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Decision and Order on Appeal Insurance Claim

March 2021
Decision and Order on Appeal Insurance Claim
Insurance Claim



In the Matter of


Share Insurance Appeal

Docket BD-01-20

Decision and Order on Appeal


This matter comes before the National Credit Union Administration Board (Board) under 12 C.F.R. Part 746, Subpart B as an administrative appeal by [redacted] (Petitioner) of the determination by the Liquidating Agent for [redacted] ([redacted]) denying his share insurance claim for $66,422.42.


[redacted] was a federally insured, state-chartered credit union located in [redacted], [redacted]. In 2017, [redacted] was placed into conservatorship because it was critically undercapitalized. It later became insolvent1 and the Board placed [redacted] into involuntary liquidation2 and appointed itself Liquidating Agent3 for the credit union.

Petitioner’s father, [redacted] (Decedent), joined [redacted] and opened a Totten Trust account on November 7, 2012, with Petitioner listed as a payable on death (POD) beneficiary on the membership documents. On November 20, 2012, Decedent executed a three-year promissory note secured by a taxi medallion for $400,000 calling for monthly payments until maturity, ending in a balloon payment due on November 20, 2015. According to the loan credit memorandum, the purpose of the proceeds of Decedent’s “medallion balloon loan” was to “buy [a] house for [his] children,” including Petitioner.

On November 20, 2015, Decedent defaulted on the medallion loan after failing to pay the balloon, although monthly payments on the loan continued. Decedent died abroad on May 26, 2016, and Petitioner, through his attorney, notified [redacted] of Decedent’s death via letter on November 30, 2016. Petitioner received his Letters of Administration, appointing him administrator for Decedent’s estate, on March 17, 2017. Despite the default, loan payments on the medallion loan continued under a lease agreement between Decedent and [redacted] until [redacted] called the note due in May 2017.

Sometime between March 17, 2017 and April 11, 2017, Petitioner requested that [redacted] pay him the $66,422.42 balance in Decedent’s share account. However, [redacted] denied Petitioner’s request and notified him that on April 11, 20174 the credit union had offset the balance in Decedent’s share account against his past due medallion loan. Petitioner, through his attorney, subsequently requested a reversal of the set-off; however, [redacted] declined the request on April 20, 2017.

[redacted] was placed into conservatorship on February 10, 2017 and was liquidated on August 31, 2018. Upon liquidation, due to the earlier offset, there were no funds remaining in Decedent’s share account. Petitioner was not on record as a member of the credit union at the time of liquidation.

On May 3, 2017, [redacted] filed suit in the [redacted], [redacted] against Decedent’s estate seeking $287,411.54 plus interest and fees for money owed on the medallion loan ([redacted] v. [redacted]).5 On August 8, 2017, Petitioner filed an Answer and sued [redacted] for payment of the shares that were applied to the loan, alleging that the offset was improper ([redacted] v. [redacted]).6 Petitioner further alleged that, as the beneficiary of Decedent’s account, [redacted] should have transferred the funds in the account to him. [redacted] argued that, under [redacted] law, it acted fully within its right to apply funds from Decedent’s account to the debt owed at the time of his death. Further, the loan documents provided that [redacted] could apply shares and deposits against any debt owed to [redacted].7

On April 26, 2018, the court in [redacted] v. [redacted] decided in favor of the credit union and against Decedent’s estate for breach of contract, and on June 1, 2018, the court granted summary judgment in favor of [redacted]. Meantime, on August 6, 2019, the court in [redacted] v. [redacted] granted summary judgment in favor of Petitioner for the offset and entered a judgment against [redacted] for $88,806.208 on January 13, 2020. The Liquidating Agent declined to appeal the adverse judgment. However, Petitioner is completely barred by the Federal Credit Union Act (FCU Act) from executing the judgment and has no legal avenue to collect against the assets of the Liquidating Agent.9

After the judgment in favor of Petitioner was entered in [redacted] v. [redacted], the Liquidating Agent issued a discovered creditor notice on August 30, 2019. Petitioner, through his attorney, filed a creditor claim on September 11, 2019, but the Liquidating Agent disallowed the claim as untimely and notified Petitioner of such by letter of April 20, 2020.10 Therefore, Petitioner has no further rights or remedies with respect to his creditor claim.11

In late 2019, the Liquidating Agent offered Petitioner a settlement. However, Petitioner declined the offer in a letter from his attorney on December 27, 2019. The letter also asserted a share insurance claim against the liquidation estate. On April 21, 2020, the Liquidating Agent denied Petitioner’s share insurance claim, reasoning that at the time of liquidation, there were no insured deposits in Decedent’s account and as such, Petitioner did not have a valid share insurance claim. Petitioner subsequently requested reconsideration through his attorney on May 6, 2020, and the Liquidating Agent upheld the initial decision and issued a determination on June 5, 2020, again disallowing his share insurance claim. Petitioner has appealed that determination to the NCUA Board.12

