Virtual Membership Meeting

Earlier this year, the Washington-state Division of Credit Unions issued an interpretive letter on virtual membership meeting.

The state credit union regulator stated that a Washington credit union may not conduct an annual membership meeting or special membership meeting as a virtual meeting without simultaneously conducting an in-person meeting.

However, the credit union regulator wrote that a virtual meeting can be conducted at the same time as an in-person meeting.

The letter noted that there are benefits associated with a virtual meeting, such as cost savings and greater membership participation; but virtual meetings also come with detrimental effects.

The state regulator pointed out that the Washington Credit Union Act requires a credit union's by-law to address the time and place of an annual meeting. In addition, a special meeting must be held in a reasonable location in the county that is the principal place of business for a credit union.

Read the interpretive letter.

State Regulator Suppresses Member Insurrection

Iowa's superintendent of credit unions, JoAnn Johnson (the former Chairman of NCUA), has invalidated a board and management shake-up at Family Community Credit Union in Charles City.

At an annual meeting of the Family Community Credit Union, members voted to dismiss the board of directors, to suspend CEO Dawn Swaningson, to reinstate staff members who had quit in protest of their treatment by Swaningson, and to appoint a new board and CEO.

But JoAnn Johnson wrote the members that their actions "were not in compliance with the bylaws of the credit union, or with the Iowa Credit Union Act."

I suspect that this is not the end of the story.

Read the story.

Violating Confidentiality Provisions

On May 27th, I wrote about Visions FCU publishing in its newsletter the names of members, who caused Visions a financial loss, that the credit union was going to expel at a special meeting.

I've obtained a copy of a NCUA letter (see below), not from the person that filed the complaint, that states this practice by Visions does not appear to comply with Part 716 of the Gramm-Leach-Bliley Act and the disclosure of this information in its newsletter appears to represent a violation of the confidentiality provision of the FCU Bylaws.

NCUA stated in its letter that "this is a regulatory compliance violation that will be addressed and corrected in the upcoming 2011 examination."

It seems to me that since this practice has been going on for some time (I wrote about this practice in a 2005 ABA Bankers News column), NCUA should hit Visions with a cease and desist order, which is published on NCUA's website, and a civil money penalty.

Click on images to enlarge.

Are Credit Unions Engaging Their Members?

In publicizing the credit union difference, credit unions regularly talk about their members as owners. However, are credit unions engaging their members as owners or are their members really just customers in the eyes of management?

What got me wondering about this question was a November 4th letter on Cooperative Operating Philosophy from the Farm Credit Administration (FCA), the regulator of the Farm Credit System (FCS), to Farm Credit institutions, financial cooperatives serving agriculture.

The letter encouraged Farm Credit institutions to engage their members as owners.

"Members need to know and understand their rights and benefits of ownership and be informed of the many ways they can exercise those rights and participate in the control of their institution."

While not mandating, the FCA wrote that FCS institutions could engage their members by:

1) posting their bylaws on their website;
2) ensuring that members petition rights are understood and fully supported; and
3) informing members how they may bring matters to the attention of the board or the membership as a whole.

I then went to several credit union websites including Navy FCU, State Employees CU, Altura CU, and Safe CU. I could not find their bylaws or any information on petition rights.

If management is not engaging members to participate in the control of their credit unions or providing them with the necessary information to participate in their institutions, then there may be a principal-agent problem.