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A Direct Line Blog

NCUA Provides Member Expulsion Rule

July 26, 2023 7:30 am

By Donya Parrish, MCU VP- Risk Management

The NCUA Board met last week and approved the final version of a member expulsion rule for federal credit unions that will be effective around Sept. 1, 2023. NCUA was provided the authority for the change after Congress passed the Credit Union Board Modernization Act in March 2022.

Federal credit unions will have the option to adopt new bylaw language to define a “member in good standing” to provide a specific process for action to expel violent and disruptive members beyond just limitation of services. Chairman Harper noted that he feels this option should be used “sparingly” and be the exception and not the rule as credit unions balance the power of a members right to safe, fair, and affordable financial services with the obligation to provide a safe environment for employees and other members.

The new rule:

  • defines how the credit union must provide a copy of their new expulsion policy to all members;
  • provides a model notice for the standard disclosure of expulsion policy;
  • defines the term “cause” as it relates to expelling a member as
    • a substantial or repeated violation of the membership agreement of the credit union,
    • a substantial or repeated disruption, including dangerous or abusive behavior, to the operations of the credit union, or
    • fraud, attempted fraud, or conviction of other illegal conduct in relation to the credit union, including the credit union’s employees conducting business on behalf of the credit union;
  • clarifies that a class of members cannot be expelled and it must be at an individual level;
  • allows the opportunity to request a hearing with the credit union board;
  • automates the expulsion if no hearing request is made for 60 days or there is a 2/3 vote of the quorum of directors present to expel within 30 days after the hearing;
  • informs the removed member how to challenge a decision to the NCUA Consumer Assistance Center; and
  • gives one opportunity for the former member to apply for reinstatement.

You can find the rule itself starting on page 41 of the link above. We’ll be covering this more in the coming months as the agency updates their website and materials to assist with compliance and implementation.

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