If you hear something, say something

by Michael Fryzel, Attorney and Financial Services Consultant

The recent opinion piece written by Scott Butterfield that appeared on CUInsight regarding examiners of financial institutions contained some expressions that may have been heard before. Fortunately he prefaced his remarks by saying that “most examiners are good”.

Having been a financial regulator at both the state and federal level I have had considerable contact with examiners. My experience has not been that of being examined but rather of being ultimately responsible for the examiner’s conduct.

I have found that most examiners conduct themselves in a highly professional manner.  Prior to taking on the responsibility of examining credit unions they are classroom trained on exam policy and procedures. They are instructed on the applicable laws and regulations as well as how to interact with credit union personnel. There is continuing education throughout their careers. They not only understand the examination process but are fully aware of their responsibilities and the code of conduct under which they operate.

In his article Mr. Butterfield talks about “bad behavior” that “falls into three baskets” he calls the bad “B’s”. Normally one would expect a regulator to challenge what he is saying by perhaps calling it “baloney”. However, that is not the case.I too have heard similar remarks he attributes to examiners relating to membership bias, gender bias, bullies and bad advice.

A regulator usually hears about such an occurrence, which are rare, from a state credit union league or association or from the CEO of one of the two national organizations. That has been my experience.

When told of an instance involving an examiner going beyond their authority as detailed in the “B’s” of Mr. Butterfield, I, as every regulator would, be upset and immediately want to know the five “W’s”: who, what, when, where and why? Without that information the regulator is left with sending out a memo to the entire examination staff telling them don’t be a “B’ and implying they are not doing their job. That is not the proper corrective action when, in my opinion, the majority of examiners do not fall into that category because they are professional.  Only by knowing which examiner falls into the “B” category can the proper action be taken to reeducate that examiner and prevent a reoccurrence of the behavior.

However, every time, without exception, when I asked which credit union experienced the problem I was told they wanted to remain anonymous because they feared retaliation. Really? Does anyone truly believe that a state or federal regulator would allow retaliation for reporting of wrongdoing? I think not.

A problem can only be corrected if you know the source causing it. You cannot resolve an issue involving one or a few examiners when you have hundreds of them on your staff.  A regulator always wants to know if one of their staff, at the examiner or any level, is abusing their authority. If an allegation is found to be true, action will be taken and the problem corrected without retaliation to the reporting credit union.  

The common practice has been that if a credit union has an issue with an examiner they should follow the chain of command within the agency structure and address the issue with the Supervising Examiner or Regional Director. My suggestion is to bypass that process and take the issue directly to the top.

There is a new Chairman at NCUA, a new board member and a former Chairman. If you have an examiner problem send an email to Chairman Hood and board members McWatters and Harper. Make sure you give them all the “W’s”. If there is a “B” problem, they want to correct it. They are all committed to a transparent and responsive federal agency.

Michael Fryzel

Michael Fryzel

Michael Fryzel is an attorney and financial services consultant based in Chicago, Illinois. He is a former Chairman and Board Member of the National Credit Union Administration and Director of ... Details

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