Issue on Appeal

The sole issue before the Board for resolution on appeal is whether the Liquidating Agent erred in denying Petitioner’s claim that $66,422.42 in insured funds were owed to him upon [redacted]’s liquidation. In support of his appeal, Petitioner alleges three errors. First, Petitioner contends the Liquidating Agent erred in determining there were no insured funds in Decedent’s account at the time of liquidation and there would be no insured funds even if the offset did not occur. Second, Petitioner argues the Liquidating Agent was incorrect in invoking 12 U.S.C. 1787(n)13 as justification for the denial of Petitioner’s claim because the liability is owed by the Decedent’s estate, not by Petitioner. Lastly, Petitioner asserts that the NCUA, in defending the action in the [redacted] after [redacted] went into liquidation, submitted itself to the jurisdiction of that court and should therefore acknowledge and pay the judgment against it.

Legal Standards

The NCUA, as an independent federal agency that insures deposits at federally insured credit unions, protects members against losses should an insured credit union fail. With the backing of the full faith and credit of the United States, the NCUA operates and manages the National Credit Union Share Insurance Fund (NCUSIF), which makes payments of insurance to its members, provides assistance in connection with the liquidation or threatened liquidation of an insured credit union, and for administrative and other expenditures in carrying out its purpose.14 The FCU Act and the NCUA’s regulations provide for payment of each member’s shares, up to the standard maximum share insurance amount,15 in the event of the liquidation of any insured credit union.16 The Board17 has discretion to require proof of claims to be filed and may approve or reject such claims for insured deposits.18

Upon the liquidation of an insured credit union, the Board will promptly determine the insured accountholders and the amount of the insured account(s) of each accountholder.19 However, pursuant to 12 U.S.C. §1787(n), the Board may “withhold payment of such portion of the payment of such portion of the insured account of any member as may be required to provide for payment of any direct or indirect liability to the closed credit union or the liquidating agent, which is not offset against a claim due from such credit union.”20 In accordance with the provisions in Part 745 of the NCUA’s regulations, the amount of insurance on an insured account is determined based on the account records of the insured credit union. Such account records are “conclusive as to the existence of any relationship pursuant to which the funds in the account are deposited and on which a claim for insurance coverage is founded.”21

Discussion and Analysis

Petitioner’s share insurance claim for $66,422.42 represents the total funds that were on deposit in Decedent’s account in April 2017, over a year before [redacted]’s liquidation in August 2018. However, numerous subsequent events took place between the April 2017 timeframe and the date of liquidation. Based on the credit union’s account records, at the time of [redacted]’s liquidation Petitioner was not on record as a member of the credit union with ownership in a share account, and there were no insured funds in Decedent’s share account (to which Petitioner was named beneficiary) due to the earlier offset. The offset22 and the judicial affirmation23 of Decedent’s debt well preceded [redacted]’s liquidation. The judgment in favor of Petitioner was entered 17 months following [redacted]’s liquidation. Even if the disputed offset had not occurred, given the timeline, determining what, if any, insured funds were owed to Petitioner upon [redacted]’s liquidation would be mere speculation. Any number of intervening events could have taken place between April 2017 and August 2018 that might have altered the amount of insured funds in the account by the time of [redacted]’s liquidation on August 31, 2018. Indeed, given that Petitioner concedes he sought to withdraw the full balance of funds in Decedent’s account in March or April of 2017, there is at least a reasonable likelihood that, as the Liquidating Agent determined, “no insured funds would have been in the account even if the offset did not occur.” Moreover, any remaining funds would be subject to the Liquidating Agent’s statutory authority to withhold such funds for payment of the debt owed to [redacted].

Petitioner draws the distinction that the debt was owed to the credit union by Decedent (and then Decedent’s estate), not Petitioner. Petitioner asserts that the funds in Decedent’s account became his property at the time of his father’s death on May 26, 2016 and since Petitioner owed no liability to [redacted], the April 2017 offset should not have occurred. But even if the Board were to concede24 that the funds passed to Petitioner upon Decedent’s death and should not have been offset against Decedent’s outstanding liability in April 2017, Petitioner would have been required to qualify for membership in order to maintain the insured funds in [redacted] under an account in his ownership. At the time of [redacted]’s liquidation, Petitioner was not on record as a member of the credit union. Nonmembers only receive share insurance coverage under limited circumstances.25 Accordingly, Petitioner’s second argument fails.

Petitioner’s third argument is also unpersuasive. Notwithstanding the ancillary claims and legal actions related to this case, the sole question before the Board for resolution is whether the Liquidating Agent erred in denying Petitioner’s share insurance claim. Petitioner’s dispute over [redacted]’s offset has been litigated in a [redacted] state action and a judgment was rendered in his favor, but Petitioner’s share insurance claim is not a proper proxy to enforce that judgment.


