Exam Appeals: Credit Unions Deserve A Better Process - Part 2

by J. Mark McWatters, NCUA Board Member

In the December 2015 issue of The NCUA Report, I discussed what the deficiencies are with the NCUA's examination appeals process, the need to address a credit union's right to appeal, and provided recommendations for NCUA action. In this month's column, I continue to expand upon this topic with additional options for NCUA to consider to enhance the examination appeals process.

NCUA Should Have an Exam Outreach Officer

The NCUA Board should designate a senior executive as an outreach officer who will contact credit unions that have just completed an examination to obtain retaliation-free feedback from them about their experience. The outreach officer should report directly to and provide the NCUA Board with quarterly reports on his or her findings and analysis. NCUA should utilize the information from that outreach and undertake periodic short surveys to credit unions on examinations to develop recommendations that are incorporated into future exam appeals proposals to continually improve our process.

NCUA Should Revisit Examiner Training and Provide a New Appeals Process Resource Webpage

More must be done within NCUA's examiner training programs to promote a culture of tolerance and respect for credit unions throughout their exams and any appeal. In addition, to the extent legally permissible, NCUA should make all information about appeals-including the reports of the outreach officer made to the NCUA Board-accessible in a fully transparent manner on a separate NCUA web page.

The credit union community, rightly so in my view, has grown exceedingly weary with the agency's failure to address the glaring inadequacies in its appeals process. That the appeals process offered by other regulators of financial institutions also remains deficient should not offer NCUA a justification for inaction. The NCUA Board's job is not merely to follow the script set by other financial regulators, but to lead and set the standard of transparency and accountability for all such regulators.

NCUA Really Should Have an Advisory Council

As I have often stated, one of the most important steps NCUA could take to address regulatory relief and examination issues would be to establish a credit union advisory council. In fact, NCUA is the only federal financial institutions regulator that does not utilize the talents and expertise of such a council. The Federal Deposit Insurance Corporation has an Advisory Committee on Community Banking, the Federal Reserve Board has the Community Depository Institutions Advisory Council (and the Federal Reserve Banks have their own councils), the Consumer Financial Protection Bureau has the Credit Union Advisory Council and the Community Bank Advisory Council, and the Office of the Comptroller of the Currency has the Mutual Savings Association Advisory Committee and Minority Depository Institutions Advisory Committee. I continue to urge the agency to follow suit and not remain a regulatory outlier.

Meanwhile, it is not beyond NCUA to provide a fully functional exam appeals process that does not dictate outcomes or block challenges, but affords robust transparency and due process rights, without the use of one-sided hearings where neither credit unions nor their counsel participate. By law, credit unions should be able to present their concerns in a timely manner before an impartial forum and, in my view, accompanied by counsel, with the expectation that right-sized solutions will result, and without retaliation or the appearance of impropriety. Credit unions may not always prove to be right in their appeals, but our process must not preordain that they are always wrong, either.


In the final analysis and regardless of the improvements that the NCUA attempts to pass off to the credit union community as due process, the NCUA still acts as judge and jury given as every step of the appeal process is decided by an employee of the NCUA. In my view, it is difficult to defend that the current process is completely above reproach and not tilted toward a self-serving outcome. I believe our appeal process is contrary to the rule of law and constitutional due process.

The agency should look to create a very transparent non-retaliatory process instead of doubling down to defend the current process, which only serves to exacerbate the disconnect within the credit union community and the disdain of those who dare challenge the rule of the NCUA.

Editor's Note: A version of this column originally appeared in Credit Union Journal on Nov. 3, 2015.http://bit.ly/1XCExbt.


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