Proposed Rule Summary

NCUA Appeal Procedures

Prepared by NASCUS Legislative & Regulatory Affairs Department
June 2017

NCUA is proposing streamlining and replacing the process for appeals to the NCUA Board for those agency regulations that have existing embedded appeals processes. The procedures would apply in cases in which a decision rendered by a regional director or other program office director is subject to appeal to the Board. These kinds of decisions are regarded as “informal” decisions by NCUA. “Formal” agency determinations would not be covered. This proposal would NOT cover:

  • formal Administrative Procedure Act (APA) adjudications
  • formal NCUA enforcement actions
  • prompt corrective action (PCA) orders
  • matters within the jurisdiction of the NCUA’s Supervisory Review Committee
  • creditor claims in liquidation
  • delegated final agency actions
  • several other administrative agency actions such as FOIA requests

NCUA seeks comment on whether the above situations should be included in the proposed appeals process. NCUA also seeks comments on whether there are other rules that should have an appeal process.

Of course, NCUA’s proposed appeals rule would not cover supervisory actions taken by state regulators.

NCUA’s proposed rule may be read here. The proposed rule is open for comment until August 7, 2017.

Summary
In order to implement the proposal, NCUA would create new Part 746, subpart B to govern most of the already authorized adverse action appeals imbedded in existing NCUA rules. The proposal would homogenize the currently imbedded appeals process of the following rules:

  • Part 709 Claims of a Creditor of an Insolvent FICU under an NCUA Alternative Resolution Dispute Process

    Presently, during the liquidation of a federally insured credit union (FICU) a creditor may appeal a notice of disallowance from NCUA’s Asset Management and Assistance Center (AMAC) to the NCUA Board, file a suit in U.S. district court or submit to an alternative dispute resolution process.

  • Payment of Claims Regarding Federally Insured Shares or Deposits

    A depositor in a FICU liquidation may challenge NCUA rejection of a claim in court or by the current appeal process in Subpart B to Part 745.

  • Chartering and Field of Membership

    These provisions apply solely to FCUs.

  • Community Development Loans

    Part 705 of NCUA’s rules allows credit unions to apply for loans from NCUA’s Community Development Revolving Loan Fund and provides for a non-qualifying credit union to appeal to the NCUA Board. The rule limits the Board’s review to the threshold question of qualification. Federally insured state chartered credit unions participate by reference in Part 741.207.

  • Golden Parachutes

    Pursuant to NCUA Part 750, FICUs may request permission to make an otherwise impermissible severance payment to an IAP from the RD or ONES Director. If the request is denied, Part 750 specifies a process by which the credit union may appeal to the NCUA Board. This rule applies to FISCUs by reference in 741.224.

  • Investment Authority

    NCUA’s investment rule nominally only applies to FCUs. However, the rule does affect FISCUs by way of reference in Part 741.3 with respect to non-conforming investments. It is unclear to what extent a FISCU would make use of the appeal process imbedded in Part 703 in a disagreement over whether a state investment was non-conforming.

  • Change of Officials for Troubled or Newly Chartered Credit Unions

    A ‘troubled’ or newly chartered FICU may appeal an adverse determination regarding a change of officials to the NCUA Board pursuant to ยง 701.14 of NCUA’s regulations. The NCUA Board has 90 days to decide the appeal. FISCUs are subject to Part 701.14 by reference in Part 741.205.

  • Conversions and Mergers

    Part 708a governs the process by which NCUA administers a FICU conversion to a mutual savings bank or merger into a bank. The rule specifies that a FICU may appeal an NCUA disapproval of the methods by which the vote was taken or the procedures applicable to the vote to the NCUA Board. For conversions, a FICU has 30 days to file an appeal and the NCUA Board must act within 90 days. For mergers, a FICU must appeal within 30 days and the Board must act within 120 days.

