Board Action Memorandum - Final Rule – Fair Hiring in Banking (Parts 701, 741, 746, 748, and 752); Delegation of Authority SUP 49

TO: NCUA Board

FROM: Office of General Counsel

DATE: September 12, 2024

SUBJ: Final Rule – Fair Hiring in Banking (Parts 701, 741, 746, 748, and 752); Delegation of Authority SUP 49

ACTION REQUESTED: NCUA Board approval to issue the attached final rule, rescind Interpretive Ruling and Policy Statement 19-1 ("IRPS 19-1"), and amend Delegation of Authority SUP 49.

DATE ACTION REQUESTED: September 19, 2024

OTHER OFFICES CONSULTED: Office of Examination & Insurance.

VIEWS OF OTHER OFFICES CONSULTED: Concur.

BUDGET IMPACT, IF ANY: Corresponding changes to agency procedures and forms will be accomplished within current budget resources.

SUBMITTED TO INSPECTOR GENERAL FOR REVIEW: Yes.

RESPONSIBLE STAFF MEMBERS: Pamela Yu, Special Counsel, Office of General Counsel and Rachel Ackmann, Senior Staff Attorney, Office of General Counsel.

SUMMARY: The final rule incorporates into the NCUA’s regulations IRPS 19-1 regarding statutory prohibitions imposed by Section 205(d) of the Federal Credit Union Act ("Section 205(d)"). Section 205(d) prohibits, except with the prior written consent of the Board, a person who has been convicted of certain criminal offenses involving dishonesty or breach of trust, or who has entered into a pretrial diversion or similar program in connection with a prosecution for such an offense, from participating in the conduct of the affairs of an insured credit union. The final rule amends the NCUA’s policies and procedures governing an application to rescind a prohibition pursuant to Section 205(d), as currently reflected in IRPS 19-1 and consistent with both amendments made by the recent Fair Hiring in Banking Act and with comparable Federal Deposit Insurance Corporation regulations. With the issuance of this final rule, IRPS 19-1 is rescinded.

The final rule also amends the regulation governing the conditions under which federally insured credit unions that are newly chartered or in troubled condition must notify the NCUA of any proposed changes to the credit union’s board of directors, committee members, or senior executive staff, and makes other conforming changes.

Along with the final rule, revisions to Delegation of Authority SUP 49 are recommended to delegate to the Regional Directors and the Director of the Office of National Examinations and Supervision (ONES), authority to approve or disapprove individual and credit union-sponsored applications to request consent pursuant to Section 205(d). Formerly, the Regional Directors and the ONES Director only had delegated authority to act on credit union-sponsored applications, and the Board had retained the authority to approve or disapprove individual applications. Under the revised delegation, the Regional Directors and the ONES Director will have authority to act on both individual and credit union-sponsored applications. The Board will retain authority to approve or disapprove individual applications for consent involving an offense described under Section 205(d)(2)(A) and such other high-level security cases it designates.

The revisions to Delegation of Authority SUP 49 also require the prior concurrence of the General Counsel for any disapproval by a Regional Director or the ONES Director of an individual or credit union-sponsored application for consent, including a disapproval of a request for reconsideration. Consistent with the Fair Hiring in Banking Act, the General Counsel’s concurrence must certify that the denial is consistent with Section 205(d).

In any case where a credit union-sponsored or individual consent application is denied, the denied applicant may request reconsideration from the field office or appeal the adverse decision and request a hearing before the Board. The Board will act upon any appeals and requests for an oral hearing consistent with the appeals process contained in 12 Code of Federal Regulations Part 746, Subpart B.

RECOMMENDED ACTION: Board approval to (1) issue the attached final rule for publication in the Federal Register, effective 30 days after publication; (2) rescind IRPS 19-1; and (3) amend Delegation of Authority SUP 49.

ATTACHMENT: Final rule; revised Delegation of Authority SUP 49.