Breaking down NCUA’s CUGMA proposal

Earlier this year, we blogged about the Credit Union Governance Modernization Act (CUGMA), which was signed into law in March. As our previous blog discussed, CUGMA amended the Federal Credit Union Act to make it easier for federal credit unions (FCUs) to expel problematic members, such as those that engage in violent, abusive or illegal behavior. Whereas FCUs previously needed a 2/3 vote of the credit union’s membership at a special meeting to expel a member, CUGMA changed federal law to allow FCUs to expel members “for cause” with a 2/3 vote of the FCU’s board of directors.

While FCUs welcomed this change, CUGMA is written so that FCUs cannot begin to utilize this new expulsion process until the National Credit Union Administration (NCUA) adopts a policy and regulations on this topic. NCUA adopted a proposed rule on this topic at their September 2022 Board Meeting. I’ll review some of the key points below. However, it should be noted that this is merely a proposal and that things may change by the time a final rule is formally adopted – in fact, the proposal asks for comments on basically all aspects of the proposed rule, indicating that NCUA is open to considering feedback and potentially making changes. Additionally, NAFCU has published a comprehensive regulatory alert on this topic – NAFCU members may want to review that alert and use the “comment now” button to send comments to our Regulatory Affairs team to be included in a future NAFCU comment letter regarding this proposal. Additionally, members can email their questions or comments to James Akin on NAFCU’s Regulatory Affairs team at

Expulsion Versus Limitation of Services

Pre-CUGMA, credit unions would often stop short of fully expelling a member through a special meeting, but would instead choose to use a limitation of services policy to limit services to certain members who were no longer “in good standing.” The current FCU Model Bylaws include language permitting FCUs to limit services to members who are no longer “in good standing” so long as the FCU has provided the member with notice of the limitation of services policy. Additionally, the services to be limited were required to bear a “logical relationship” to the member’s offending conduct.


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