Alleging the credit unions’ failure to follow disclosure procedures, the NCUA invalidated their conversion votes. In a subsequent lawsuit filed against the NCUA by the credit unions in question, a magistrate found for the credit unions, issuing an injunction against the NCUA that has cleared the way for the conversions.

NCUA Chairman JoAnn Johnson said in an NCUA statement following the settlement that the NCUA will continue to evaluate regulations and processes to make sure member votes moving forward are administered properly in the conversion process. "The lawsuit has served to bring into clear focus several issues regarding our regulatory procedures, particularly the need for full and fair disclosures to members,” said Johnson in an August 31 NCUA statement.

NASCUS agrees that full and clear member disclosure is critical in the conversion process. NASCUS also believes states should have the authority in the conversion of state-chartered credit unions, not the federal insurer.

NASCUS’ long standing belief is that state law and state regulations should determine the conversion process for state-chartered credit unions. The chartering authority should establish the guidelines for conversion and exercise the appropriate regulatory oversight. It is true that through the Federal Credit Union Act, Congress granted NCUA limited authority to prescribe rules and regulations for conversion.

Perhaps it is time to revisit the issue of where the proper authority for regulatory oversight of state-chartered credit unions conversions should reside. Working together, NCUA and state regulators can ensure the procedures for proper disclosure are in place while balancing the roles of state and federal regulators.

Debate about credit union conversions has been widespread. In late August, while in Chicago for NASCUS’ Annual Conference and Symposium, we hosted a Charter Conversion Colloquium with a panel including Dick Ensweiler, President and CEO of the Texas Credit Union League; Bob Hoel, Executive Director of the Filene Research Institute; Mitch Lucus, former CEO of Washington’s Credit Union; and Richard S. Garabedian, attorney with Luse Gorman PC.

Discussion from the Colloquium panel and audience centered on making sure that conversion procedures fully inform and protect members, and preserve the charter choice. 

NASCUS promotes transparency in member disclosure and wants to ensure that credit union boards fulfill their fiduciary responsibilities to members when considering conversion. In the coming months, one of NASCUS’ priorities will be to facilitate dialogue between states agencies, state credit unions and the NCUA to ensure conversion processes are appropriate and contain proper disclosure requirements.

The conversions in Texas and the resulting national credit union community debate have brought credit union values and member ownership into the spotlight. Conversation on conversion will continue. A necessary component of those conversations is the role of the regulator and where regulatory and statutory authority should reside.