In July, NCUA released its final rule amending federal credit union bylaws to include expelling members for cause. The final rule became effective Aug. 25, 2023.

Federal credit unions have wanted the option to expel members who pose a threat to staff, other members, and credit union property. As background, member expulsion amendments first required a change to the member expulsion provisions in the Federal Credit Union Act.

In 2022, the Credit Union Governance Modernization Act (CUGMA) was included in the Consolidation Appropriations Act. It amended the Federal Credit Union Act to include a third way to expel members. However, the provision in the Federal Credit Union Act to expel members for cause was not self-executing.

Instead, it required NCUA to develop a policy by which a federal credit union member can be expelled for cause by a two-thirds vote of a quorum of the credit union’s board of directors. NCUA had 18 months to develop the expel-for-cause policy following the enactment of CUGMA.

Prior to the Aug. 25, 2023, effective date, there were only two ways members could be expelled from a federal credit union: by a two-thirds vote of the membership present at a special meeting called for that purpose (and only after the member received an opportunity to be heard), and for nonparticipation in the credit union’s affairs per the board-approved nonparticipation policy.

Now that NCUA has amended the Federal Credit Union Bylaws, and the expel-for-cause policy is effective, federal credit unions can use this authority when unsustainable situations arise.

The Federal Credit Union Act and Federal Credit Union Bylaws define “cause” as:

• A substantial or repeated violation of the credit union’s membership agreement.
• A substantial or repeated disruption, including dangerous or abusive behavior, to credit union operations.
• Fraud, attempted fraud, or conviction of other illegal conduct in relation to the credit union, including the credit union’s employees.

Member expulsion is an extreme remedy. Federal credit unions can always use less severe restrictions, such as limiting services or restricting access to members considered not in good standing.

Federal Credit Union Bylaws define a member not in good standing as one who has engaged in any of the following conduct: dangerous or abusive behavior/actions, including violence, intimidation, physical threats, harassment, and physical or verbal abuse of credit union officials, employees, members, or agents.

However, these actions should have occurred while on credit union premises or be otherwise related to credit union activities, such as via telephone, mail, email, or social media.

This unacceptable behavior also includes actions that cause or threaten damage to credit union property, or unauthorized use of or access to credit union property. Any conduct that’s dangerous or abusive and related to a credit union’s activities will allow a credit union to limit services to that member or expel them from membership.

Therefore, the conduct (as long as it’s related to credit union activities) doesn’t need to occur on credit union premises.

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