Don’t Be Afraid To Question Your Examiner

September 11, 2012 at 7:29 am 2 comments

NCUA’s Office of Inspector General recently released a report, produced at the request of the Chairman of the Senate Banking Committee, reviewing the examination and appeals process as it relates to small credit unions.  On balance, the report concludes that NCUA is doing a pretty good job of standardizing its examination process, ensuring that experienced examiners handle the most complex credit unions, working towards a more uniform application of NCUA regulations and giving credit unions the means to question examiner determinations.

Let’s face it:  examiners and credit unions will never see eye to eye on all issues and some of what I read in this report is, to put it mildly, inconsistent with what I hear at the Association.  But what the report drives home is that NCUA does have a process, albeit an imperfect one, to handle disputes regarding examiner findings.  Credit unions can’t be afraid to utilize the remedies  available to them.

For example, the Inspector General points out that “NCUA encourages examiners to discuss problems and/or conditions that impair or may impair the safety and soundness of the credit union with the appropriate credit union officials and employees throughout the examination.”

I know there are some of you who believe this is a naïve myth and you may be right.  But the first step in a successful mediation is to explain to the other side why you think they are wrong.

The report points out that NCUA has taken steps to nationalize its examination guidance.  After all, credit unions are entitled to have the law applied in a consistent and accurate manner.  Most examiners do this.  But to ensure that they are enforcing federal regulation as opposed to their own view of safety and soundness, it is perfectly acceptable to ask an examiner on what they are basing their conclusions.

I will continue to argue that an appeals process with a truly independent department to hear reviews is in the best interest of both the NCUA and credit unions.  It is in the best interest of NCUA because credit unions will see that many of its determinations are consistent with the law and regulations.  It is in the best interest of credit unions because for the appeals process to be truly effective, the arbitrator must be independent.  No one can be both judge and jury.

That being said the Inspector General was able to cobble together a number of complaints that made their way to the regional directors and making your case is not an exercise in futility.  According to the report an average of six complaints reach each regional director every year and 85% of the complaints are resolved in favor of the examiner.  There was surprising variation by region: Region II examiners apparently never make any mistakes while Region V’s director decided one out of every four disputes in favor of  credit unions.  Region I’s director, who oversees New York, decided 17% of disputes in favor of the credit union.  These are long odds, but they are not insurmountable and where you feel you have a legitimate gripe you should present your case.

Entry filed under: Compliance, Regulatory. Tags: , , , .

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2 Comments Add your own

  • 1. Vicky Burdick  |  September 17, 2012 at 4:14 pm

    And after you present your case be ready to look for a job in a different profession. Sorry Henry but that is how I feel.

  • […] a credit union CEO of longstanding, has suggested that I am delusional (my words, not hers) for suggesting that credit unions challenge examiner findings.  We all should support a credit union that has the […]


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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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