It’s Not Me, It’s You

It’s Not Me, It’s You: For Federal Credit Unions, breaking up with problematic members just got easier to do  

By: Heather Line, UCUA Compliance Guru 


FCU Bylaws Govern Member Expulsion 
Until recently, expelling disruptive members from Federal Credit Union (FCU) membership was difficult. FCU’s only had two options for expulsion: 

  1. Special Meeting Option: Under this option, a FCU must call a special meeting of the members, provide the member the opportunity to be heard, and obtain a two-thirds vote of the members present at the special meeting to expel a member.  
  1. Nonparticipation Policy: FCUs are permitted to expel a member under a nonparticipation policy given to each member that follows the requirements found in the Federal Credit Union Act. 

Neither of these options worked well for expelling violent, disruptive, abusive (but participating) members. The best a FCU could do is deny services and/or prohibit in person transactions and hope the problematic member would quit.

A New Expulsion Option 
On July 20, 2023 the NCUA Board unanimously approved a final rule that amended the standard federal credit union bylaws to permit a third way to expel a member. Under this new option, a FCU can adopt a policy by which a member may be expelled “for cause” by a two-thirds vote of a quorum of the credit union’s board of directors. 

Work is Still Required 
FCU’s that wish to implement the new expulsion option, still have to jump through some hoops: 

  1. Amend Article XIV of the FCU’s bylaws to include the new expulsion option  
  1. Provide a copy of the FCU’s Expulsion bylaw or optional standard disclosure to the member 
  1. Follow the notification and expulsion procedures as outline in the bylaws (which include giving the subject member an opportunity to request a hearing and a 60-day waiting period before the expulsion become effective) 

What about State Chartered Credit Union’s?
Credit Unions chartered by Utah’s Department of Financial Institutions may terminate a person’s membership in the credit union according procedures stated in their respective bylaws.  The Utah Credit Union Act also permits state chartered Credit Unions to close accounts of any member that causes a loss to the credit union.