Upon a review of the entire record in this case, the Board finds that the Liquidating Agent was correct to deny Petitioner’s share insurance claim. Based on the credit union’s account records, at the time of [redacted]’s liquidation Petitioner was not on record as a member of the credit union with ownership in a share account, and there were no insured funds in Decedent’s share account (to which Petitioner was named beneficiary) due to the earlier offset.


For the reasons set forth above, it is ORDERED as follows:

The decision of the Liquidating Agent for [redacted] denying [redacted]’s claim for share insurance is AFFIRMED and the appeal of [redacted] is DENIED.

The Board’s decision constitutes a final agency determination and is subject to judicial review in accordance with Chapter 7 of Title 5 of the United States Code.

So ORDERED this 8th day of March 2021, by the National Credit Union Administration Board.


Melane Conyers-Ausbrooks
Secretary of the Board

1 [redacted]’s insolvency was generally a result of the devaluation of the credit union’s large portfolio of taxi medallion loans.

2 After [redacted] became insolvent, the NCUA consulted with the [redacted], [redacted]’s primary supervisory authority, on April 20, 2018. The [redacted] declined the opportunity to take action to liquidate the credit union; thus, the NCUA Board placed [redacted] into involuntary liquidation and appointed itself liquidating agent for [redacted], effective August 31, 2018.

3 The NCUA Board has delegated complete authority to act as Liquidating Agent to the President of the Asset Management Assistance Center (AMAC) under Delegation of Authority AMAC 2.

4 On April 12, 2017, [redacted] sent written notification of the offset to the Decedent’s last known address, copying Petitioner.

5 [redacted] v. [redacted], [redacted], [redacted], Index No.: [redacted].

6 [redacted] v. [redacted], [redacted], [redacted], Index No.: [redacted].

7 Section 11 of the balloon note signed by Decedent provides: “I pledge to you all shares and deposits as well as payments and earnings of present and future shares and deposits with you for the payment of any present or future debt with you. You may apply these shares and deposits to the payment of any and all debts I owe you in the event I default.”

8 This amount represents the original amount of the offset of $66,422.42 plus interest and fees.

9 The FCU Act expressly states, “[n]o attachment or execution may issue by any court upon assets in the possession of the liquidating agent.” 12 U.S.C. §1787(b)(13)(C). Further, the FCU Act is clear that unless otherwise provided, “no court shall have jurisdiction over any claim or action for payment” or over “any action seeking a determination of rights with respect to, the assets of any credit union for which the Board has been appointed liquidating agent, including assets which the Board may acquire from itself as such liquidating agent.” 12 U.S.C. §1787(b)(13)(D). Thus, Petitioner’s judgment is unenforceable.

10 Petitioner’s claim was received after the expiration of the claims waiver date of December 10, 2018, as specified in creditor notices published, per the requirements of the FCU Act, in the [redacted] on September 6, 2018, October 9, 2018, and November 8, 2018. See 12 C.F.R. §709.6(a)(1). Under the FCU Act, a claim filed after the date provided in the notice to creditors shall be disallowed and such disallowance is final. See 12 U.S.C. §1787(b)(5)(C).

11 See 12 U.S.C. § 1787(b)(5)(C).

12 Through his attorney, Petitioner submitted a timely notice of appeal of the Liquidating Agent’s determination on his share insurance claim by letter to Secretary of the NCUA Board, received on July 14, 2020.

13 Petitioner’s notice of appeal erroneously cites 12 U.S.C. §1788(n) rather than 12 U.S.C. §1787(n), but the Board assumes this was merely a typographical error.

14 See 12 C.F.R. §745.20.

15 Currently, the standard maximum share insurance amount is set by statute at $250,000. Petitioner’s claim involves an amount under the $250,000 insurance limit.

16 See 12 U.S.C. §1787(d)(1).

17 The Board has delegated to the President of AMAC, as Liquidating Agent, authority to evaluate, determine, and make payment from the NCUSIF of the insured portion of share accounts owned by members of an insured credit union undergoing liquidation under Delegation of Authority AMAC 4c, and the authority to evaluate and determine the validity of claims (including any uninsured portion of an insured share account) filed against the estate of an insured credit union undergoing liquidation under Delegation of Authority AMAC 4d.

18 See 12 U.S.C. §1787(d)(2).

19 See 12 C.F.R. §745.200(a).

20 12 C.F.R. §745.200(a).

21 12 C.F.R. §745.2(c).

22 The offset took place on April 7, 2017, approximately 16 months before [redacted]’s liquidation.

23 The court in [redacted] v. [redacted] granted summary judgment in favor of [redacted] on June 1, 2018, two months before liquidation.

24 This Decision and Order should not be read as to concede to any liability or wrongful act on the part of the Liquidating Agent in this matter.

25 See 12 C.F.R. Part 745.

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