Member expulsion – Time to update procedures?

The Defense Credit Union Council recently held its third quarter Military Advocacy Committee meeting where it continues to listen to our member concerns and welcome informed discussion. Many of our member CEOs and Senior Execs participate in these quarterly meetings, through which quality recommendations and decisions are made in guiding our advocacy strategy. As the committee builds on successful passage and implementation of our approved initiatives, we continue to hear about other pending legislation where DCUC can make a difference. Our most recent instance is the Credit Union Governance Modernization Act of 2020 (S. 3323).

This bi-partisan bill was introduced in the Senate on February 24, 2020, just prior to the pandemic shutdown. This legislation revises the procedure for expelling members from a federal credit union. Currently, a member may be expelled only by a two-thirds vote of the credit union membership present at a special meeting. This legislation would allow a member to be expelled for cause pursuant to a member conduct policy adopted by a majority vote of a quorum of the directors of a credit union. Member conduct that may be cause for expulsion would include:

• • a loss to the credit union,
  • a violation of the credit union membership agreement,
  • a disruption to the operations of a credit union,
  • fraud or attempted fraud, and
  • other illegal or inappropriate behavior. 

Any member expelled under this new legislation will be provided with written or electronic notice of the reason for the expulsion and will also be given an opportunity to request reinstatement of membership and have the request considered at a meeting of the board of directors, in a timely manner after the expulsion. Of note, there is nothing in the bill that may be construed to require a board of directors to allow an expelled member to address the board in person or attend the special membership meeting.

To be honest, I had not heard about this bill until one of our members was conducting research on member expulsion rules and noticed this bill. Unsure whether DCUC and other credit union trade associations had supported it, this member asked our opinion on this change. Thus, about two weeks later we included this topic in the August 10, 2020, DCUC Military Advocacy Committee meeting. The response and subsequent discussion took me by surprise.

When I looked deeper into this topic, I learned this is not a new issue. In fact, in 1991 the NCUA strongly advised against such a measure, opining that expulsion is an extremely harsh remedy best left to the discretion of the membership, except for instances already described in the Federal Credit Union Act. There is also a sense that this current bill does not have much support on Capitol Hill. Finally, I have also discovered that other decision-makers in our industry believe this issue is best left to the states in terms of legislation. Fair points to be sure.

However, many of our Military Advocacy Committee members expressed strong support for this change. Several shared instances where a member has threatened the life of the installation commander, physically attacked credit union member service representatives, or has engaged in multiple acts of fraud. Each of these individual acts impacts not only the safety of our communities, but the reputation and brand of our hard-working credit unions and their membership at large.

Many of our credit union executives realize that while this proposal takes power away from the membership, it is also true that most members do not get involved in annual meetings much less a special meeting in order to expel a member. Additionally, these meetings are costly and time consuming to assemble a quorum. As we operate in a 21st Century world and given the speed and reach of social media, too much time passes before credit unions can act. Clearly some flexibility is required, which is why discussion of this issue was needed.

Per unanimous vote of our Military Advocacy Committee, DCUC will be sending letters of support to bi-partisan sponsors along with the Chair and Ranking Members of the Senate Committee on Banking, Housing, and Urban Affairs. In doing so, DCUC is proud to support our members in their efforts to set and enforce standards of behavior for their membership. As a retired military officer and former commander, I can appreciate this effort as there are minimum standards that must be enforced. As President and CEO of a leading defense trade association, I am proud of our members for bringing this to our attention and trusting us to make the right call.

“Serving Those Who Serve Our Country” is more than just a slogan. It is an ethos that defines who we are and what we do. Stay tuned for more DCUC initiatives as we continue to build our trade association.