Suspension of Services Policy

Dear Ms. Droppleman:

 

You state your federal credit union (FCU) has a suspension of services policy it applies to members
who cause a loss to the credit union, and you have asked if it can be extended to other situations,
such as members who threaten or behave inappropriately towards staff or other members, have
presented counterfeit items, kite checks, or engage in suspicious transactions. An FCU may have a
policy suspending or limiting services to members in various circumstances if there is a rational
basis for the policy and members receive notice of the policy, but a credit union cannot terminate
a member’s right to vote in annual elections or maintain a share account without complying with the
FCU Act’s requirements for expulsion.

The Federal Credit Union Act (FCU Act) grants all members two basic rights: the right to maintain
a share account and the right to vote at annual meetings. 12 U.S.C. §§1759, 1769. These rights
cannot be suspended or terminated without following the process for expelling a member in the FCU
Act. 12 U.S.C. §1764. Nothing in the FCU Act or the National Credit Union Administration's (NCUA)
regulations, however, precludes an FCU from restricting the availability of certain services to
members, provided the FCU has a rational basis for doing so and member have notice of the policy.

 

Your proposal would extend your current suspension of services policy to members who are abusive
to credit union staff and members or who present a risk of loss to the credit union. In a previous
opinion, letter we addressed suspension of service policies as applied to an abusive member.
OGC Op. 91-0119 (February 20, 1991). That letter provides that an FCU may establish a policy
denying an abusive member access to FCU premises or to services that involve personal contact
with FCU employees.

 

You noted we have not directly addressed all the circumstances you raised. Generally, we would have no objection to suspending certain services to members where there is a logical relationship between the objectionable conduct and the services to be suspended, for example, denying access to credit union premises if a member has been abusive or threatening towards staff. Another example would be denying services involving an extension of credit where a member has caused a loss or repeatedly presented counterfeit items for cash or deposit. We caution that mere suspicion regarding a member’s activities would not constitute a rational basis for suspending member services without more direct evidence of the member causing actual harm or loss to the FCU. Before any suspension of services policy can be enforced, FCUs need to ensure that the policy is in writing and provided to all members so that members are aware of it.

Finally, we note that contract provisions in your account and other member service agreements, as
well as federal and state laws, affect an FCU’s ability to implement a suspension of services
policy. Specifically, the Equal Credit Opportunity Act (ECOA) and its implementing regulation,
Regulation B, 12 C.F.R. Part 202, are intended to ensure the availability of credit to creditworthy
applicants, regardless of race, color, religion, national origin, sex, marital status or age. The
proposed program does not appear, on its face, to violate ECOA or Regulation B. Policies that are
facially neutral, however, may be impermissible under the so-called "effects test." Under the
"effects test," a policy is discriminatory if it has a negative impact on a protected class of
persons, even if there is no intent to discriminate. We suggest you consult with your own legal
counsel to determine the applicability of ECOA, contract provisions in your member agreements,
and state law to your suspension of services policy.

We hope you find this guidance helpful.