WASHINGTON, DC (November 28, 2017) — Nineteen credit unions from across the country have appealed the National Credit Union Administration’s decision to retain the bulk of the initial surplus resulting from the regulator’s merger of the Temporary Corporate Credit Union Stability Fund (TCCUSF) into the National Credit Union Share Insurance Fund (SIF).
The NCUA Board voted on Sept. 28 to merge the TCCUSF into the SIF, the fund that credit unions pay into to insure members’ deposits. The Nov. 16 appeal letter was sent to the NCUA’s Inspector General citing its authority under the Inspector General Act of 1978 to review agency actions that involve “fraud, waste, abuse, and illegal” activity.
The retained funds exceed $2.6 billion, according to a Sept. 30 KPMG audit. The NCUA’s plan would return just $600 million to $800 million to the credit unions that funded the Stabilization Plan for the corporate credit union system during the Great Recession.
The letter noted that the 2009 TCCUSF enabling act states: “These provisions are intended to ensure that the activities of the Fund are restricted to resolving problems in the corporate credit union system, and not used for other purposes, such as for dealing with natural person credit union problems.”
The letter also noted that 98% of the 663 comments the NCUA received prior to the Sept. 28 vote opposed the board’s proposal. This independent IG review is also necessary because the NCUA has a conflict of interest by deciding to retain funds for its own use.
It’s The Members’ Money
“I signed the appeal because it is just NOT right,” wrote Cheryl J. Foster, Executive Vice President of BFG FCU in Akron, OH. “Our credit union members money saved the industry. The money belongs to our members and NCUA repeatedly stated that recoveries would be returned to the credit unions.”
The letter of appeal details more than $10 billion in direct costs that credit unions paid to support the NCUA’s corporate stabilization plan. It also points out that all liquidation expenses and all interim funding sources have been fully reimbursed, including the U.S. Treasury, external creditors, insured shareholders, and external vendors. These payments also include more than $1.0 billion spent on outside attorneys who helped secure settlements from the big banks that sold toxic securities to the corporate credit unions.
Every party involved in the stabilization plan has been fully paid, except the credit unions themselves. They alone have yet to recover a single penny from the surplus which is now projected to exceed $4 billion.
The NCUA’s board’s plan retains almost $2.0 billion of the initial surplus for NCUA’s growing budget and to fund hypothetical contingent liabilities that that the fund’s auditor KPMG has stated are non-existent in the last five year’s (2013-2017) certified opinions.
The credit unions requested that the agency’s Inspector General direct the NCUA to:
No Outside Capital
Credit unions have no access to outside capital. Signers said these recoveries would be vital in helping members now versus the NCUA investing the funds in Treasury securities and spending millions on its own growing budget.
Mark Overfield, CFO of Firelands Credit Union in Bellevue, OH, said, “These funds will go a long way to providing more members financial literacy and to help those struggling financially in our communities.”
The 19 initial signers are from eight states and range in size from just more than $100 million to greater than $10 billion. Copies were also sent to the congressional committees which oversee the TCCUSF, KPMG (the fund’s auditor), and the GAO.
Full copies of the letter and credit union signers are attached.
Additional information on the issue is in these articles:
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Victoria Taylor
vtaylor@callahan.com
