What Is a Cease and Desist Order?

What Is a Cease and Desist Order?

A Cease and Desist (C&D) Order is one of the most serious formal enforcement actions the National Credit Union Administration can take against a credit union or an individual associated with one.

At its core, a C&D Order requires a credit union—or an institution-affiliated party—to stop illegal, unsafe, or unsound practices that have caused, or are likely to cause, more than minimal financial loss or a significant adverse effect on the institution.

Unlike informal supervisory actions, a C&D Order is a legal order, backed by statute, and enforceable in federal court.

How a Cease and Desist Order Begins

A C&D action starts with a Notice of Charges and Hearing. This document lays out:

• The specific violations or unsafe practices alleged

• A detailed statement of facts supporting those charges

• The scheduling of an administrative hearing

The Cease and Desist Order itself sets forth the required corrective actions. Importantly, these actions are designed to address only the most significant deficiencies, not every supervisory issue facing the credit union.

Who Can Be Subject to a C&D Order?

A Cease and Desist Order may be issued against:

• An insured credit union, or

• An institution-affiliated party (IAP)

An institution-affiliated party includes:

• Directors, officers, committee members, employees, or agents

• Consultants, joint-venture partners, or others participating in the credit union’s affairs

• Independent contractors who knowingly or recklessly participate in violations, breaches of fiduciary duty, or unsafe or unsound practices

In short, C&D exposure is not limited to management—it can extend well beyond the credit union’s payroll.

Common Issues That Lead to a C&D Order

C&D Orders are most often used to address significant control, governance, or compliance failures, including:

• Failure to maintain adequate books and records

• Deficient or unsupported appraisal reports

• Transactions involving conflicts of interest

• Inadequate due diligence

• Weak control structures or insufficient oversight

These are typically issues that examiners believe cannot be corrected through less formal measures.

What Can a C&D Order Require?

NCUA has broad discretion in crafting corrective actions. In addition to ordering a credit union to stop certain activities, a C&D Order may require affirmative actions, such as:

• Making restitution or providing reimbursement or indemnification

• Restricting asset growth or business expansion

• Rescinding contracts or agreements

• Disposing of loans or other assets

• Hiring qualified officers or employees

• Taking any other action NCUA determines is necessary

This flexibility allows NCUA to tailor orders to the specific risks presented.

Legal Authority and Consequences

Cease and Desist Orders are issued under Section 206(e) of the Federal Credit Union Act. Orders are written article-by-article and prescribe the specific restrictions and remedial actions required to return the credit union to a safe and sound condition.

Violating a final C&D Order is serious:

• It can serve as the basis for civil money penalties against directors, officers, or other institution-affiliated parties

• It may be enforced through a U.S. district court

• A willful violation of a final C&D Order is itself grounds for conservatorship

The Three Types of Cease and Desist Orders

1. Consent Cease and Desist Order

A Consent Order is a C&D Order that becomes final when the board of directors signs a Stipulation and Consent.

• A Notice of Charges is still issued

• No administrative hearing is required

• The order becomes effective as specified in the document

This is the most common form and reflects a negotiated resolution.

2. Final (Permanent) Cease and Desist Order

A Final C&D Order has the same legal effect as a Consent Order but is imposed involuntarily.

• Issued after a Notice of Charges

• Followed by a hearing before an Administrative Law Judge

• Concludes with a final decision by the NCUA Board

The order becomes effective 30 days after service and may be appealed to a U.S. Court of Appeals.

3. Temporary Cease and Desist Order

A Temporary C&D Order is an interim measure used when immediate action is necessary to prevent harm.

• Effective immediately upon issuance

• Issued alongside a Notice of Charges seeking a final order

• May be challenged in U.S. District Court within 10 days

Temporary orders are typically used when violations are likely to:

• Cause insolvency or significant dissipation of assets or earnings, or

• Seriously weaken the condition of the credit union or prejudice member interests

They may also be issued when books and records are so incomplete or inaccessible that the credit union’s true condition cannot be determined.

Grounds for Issuing a Cease and Desist Order

NCUA may issue a C&D Order if a credit union or institution-affiliated party:

• Is engaging in, has engaged in, or is about to engage in unsafe or unsound practices, or

• Is violating, has violated, or is about to violate a law, regulation, written condition, or published agreement with NCUA

Certain Bank Secrecy Act deficiencies require mandatory C&D issuance, such as failure to establish or correct required compliance programs.

How the C&D Process Works

C&D proceedings follow formal administrative rules under NCUA regulations.

For final or consent orders, the process generally includes:

1. Issuance of a Notice of Charges

2. Consent by the respondent or a hearing before an ALJ

3. A recommended decision forwarded to the NCUA Board

4. A final Board decision within statutory timelines

5. Potential appeal to a federal court

Temporary orders run in parallel with this process until replaced or terminated.

Violations and Removal of C&D Orders

Failure to comply with a final C&D Order can result in:

• Federal court enforcement

• Civil money penalties of up to $1,000,000 per day, if statutory criteria are met

A Temporary C&D Order automatically terminates when charges are dismissed or a final order becomes effective. Removal of a Board-approved C&D Order also requires Board approval.

Bottom Line

A Cease and Desist Order is not just a supervisory escalation—it is a formal legal action with real personal and institutional consequences. Understanding how C&D Orders work, how they arise, and how they are enforced is critical for boards and executives navigating serious regulatory risk.