Friday, November 5, 2010

Redacted Consent Orders

The Washington Department of Financial Institution's Division of Credit Unions is making public consent orders for state chartered credit unions. They should be commended for doing so. With the exception of the most recent order against The Union Credit Union, which failed on October 29th of this year, the state credit union regulator unfortunately has redacted most information from its consent ordersthat would have been of value to credit union members and the public.

The Division of Credit Unions does state on its website that "under Washington State law, examination reports and any information obtained in connection with the examination of a credit union are confidential and privileged and not subject to public disclosure. For this reason, portions of the administrative actions available on this website may be redacted."

Take for example the enforcement action against Global Credit Union in 2009, it is full of redactions.

Page 2 of the consent order reads, as follows:

"IT IS HEREBY AGREED AND ORDERED that the Credit Union cease and desist from [redacted text]." The consent order goes on to enumerate 8 additional items under A, which are all redacted.

Under section 2.a.2) dealing with asset quality, the order says: "The consultant must deliver copies of their report within 60 days of engagement to the Board and Assistant Director. At a minimum, the deliverables must include

i) [redacted]
ii) [redacted]
iii) Suggestions for [redacted]
iv) Suggestions for a [redacted]

The consent order has additional redactions, including key net worth ratios. For example, it redacts the net worth ratio the credit union needs to obtain by December 31, 2010.

The Division even redacted the date of the last exam of the credit union. How is providing the date of the last exam harmful?

I believe the Division of Credit Unions should take a very narrow instead of an expansive view of "confidential and privileged" information. This will result in greater transparency.

1 comment:

  1. If the regulators told the whole story, then they would also have to explain to the public how and/or why they failed to take appropriate action before allowing the financial collapse of the credit union. Having being involved with bond claim area of the credit union industry, I have witnessed many instances of state regulator exams saying everything is OK and then overnight the credit union is a disaster. Nevada is another example of State regulators not doing their jobs regarding state chartered credit unions.



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