Breaking up is about to be easier to do

Last week, the National Credit Union Administration (NCUA) held its July board meeting, which featured a unanimous vote by the board to approve a final rule which will implement the Credit Union Governance Modernization Act (CUGMA). This rule will amend the Federal Credit Union (FCU) Model Bylaws (which are found in Appendix A to Part 701 of the NCUA regulations) to add new provisions relating to member expulsion and limitation of services. The NAFCU Compliance Team has already received several questions about this new rule. While there is likely too many nuances to cover in a single blog post, let’s dive into some of the major questions on this topic Q&A style:

How did we get here?

As we previously blogged, Congress passed CUGMA in March 2022. Prior to CUGMA, FCUs were limited in how they could deal with problematic members – such as members who engage in violent or abusive behaviors toward FCU staff, members who engage in criminal activity and members who otherwise violate the account or membership agreement. While FCUs could limit services to some members through a board-adopted limitation of services policy, such an approach required the credit union to maintain a relationship with the member and was only available if the member’s conduct met a specific definition of “not in good standing.” For FCUs that wanted to end the relationship with the member, the FCU Act prior to CUGMA only permitted FCUs to expel a member through a 2/3 vote of the members present at a special meeting, or through a non-participation policy (which basically only applied to inactive members).

CUGMA amended the FCU Act to allow FCUs to expel certain members through a 2/3 vote of the FCU’s board of directors. The law required the NCUA to adopt regulations regarding this new expulsion process within 18 months – setting a final deadline of September 2023. NCUA adopted a proposed rule on this topic in Fall 2022, which we blogged about here. As mentioned above, the NCUA adopted the final rule implementing CUGMA at the July 2023 Board Meeting last week.


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