The NCUA board of directors’ approval of a final rule on member expulsion at its July meeting is garnering a positive response from New York credit unions.

The NCUA’s approved final rule amends the federal credit union bylaws to adopt a policy by which a federal credit union member may be expelled for “cause” by a two-thirds vote of a quorum of the credit union’s board of directors.

Cause is defined as either:

• a substantial or repeated violation of the membership agreement of the credit union;
• a substantial or repeated disruption, including dangerous or abusive behavior, to the operations of credit union; or
• fraud, attempted fraud, or other illegal conduct that a member has been convicted of in relation to the credit union.

Member expulsion has long been a thorny area for credit unions, who obviously want to keep staff safe, but fairly and appropriately handle difficult members.

“I believe this new rule will help management and the board make decisions quicker and in the best interest of staff and other credit union members’ safety,” said Maggie Pope, CEO/treasurer of Mountain Valley Federal Credit Union and New York Credit Union Association board vice chair. “It allows the credit union to expeditiously deal with members that would require this type of action when needed. We have had a few members we would have applied this new rule to over the past few years, especially when a member acted in a bit of a rage in regard to their account.”

Bill Carhart, Oswego County Federal Credit Union CEO, agrees, saying that rule will allow the credit union to remove members that are “habitually abusive” to staff. “We have had a few members that have regularly made staff cry and made overt threats to staff. We love our members and that’s why we are here, but safeguards that help create an inviting work environment and help us deal with the few members who abuse our hospitality is long overdue.”

The NCUA, says that the with the new rule, it aims to strike a balance between addressing the legitimate concerns over providing services to violent and disruptive members and providing due process rights to credit union member-owners.

These rights include proper disclosures, hearings, and an appeals process, according to the NCUA, with the agency saying that the powers granted in the Credit Union Governance Modernization Act must not be used as a tool to facilitate financial exclusion. What’s more, a federal credit union must ensure its implementation of the authority to expel members for cause is consistent and does not violate anti-discrimination laws or regulations.

The Association has supported an amendment to the federal credit union bylaws, and in December, 2022, William J. Mellin, president/CEO sent a comment letter to the NCUA, stating that in certain cases, expedited expulsion is critical.

This week, Mellin applauded the agency’s approval of the new rule, stating that, while “member credit unions do not take member expulsion lightly or see the need frequently, on the few occasions in which they resort to expulsion, the ability to expedite expulsion will contribute to the safety of employees, members, and the credit union itself moving forward.”

Under the Credit Union Governance Modernization Act of 2022, enacted by Congress on March 15, 2022, the NCUA had until Sept. 15, 2023, to develop a final rule that federal credit unions may adopt to expel a member for cause. As stated in the Federal Register, the final rule is effective Aug. 25, 2023.

As for state-chartered credit unions, they may expel an abusive member as long as the credit union has an expulsion policy in place.