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Member Access to Credit Union Records and Bylaws

March 23, 2012

by Stephen J. Edwards, Esq.

This year may be a good time to examine closely the election procedures for board members that are set forth in your credit union Bylaws.  Quite often elections are held in the same manner year after year, with the board and management just doing what it did in the prior year, or  following what the prior officials did.  Unfortunately, this procedure sometimes does not follow the rules set forth in the Bylaws.  However, as long as the election is not contested no one looks closely at the election procedures.

Every year a certain number of credit unions have contested elections where the losing side is not content with the outcome of the election.  After the election the losers sometimes mount a challenge to the elected board.  In the past this has generally taken the approach of complaining to NCUA and hoping the regulator will investigate on behalf of the dissatisfied challengers.  NCUA usually takes the approach that it will not intervene unless allegations are made, and supported, that lead them to believe that the safety and soundness of the credit union is impacted.  When NCUA amended its regulations several years ago to make the Bylaws a part of the regulations, it stated as follows:

“NCUA has discretion to take administrative actions when a credit union is not in compliance with its Bylaws. If a potential violation is identified, NCUA will carefully consider all of the facts and circumstances in deciding whether to take enforcement action. NCUA will not take action against minor or technical violations, but emphasizes that it retains discretion to enforce the Bylaws in appropriate cases, such as safety and soundness concerns or threats to fundamental, material credit union member rights.”

In addition, at about the same time the regulations were further amended to allow members the right to inspect the books, records and minutes of the credit union.  The regulation allowing members access to credit union records is likely to be felt most noticeably in this area of contested board elections.  Members don’t generally delve into what the board does.  However, a contested board election, where the losers are dissatisfied with the results, is fertile ground for those members to demand to inspect books, records and minutes of the board.  Those records may indicate that the Bylaws were not followed to the letter.  Not for any nefarious reason, but just because “that’s the way it was always done”.  There are many aspects of the election process that can inadvertently be violated, from the appointment of the Nominating Committee to the actual voting procedure itself.  The NCUA Bylaws provide for four methods of voting and it is not uncommon for credit union boards and management to get confused and combine aspects of several of them.

As a result of the above this may be a good time to review your Bylaws to make sure they are up to date and that your election procedures are in accordance with your Bylaws.  The NCUA Bylaws can be found at http://www.ncua.gov/Legal/Regs/Pages/Bylaws.aspx .  Note that there are 3 different sets of Bylaws – 1999, 2006 & 2007.  A credit union can continue to use its old Bylaws and does not have to update to the newer versions.  It can also adopt portions of the new Bylaws to supplement its existing Bylaws.  A review now may avoid a great deal of aggravation in the future.

DISCLAIMER: The foregoing is provided for informational purposes only, and does not constitute legal advice. It is not a substitute for legal or professional advice. Any legal advice should be tailored to specific clients and their specific needs. No attorney-client relationship is created by any use of this website. You should not act on the information contained in any of the materials on this website without first consulting a competent attorney licensed to practice in your jurisdiction.

From → Credit Unions

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