Metsger: Contingent Legal Fee Was the Best Available Option

In a December 20th letter to Rep. Mick Mulvaney (R - SC), National Credit Union Administration (NCUA) Chairman Metsger wrote that "the decision to pursue legal action using a contingency fee arrangement was the best available option" for the agency over the failure of five corporate credit unions that had bought faulty mortgage-backed securities.

The letter was in response to a November 21 letter from Rep. Mulvaney.

NCUA has paid more than $1 billion in legal fees on $4.3 billion in recoveries from legal settlements.

In pursuing its contingent fee arrangement, Chairman Metsger stated that NCUA did not have the in-house resources or expertise to independently pursue its legal strategy.

He also noted that the agency lacked resources to hire law firms on a hourly basis. Therefore, an hourly fee arrangement would have required increased assessments on credit unions, which credit unions would have had difficulty paying.

Metsger contended that a contingency fee arrangement insulated credit unions from most expenses, if the lawsuits failed, and provided significant upside benefit to credit unions, if the agency's legal strategy was successful.

Metsger claimed that the agency could not have brought these complex lawsuits without the contingency fee arrangement.

Metsger pointed out that the recoveries from NCUA's lawsuits "enabled the agency to stop assessing credit unions the cost of the repayment of the Stabilization Fund since 2012."

Metsger also stated that the agency created a website for credit unions to get information regarding the legal settlements.

The letter also addressed the agency's efforts to control expenses and to increase budget transparency.

The letter appears below (click on image to enlarge)