NCUA Finalizes Formal Appeals Framework

October 23, 2017 at 9:26 am Leave a comment

At Thursday’s Board meeting, the NCUA quickly finalized regulations which will give credit unions a much more structured and formal process for challenging supervisory determinations with which they disagree. The new regulations begin in January 2018.

 Judging by the lack luster response to this proposal—NCUA only received nine comment letters—this new regulation hasn’t sparked all that much interest in credit union land. I don’t know why. For as long as I have worked in the industry, I have heard complaints about how difficult it is to challenge examiner determinations. This new process has the potential of giving credit unions, and examiners for that matter, a fair and dispassionate way of resolving disputes. It also has the potential of providing a body of written decisions that all credit unions could use to help guide their interpretation of regulations.

 The list of material determinations for which appeals can be taken includes: (1) a composite examination rating of 3, 4 or 5; (2) a determination relating to the adequacy of loan loss reserve provisions; (3) the classification of loans and other assets that are significant to an insured credit union; (4) a determination regarding an insured credit union’s compliance with federal consumer financial law; (5) a determination on a waiver request or an application for additional authority where independent appeal procedures have not been specified in other NCUA regulations; and (6) a determination by the relevant reviewing authority that an appeal filed under this subchapter does not raise a material supervisory determination.

 I would have liked the list to be a bit more expansive. For example, I believe there are circumstances under which a credit union, which has its composite CAMEL rating reduced from a 1 to a 2, should have the ability to appeal that determination. Nevertheless, the categories of material determination will cover many situations for which credit unions currently find there is not an appropriate mechanism to question supervisory determinations.

 The new procedure generally works as follows: A federally insured credit union subject to a material determination with which it disagrees will first have to make a written request for reconsideration. Credit unions will now have the opportunity to appeal such determinations to a newly constituted supervisory review committee. The committee will be comprised of at least eight members from among NCUA’s senior staff in all of its regional and central offices. These committees will act very much like intermediate Appellate Courts do. They will have the opportunity to take a fresh look at the material determinations. Finally, your credit union will have the opportunity to bring a further appeal to the NCUA Board.

 On that note, I’ll be seeing some of you later this morning in beautiful Syracuse, New York. Enjoy your day.


Entry filed under: Regulatory. Tags: , .

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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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