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NCUA Vice Chairman Kyle S. Hauptman Statement on the Proposed Rule, Member Expulsion

September 2022
NCUA Vice Chairman Kyle S. Hauptman Statement on the Proposed Rule, Member Expulsion

As Prepared for Delivery on September 22, 2022

Thank you, Rachel, for your presentation.

First, let me say that I appreciate the thought that went into the development of the 2019 Bylaws Final Rule. At the time, the Board noted that it could not amend the statutorily prescribed expulsion procedures for members. The current expulsion procedures are so difficult they are impractical for most, if not all, credit unions.

As an alternative to expulsion, back in 2019, the Bylaws Final Rule allowed the limitation of services to certain members. The final rule also stressed that FCUs are not prohibited from contacting law enforcement to deal with abusive or violent members. While these seem reasonable and effective options, the credit unions told NCUA and Congress that they were not enough.

In March 2022, Congress enacted the Governance Modernization Act to revise the Federal Credit Union Act procedures for expelling members. Congress addressed concerns that FCUs lacked the tools to protect employees and other members from abusive and violent members. The Act directed NCUA to develop new procedures where the FCU, by two thirds vote of a quorum of its board, could expel a member.

This is my first in-person board meeting. Everyone in this room had to go through a metal detector and sign in with guards. Now, NCUA could just as easily call law enforcement in the event of a violent or abusive person in the building, but NCUA is using every tool possible to keep staff and guests safe.

While I agree that expulsion of a member – especially in a financial cooperative – should not be taken lightly, FCUs should be allowed every tool possible to protect the safety of staff and other members.

I also agree that the Board does not want this rule used to deny financial access to individuals. But members who act in an egregious manner are the exception. An FCU should have the ability to deny such a member not only access to services, but also access to its branches and member meetings.

As financial cooperatives, credit unions have member owners, so the notion of expelling a member-owner – as opposed refusing service to a customer – deserves thoughtful consideration from that perspective. I look forward to reading the input from stakeholders.

Mr. Chairman that concludes my remarks. I do have a couple of questions.

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