Is an NCUA DOR an Enforcement Action?
Samantha: Hello, this is Samantha Shares.
The following is an audio version
of an article from our website.
Called - Is an N C U A D
O R an enforcement action?
The following is an audio version
of an article from our website.
It is based on N C U A's guidance
and on our own experience
working with credit unions.
This podcast is educational
and is not legal advice.
We are sponsored by Credit Union
Exam Solutions Incorporated, whose
team has over two hundred and
forty years of National Credit
Union Administration experience.
We assist our clients with N C
U A so they save time and money.
If you are worried about a recent,
upcoming, or in process N C U A
examination, reach out to learn how they
can assist at Mark Treichel dot com.
Also check out our other podcast called
With Flying Colors where we provide tips
on how to achieve success with N C U A.
And now the article.
Is an N C U A D O R an enforcement action?
No.
The National Credit Union Administration
puts the Document of Resolution on the
informal side of the administrative
remedies table in its National
Supervision Policy Manual, and reserves
the phrase enforcement action for
the formal actions on the other side.
The classification matters less than
credit unions hope, because a D O R
is how N C U A builds the record that
makes a formal action possible later.
What the manual says.
The Administrative Remedies section of the
current N S P M, version twenty six point
zero, splits remedies into two categories.
The informal actions are the document
of resolution, the regional director
letter, the non published letter
of understanding and agreement,
and the preliminary warning letter.
The formal actions are the published
letter of understanding and agreement,
the immediate or permanent cease
and desist order, the civil money
penalty, involuntary liquidation,
conservatorship, removal or prohibition,
termination of insurance or revocation
of charter, and some Prompt Corrective
Action related actions, such as
ordering a new election or dismissing
a director or senior officer.
The next section settles it.
Formal actions are also
known as enforcement actions.
They are authorized by statute, generally
more severe, may be disclosed to
the public, and require consultation
with the Office of General Counsel.
None of that describes a D O R.
The D O R procedures also moved.
In version ten point zero they sat in
Chapter One, Administrative Remedies.
In version twenty six point zero they
are in the Examination Reports chapter
under Report Components, starting
around page two hundred twenty two.
Where N C U A's own language gets loose.
The D O R section of version twenty
six point zero says a problem has to
be significant enough that an examiner
would recommend escalating to the next
level of elevated enforcement action,
and gives a Regional Director letter, or
R D L, or a letter of understanding and
agreement, or L U A, as the examples.
Both sit on the informal list.
A few paragraphs later the D O R
criteria ask whether the problem
would need escalation to the next
level of enforcement action, naming
the preliminary warning letter,
or P W L, the L U A, a cease and
desist order, or conservatorship.
The same manual uses the term to mean
formal action in one chapter and to
cover informal actions in another.
That parenthetical
changed between versions.
Version ten point zero wrote it as P W
L, L U A, et cetera, and version twenty
six point zero names the cease and desist
order and conservatorship outright.
The Enforcement Manual
does not list the D O R.
N C U A Instruction forty eight twenty,
the Enforcement Manual the N S P M
points to, lists informal enforcement
actions as Regional Director letters, non
published L U As, establishment of special
reserves, and preliminary warning letters.
The D O R is not among them.
It appears once in the entire instruction,
in the L U A chapter, noting that
Regional Directors often issue L U As
when credit unions have not adequately
responded to less severe measures
such as Documents of Resolution.
An examiner would push back that
Instruction forty eight twenty
is dated September sixteenth, two
thousand four, and predates the
current D O R framework, so its silence
says nothing about today's policy.
That is fair.
The counterweight is that the D O
R is absent from the instruction
written to govern enforcement, and
sits on the informal side of the
manual examiners actually work from.
Does a D O R become public?
No.
Under Instruction forty eight twenty,
N C U A must publicly disclose
final orders entered under section
two hundred six, subsection s,
of the Federal Credit Union Act.
Those are terminations of insurance, cease
and desist orders, civil money penalties,
removal orders, and conservatorship.
The instruction states there is no
legal requirement to publicly disclose
temporary cease and desist orders
or any informal enforcement action.
The Office of General Counsel
publishes a monthly list of formal
enforcement actions giving the name,
the type of action, and the date.
A D O R never appears on it.
Can you appeal a D O R?
Yes, and the classification is the reason.
Part seven hundred forty six,
subpart A, allows appeal of a
material supervisory determination.
That is a written decision by a
program office that may significantly
affect capital, earnings, or operating
flexibility, or otherwise affect the
nature or level of supervisory oversight.
The examples given are composite C A
M E L S ratings of three, four, and
five, loan loss reserve adequacy,
and significant loan classifications,
and the definition says expressly
that it is not limited to those.
A D O R that constrains what
a credit union can do fits.
The exclusion list is where
the enforcement question bites.
Enforcement related actions and
decisions are excluded from the term,
including the underlying facts and
circumstances that form the basis
of a pending enforcement action.
A D O R classified as an
enforcement action would fall
outside the appeal process.
A region can push back.
If escalation is already underway,
it can argue the D O R forms the
factual basis of a pending enforcement
action and is therefore excluded.
The counterweight is the word pending.
A D O R issued at a routine exam
with no R D L or L U A behind it is
not the basis of anything pending.
Appealing also does not stay
compliance, so the requirement
stands while the appeal runs.
What the D O R is actually for.
Escalation requires a record.
N C U A does not move from an examiner's
finding to a D O R to an L U A to
a cease and desist order without
documenting each step, and absent fraud
it does not skip the intermediate ones.
The D O R is where that
documentation starts.
N S P M version twenty six point zero
says management's failure to address D O R
items may result in administrative action,
and where a credit union fails to address
outstanding items, it directs the examiner
to recommend more enforcement action
such as an R D L, an L U A, or a P W L.
Part of that process
stays out of your report.
If the examiner recommends escalation
and the supervisor disagrees, version
twenty six point zero directs the
examiner to document the rationale in
the Closed Information Questionnaire,
along with the nature of the problem,
the supervision plan, and the reason
no further action was pursued.
The file can record an escalation that
was recommended and turned down, and the
credit union has no visibility into it.
The one approval a D O R does not need.
N S P M version twenty
six point zero is direct.
With the exception of a D O
R, the Regional Director must
approve all informal actions.
Every other remedy on either list
has a signature gate above the field.
Supervisory Examiner approval is required
only for a D O R that requires a credit
union to cease an activity, and version
twenty six point zero adds that the
approval or disapproval be documented
in the Closed Information Questionnaire.
That is why the negotiation
happens where it does.
Nobody at the regional office has to
sign a D O R, so the people who can
change one are the examiner and the
supervisory examiner, and the time to
do it is while the item is still in
draft, when arguing that it belongs in
the Examiner's Findings is cheapest.
Reach out to learn how we
assist our clients with N C U
A so they save time and money.
This concludes the article.
If your credit union could use assistance
with your exam, reach out to Mark Treichel
on LinkedIn or at Mark Treichel dot com.
This is Samantha Shares, and
we thank you for listening.
