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Senate bill would ease member-expulsion process

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WASHINGTON — A new bill before the Senate could make it easier for some credit unions to give unruly members the heave-ho.

Sens. Tina Smith, D-Minn., and Ben Sasse, R-Neb., on Monday introduced the Credit Union Governance Modernization Act of 2020, which would eliminate a two-thirds majority vote for federally chartered credit unions to expel members.

The bill is supported by both major national trade groups. The National Association of Federally-Insured Credit Unions said the legislation would reduce the regulatory burden for CUs and better protect the institution, members and employees.

“NAFCU strongly supports the Credit Union Governance Modernization Act as it will help protect credit unions and their members from abusive, fraudulent and criminal activity,” NAFCU President and CEO Dan Berger said in a press release. “Credit unions have an obligation to ensure their cooperatives act in the best interests of their members and local community, and this bill would make it easier for them to address bad actors engaging in illegal behavior.”

FCUs can currently only expel members as a last resort, and the bill broadly defines “cause” as fraud or other illegal behaviors. Members could request reinstatement at the approval of each institution’s board. Many state-chartered CUs already have “for cause” provisions in their bylaws, and the legislation would provide parity for federal charters.

Last fall the National Credit Union Administration finalized a rule clarifying FCUs’ bylaws regarding expulsion. NAFCU said that rather than make it easier to expel members who are verbally or physically abusive or who engage in fraud or other illegal activities, the regulator “took a strict reading of expulsion under the [Federal Credit Union Act] and declined to broaden the definition of nonparticipation.”

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