Credit Union Regulatory Guidance Including: NCUA, CFPB, FDIC, OCC, FFIEC

Samantha: Hello, this is Samantha Shares.

This episode covers N C U A’s Enforcement
Manual on Letters of Understanding

and agreement – also known as L U A’s.

The following is an audio version of
that advisory and the press release.

This podcast is educational
and is not legal advice.

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And now the Enforcement manual on L U A’s.

What is a Letter of
Understanding and Agreement?

An L U A is a bilateral document
signed by the credit union's board of

directors and the regional director (RD).

The credit union agrees to take, or not
take, a certain specified action(s).

RDs often issue L U As when
credit unions have not adequately

responded to less severe measures,
such as Documents of Resolution.

N C U A also requires L U As for newly
chartered credit unions and for the

granting of permanent special assistance.

Delegation of Authority SUP 16 authorizes
RDs to enter into L U As with elected and

appointed officials of FCUs and FISCUs.

RDs discuss and negotiate publication with
credit unions to prevent unfair surprises

to credit unions and their officials.

The

RDs will address the issue of publication
in every L U A between N C U A and

a credit union by including one of
the following three provisions:2

1.

This L U A will not be published.

2.

This L U A will be published.

3.

The RD is reserving for a reasonable time
his/her right to publish this L U A.3•

2 Minor modifications and variations
of the listed provisions that clearly

communicate the same ideas are acceptable.

3 This third provision can also
specify the period of time within

which the RD will decide whether to
publish the L U A or can correlate

publication to a specified event (or
the failure of an event to occur).

a.

Required Letter of Understanding
and Agreement provisions

This section is redacted.

b.

Published Letter of
Understanding and Agreement

The FCU Act §206(s)(1)(A), 12 U.S.C.

§1786(s)(1)(A), requires the N C U A
Board to publish and make available

to the public "any written agreement
or other written statement for which a

violation may be enforced by the Board
unless the Board, in its discretion,

determines that publication would
be contrary to the public interest."

L U As must be published if violations
are to be considered enforceable.

The N C U A Board may take
administrative actions against credit

unions or officials when they fail
to meet terms of published L U As.

Violations of the terms of a published L
U A alone are grounds for administrative

action and, although not required,
the L U A should include language

to that effect as stated above.

N C U A may enforce a published L U
A by bringing an enforcement action,

such as a cease and desist order
or civil money penalty, and proving

noncompliance with the published L U A.

These publication requirements
apply to all L U As, including those

issued to newly chartered credit
unions, as well as those issued in

connection with special assistance.

N C U A may take an enforcement action,
even if the L U A is not published,

if the credit union fails to comply
with the terms of the L U A and the

credit union's conduct constitutes a
material safety and soundness violation

or violation of law or regulation.

While not required by the delegation,
the regions should provide the Office

of General Counsel and E&I with a
draft of an L U A considered for

publication two business days prior
to its delivery to the officials

of the credit union for signature.

c.

Non-Published Letters of
Understanding and Agreement

Non-published L U As are not enforceable.

The mere violation of a non-published
L U A is not grounds for a formal

enforcement action, but may serve as the
basis for developing grounds for a formal

enforcement action if underlying safety
and soundness concerns or violations

of statutes or regulations exist.

The FCU Act provides that N C
U A may enforce the terms of an

unpublished L U A if the N C U A
Board approves non-publication based

upon a finding that publication would
be contrary to the public interest.

If the RD recommends to the N C U A
Board that an L U A not be published

because publication would be contrary
to the public interest, and the N C

U A Board issues this determination,
the L U A will still be enforceable.

The RD's recommendation must clearly
show why publication would be

contrary to the public interest.

The FCU Act requires a quarterly
written report to Congress to summarize

all non-published L U As that are
enforceable under this exception.

This exception to publication
should be used rarely and only when

conditions justify a conclusion that
non-publication is in the public interest.

d.

L U As with Federally Insured
State-Chartered Credit Unions (FISCUs)

N C U A may independently or jointly with
the S S A’S issue an L U A to a FISCU.

The requirement for publication applies
if N C U A attempts to take action based

on a violation of the terms of the L U A.

Therefore, RDs will include one of
the three publication provisions

discussed above in all L U As issued
jointly with N C U A and a S S A’S

This concludes the N C U A’s
Enforcement manual on L U A’s.

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.