In addition, other NCUA’s Rules and Regulations would be affected by the creation of a new homogenized appeal process. These rules include:

  • Part 701.21(h)(3) NCUA’s general lending rule (see also Part 741.203 for partial applicability to FISCUs)
  • Part 701.23(h)(3) regarding eligible obligations (FCUs)
  • Part 701.22(c) regarding loan participations (see also Part 741.8)
  • Part 701.32 regarding public unit and nonmember shares (see also Part 741.204)
  • Part 701.34 regarding the low income designation (see also Part 741.204)
  • Part 741.11 regarding branch offices outside the United States

Proposed Appeals Rule

  • Proposed Section 746.203 Request for Reconsideration

    Several of the regulations with imbedded appeals processes permit the Petitioner to request the Program Office to reconsider its determination before a formal appeal is initiated. The proposed rule would set forth procedures for requesting reconsideration from a program office prior to filing an appeal with the Board for any matter that could otherwise be appealed under new Part 746, Subpart B.

    The proposed rule would allow a Petitioner to request a second reconsideration if new evidence or documentation came to light. Otherwise, after the first reconsideration petitioner’s recourse would be appeal to the NCUA Board.

  • Section 746.203(e); (f); (g) Determination of Program Office; Notice of Determination; Failure To Make a Determination

    Proposed paragraph (e) would require the program office to issue a written determination within 30 calendar days of receiving a first request for reconsideration. Proposed paragraph (f) would specify the written determination include a description of any right to appeal to the Board (or file/continue litigation if applicable). Under the proposed rule, if the program office fails to make a determination within 30 calendar days, the request for reconsideration would be treated as being denied.

    The proposal treats the denial of a request for reconsideration as an initial agency determination for purposes of the deadline to file an appeal with the Board.

  • Section 746.204 Appeal to the Board

    Petitioners would be required to file their appeal within 60 calendar days of the date of the initial agency determination or, if applicable, any determination following a request for reconsideration. Failure to file a timely appeal nullifies Petitioner’s ability to seek Board adjudication pursuant to Part 746. The Board would have discretion to grant extensions of time for appeals. With respect to Part 701.14 related to change of officials, Petitioner would only have 15 days to file an appeal. Petitioners will also have 45 days from the date of submission of the appeal to amend or modify the appeal.

    An appeal filed with the NCUA Board must contain:

    • Statement of facts underlying appeal and copies of relevant documentation
    • Statement by the Petitioner of why they believe the Program Office made the wrong determination

    The burden of proof rests with the Petitioner. The petitioner has the right to request to appear before the Board, in person or via teleconference, to make an oral presentation in support of the appeal.

  • Proposed Section 746.205 Preliminary Considerations Regarding the Appeal

    All appeals filed with the NCUA Board would be initially reviewed by an attorney in NCUA’s Office of General Counsel. This “Special Counsel” would make a recommendation to the Board on the appeal’s disposition. The Special Counsel may also, within 30 days of the filing of the appeal, request the Petitioner submit additional evidence in support of the appeal. If additional evidence is requested, the petitioner shall have 30 calendar days from the date of issuance of such request to provide the requested information.

  • Proposed Section 746.206 Administration of the Appeal

    After receipt of an appeal from petitioner, the Special Counsel will contact the relevant Program Office for a copy of all pertinent material. The Special Counsel will then study the material provided and make an oral or written recommendation to the NCUA Board.

  • Proposed Section 746.207 Procedures for Oral Hearing

    As noted above, Petitioner has the right to request an oral hearing and to appear before the Board to support the appeal. However, being granted a hearing is not guaranteed. Petitioner must submit a request for an oral hearing, in writing, at the same time as the initial appeal documents but in as a separate document. The request must show good cause for an oral presentation and state reasons why the appeal cannot be presented adequately in writing. Any single Board member may grant a request for an oral hearing. If the request is denied, then the appeal is judged on the merits of the written material submitted.

    If the oral hearing is granted, a meeting date is set. Petitioner may designate any 2 individuals to appear on its behalf. The oral hearing shall consist entirely of oral presentations. The introduction of written evidence or witness testimony at the hearing shall not be permitted.

Proposed definitions of note

The proposed appeals rule would define “Initial Agency Determination” as agency decisions made by personnel below the NCUA Board level. The term ‘‘Petitioner’’ would refer to a natural person or legal entity seeking review of an initial agency determination. The term “Program Office” would refer to all offices within NCUA responsible for making “initial agency determinations.”