When Does an NCUA Letter of Understanding (LUA) Become Public?

Every Letter of Understanding and Agreement (LUA) that the National Credit Union Administration (NCUA) issues states, inside the document itself, whether it will be published. You read that provision before you sign, which makes publication a term you negotiate rather than a date you wait out.

The publication provision is already in the draft you're handed

NCUA Instruction 4820, the Enforcement Manual, requires the Regional Director (RD) to address publication in every LUA. Chapter 2 supplies three provisions to choose among: this LUA will not be published, this LUA will be published, or the RD is reserving for a reasonable time the right to publish it. Minor wording variations are acceptable if they convey the same idea.

The same chapter directs RDs to discuss and negotiate publication with credit unions to prevent unfair surprises to credit unions and their officials. That is the agency's own language, useful to have in hand if your examiner presents publication as settled.

The National Supervision Policy Manual (NSPM) 26.0 requires exam staff to send an electronic copy of the final, approved LUA to officials before the signing meeting, and to allow officials a minimum of two business days to review it before they sign (Administrative Remedies, p. 10).

Published and unpublished are two different kinds of action

NSPM 26.0 sorts a non-published LUA under informal actions and a published LUA under formal actions (Types of Administrative Remedies, p. 5). Formal actions are authorized by statute and may be disclosed to the public (Administrative Remedies, p. 6).

Enforceability is what turns on publication. Instruction 4820 states that LUAs must be published if violations are to be considered enforceable, tracking Section 206(s)(1)(A) of the Federal Credit Union Act, which requires the NCUA Board to publish any written agreement for which a violation may be enforced. Violating a published LUA is by itself grounds for administrative action. Violating a non-published LUA is not, though 4820 provides the violation may help develop grounds where the underlying safety and soundness concerns or violations of law exist on their own.

One narrow exception runs the other way. The NCUA Board can determine that publication would be contrary to the public interest and leave an LUA both unpublished and enforceable. Instruction 4820 requires the RD's recommendation to clearly show why, requires a quarterly written report to Congress, and states the exception should be used rarely.

Only one of the three provisions leaves a clock running

The first two provisions close the question at signature. The reserved-right provision is the only one where timing stays open, and 4820 permits the RD to specify the period for making the decision, or to correlate publication to a specified event or the failure of an event to occur.

That second option is where the negotiation sits. If publication is going to be triggered by something, get the trigger written down, tied to a corrective action you control, with a date attached. Left open-ended, it becomes a lever the region can pull at any point. The agreement underneath is already open-ended: NSPM 26.0 provides that no LUA will have a specific termination date unless it is drafted in conjunction with a newly chartered credit union (Administrative Remedies, p. 8).

I met with a board recently that had been told an LUA was coming and that it might reserve the right to publish. They had not seen the language yet. Some directors were ready to sign and some were not, and the split tracked almost entirely to publication.

How a published LUA actually reaches the public

Instruction 4820 provides that NCUA's Office of General Counsel (OGC) publishes a monthly list of formal enforcement actions giving the name of the credit union or person involved, the type of action, and the date, posted on NCUA's public website.

The agency does not push it the way it pushes a conservatorship. There is no NCUA Express announcement. NCUA satisfies the requirement and moves on. The trade press knows where that list lives and goes looking, and the reputation exposure tends to arrive when a reporter picks the entry up rather than on the day it posts.

What the board should settle before it signs

NSPM 26.0 provides that if a quorum of directors signs the LUA, it is understood to be accepted by the board (Administrative Remedies, p. 10). A director who voted against it or abstained still serves on a board operating under a published LUA and carries the same fiduciary responsibility as those who signed.

Declining is a real option with a real cost. Todd Miller points out that the language in published LUAs runs heavily in NCUA's favor, reserving the agency's right to remove officials and assess civil money penalties. A dear friend of mine, a general counsel now passed, advised clients not to sign a publishable LUA and to make the agency issue a preliminary warning letter (PWL) instead. I have moved closer to that view over time, particularly where the publication right is open-ended and carries no deadlines.

The counterweight is what NSPM 26.0 does next. Examiners will draft a PWL when a credit union's problems are serious or persistent and the board is unwilling to sign an LUA, and a PWL supports formal administrative action including a published LUA or a cease and desist (C&D) order (Administrative Remedies, p. 15). Refusing can route you toward the same publicity with less of the content negotiated.

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