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NCUA Chairman Todd M. Harper Statement on the Member Expulsion Proposed Rule

September 2022
NCUA Chairman Todd M. Harper Statement on the Member Expulsion Proposed Rule

As Prepared for Delivery on September 22, 2022

Thank you very much, Rachel, for your presentation on the proposed member expulsion rule. I will support this notice of proposed rulemaking.

On March 15, 2022, Congress enacted the Credit Union Governance Modernization Act. That law requires the 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 federal credit union’s board of directors. The NCUA Board is now considering this proposed rulemaking to address this statutory change.

Under the prior requirements of the Federal Credit Union Act and our regulations, there were only two ways by which a credit union could expel a credit union member. The first was by a two-thirds vote of the membership present at a special meeting called for that purpose, and only after the individual was provided an opportunity to be heard. And, the second way was for non-participation in the affairs of the credit union, as specified in a policy adopted and enforced by the board.

Industry trade groups sought this statutory change to provide credit unions with greater flexibility in expelling members in certain extreme circumstances, such as to adequately address threats of violent or aggressive behaviors of certain members. Like the comments raised during the NCUA’s 2019 Bylaws Final Rule, federal credit unions had concerns that they lacked the tools needed to effectively protect employees and other members from violent and abusive acts.

This new statutory authority, however, was not self-enacting. Indeed, the NCUA Board has 18 months following the date of enactment to develop and finalize, pursuant to a rulemaking, a policy that federal credit unions may adopt to expel members for cause.

In moving forward today, I do have some reservations. While there are admittedly times in which the expulsion of a member is necessary to protect credit union members and staff, this is a power that credit unions should rarely use. It is, in my view, an extreme remedy that should be saved for egregious examples of member behavior.

That’s because the Federal Credit Union Act exists so that people, particularly those of modest means, can access safe, fair, and affordable financial services. That is the statutory mission of credit unions. So, in acting today, we want to preserve this guiding principle.

In that regard, I thank Vice Chairman Hauptman for adding language to the preamble of this proposal to underscore that very point. Credit unions should remain focused on financial inclusion by growing their membership and services, not on financial exclusion by expelling members.

That brings me to my first question. Under the proposed rule, if a federal credit union were to expel a member for a repeated, non-substantial disruption, the credit union would have to give the member prior notice of the potential for expulsion. Would this prior notice ever be required for acts of violence or threats?

Thank you, Rachel. That is important to understand. And, how can we ensure that credit union member expulsion policies continue to promote financial inclusion? For example, should a credit union review its list of expelled members, from time to time, to see if there is a pattern of one demographic group being disproportionately affected? What else could a credit union do?

Thank you. In the case of mortgages and other loans, how would an expelled member’s loans with the credit union be addressed?

Lastly, what, if any, recourse does a credit union member have to appeal their expulsion from a credit union?

Thank you again, Rachel, as well as everyone on this rulemaking team, for your work on this proposed rulemaking. That concludes my remarks. I now recognize Vice Chairman Hauptman.

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