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Can NCUA Examiners Fire Credit Union Employees?



Understanding NCUA Power to Remove Officials in Credit Unions ūüŹ¶



I am asked this question quite frequently these days, with NCUA downgrading CAMELS and issuing administrative actions more and more frequently.



Let's be clear:¬†¬†NCUA ūĚóĖūĚóĒūĚó°ūĚó°ūĚóĘūĚóß fire a credit union employee. ¬†The Credit Union Board and staff chain of command have full hire and fire authority. ¬†But, ¬†NCUA via the Federal Credit Union Act can remove officials if an only if grounds to do so exist. ¬†What are grounds?



Here's what you need to know:



‚ÄĘ Removal actions can follow a cease and desist order


‚ÄĘ Grounds include violations of statutes, regulations, or agreements


‚ÄĘ Personal dishonesty or unfitness must be demonstrated


‚ÄĘ Actions must result in financial loss, member prejudice, or personal gain


‚ÄĘ Removal can occur up to 6 years after leaving the credit union


‚ÄĘ Removed individuals are prohibited from all federally insured financial institutions



But here is the thing:



Only the NCUA Board can take this action


NCUA staff typically will skip a single removal and simply remove the entire board via a conservatorship action.



Worried about your NCUA examination?  Reach out to learn how my team and I assist our clients with NCUA so they save time and money.



The following portion of this post is from NCUA's (redacted) Enforcement manual.


***

What¬†is¬†an NCUA ‚Äú¬†removal‚Ä̬†action?

A removal action is the administrative action to remove directors, officers, or committee members. This action is available as an initial course of action or as a continuation of a cease and desist order if the officials refuse to comply as directed. Whether this enforcement action is an initial course or a continuation of a cease and desist order, it is separate and has its own applicability to particular situations. Section 206(g) of the FCU Act, 12 U.S.C. §1786(g), contains NCUA's authority to issue a removal order; NCUA Rules and Regulations §747, Subpart A, contains the rules and regulations governing removal administrative hearings.

 

It may become necessary to initiate formal removal action where a breach of fiduciary duty occurs on the part of the director, officer, or committee member and where the credit union's board will not or cannot discharge the responsible person and where that person does not voluntarily resign.

 

Removal of a director, an officer, or a committee member is not anticipatory in nature as in a cease and desist action. Removal is appropriate only when an official committed an act that constitutes grounds for removal, i.e., it cannot be imposed for future or threatened conduct. Removal can follow only if NCUA has issued a Notice of Intent to Remove or a Notice of Suspension and Intent to Remove and after completion of the appropriate administrative proceedings as provided in the FCU Act and NCUA Rules and Regulations.


NCUA may remove a person even if they voluntarily resign or are terminated by the credit union. A removal action may be brought any time up to six years after resignation, termination of employment, liquidation, or any other termination of a relationship with the credit union (see §206(k)(3) of the FCU Act, 12 U.S.C.

§1786(k)(3)).

 

Any party who has been removed or suspended from office is also automatically removed, suspended, and prohibited from participating in the affairs of any federally insured financial institution without the express written consent of the appropriate regulatory authority.

 

1.    What are the grounds for removal of an official?

NCUA can remove from office any directors, officers, or committee members if:

They directly or indirectly violated one of the following:

‚Ėļ¬†¬†¬†¬† A statute¬†or¬†regulation.

‚Ėļ¬†¬†¬†¬† A provision¬†of¬†a¬†Final C&D¬†Order.

‚Ėļ¬†¬†¬†¬† ¬†Any¬†published written¬†agreement between¬†the¬†NCUA Board¬†and¬†the¬†credit union.

‚Ėļ¬†¬†¬†¬† Any¬†condition imposed¬†in writing¬†by¬†the¬†NCUA Board¬†related¬†to¬†granting any application or request by¬†the CU¬†(e.g. application for insurance or 208 Assistance).

‚Ėļ¬†¬†¬†¬† ¬†Engaged¬†or participated in any¬†unsafe¬†or¬†unsound¬†practice related¬†to¬†the credit union.

‚Ėļ¬†¬†¬†¬† Committed¬†or¬†engaged¬†in¬†any¬†act,¬†omission,¬†or¬†practice¬†constituting¬†a¬†breach

of fiduciary duty.

And

Their actions either:

 

‚Ėļ¬†¬†¬†¬† Involved¬†personal¬†dishonesty.

‚Ėļ¬†¬†¬†¬†¬† Demonstrated¬†their¬†unfitness¬†to¬†participate¬†in¬†the¬†credit¬†union's affairs.

 

And

Their actions resulted in at least one of the following:

 

The credit union has or will suffer financial loss or other damage.

The interests of the members have or could be prejudiced.

The party receives financial gain or others benefit because of the violation, practice, or breach

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