CUGMA offers promise, but awaits NCUA action

On March 15, 2022, President Biden signed a large omnibus spending package into law. Included within that Omnibus bill was a legislative change that Federal Credit Unions (FCUs) have requested for a long time – the Credit Union Governance Modernization Act (CUGMA). In summary, CUGMA amends the Federal Credit Union Act (FCU Act) to add a new avenue through which FCUs can expel problematic members. I enjoy a good FAQ, so let’s break down CUGMA FAQ-style:

Why was CUGMA needed?

Let’s review the pre-CUGMA landscape. As discussed in this previous post in the Compliance Blog, sometimes FCUs have to deal with members that commit fraud or who engage in violent, disruptive or belligerent behavior – such as acting abusively towards FCU employees. However, FCUs are limited in the tools they have to deal with these types of members. One such tool is an FCU’s ability to use a board-adopted limitation of services policy to limit certain services to the problematic member, like removing the ability to conduct activity in-person at branches, removing the ability to write checks, or other limitations that bear a “logical relationship” to the member’s problematic behavior.

However, sometimes a member’s behavior is so bad that an FCU may want to expel that person from membership. Under the pre-CUGMA FCU Act, a credit union could only expel a member pursuant to a 2/3 vote of the membership at a special meeting, or pursuant to a nonparticipation policy (which could only be utilized for members who were not actively using their accounts). Thus, unless an FCU was willing to call a special meeting of its membership for the sole purpose of expelling someone, they were often stuck keeping members who engage in abusive or illegal behavior. CUGMA attempts to remedy that problem by giving FCUs another avenue for expelling problematic members, which might be more palatable to FCUs than having to call a special meeting.


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