examiner findings, conclusions, or directives without retaliation from their regulator.
  14. Have instructions, detailed on every exam report form, about how to appeal examiner decisions.
  15. Record meetings with examiners and other agency personnel.
  16. Have a representative, such as an attorney, present during meetings with the examiner and other regulatory personnel.
  17. Have any published orders—such as consent orders—address only facts and not conjecture or speculation by the examiner.
  18. Have confidential, non-discoverable communications with their legal counsel regarding examination issues.
  19. Develop and use “high-level” policies, which should be separate and distinct from detailed procedures.
  20. Have a lead examiner that is state or federal, consistent with the credit union’s charter type.
  21. Know the timing of when NCUA will publish a Letter of Understanding and Agreement.
  22. Defer to their CPA if there is a disagreement between the officials and their regulator regarding issues related to U.S. generally accepted accounting principles.
  23. Have communication (i.e., discussion of draft findings) with their examiner prior to final issuance of the examination report.
  24. Have directives from examiners (including verbal and written comments) be consistent with regulatory requirements, policies, and Letters to Credit Unions. For example, there were inconsistencies noted between how examiners treated the assessment’s effect on credit union earnings and an NCUA letter to credit unions on the subject.