Kyle Hauptman, the president of the National Credit Union Administration, voted to liquidate two troubled credit unions, a move that has raised procedural questions since Hauptman alone does not constitute a quorum of the NCUA board.
On Tuesday, the NCUA placed Aldersgate Federal Credit Union — a $10.3-million asset credit union operated by a unit of the United Methodist Church in Marion, Illinois — into liquidation.
That action comes on the heels of the NCUA closing the $173 million-asset
The credit union failures are the first since President Donald Trump
Under the Trump administration, NCUA has adopted the position that
The NCUA
Aldersgate, with just 811 members, violated numerous provisions of the Federal Credit Union Act as well as NCUA rules and regulations including "operating in an unsafe and unsound manner," the NCUA said. Two weeks ago, the NCUA placed Aldersgate into conservatorship.
Mark Treichel, CEO of Credit Union Exam Solutions LLC, who served as executive director of NCUA for more than a decade, said the Federal Credit Union Act required that the board take action.
"It is the first time that there's only been one board member, at least since 2000," Treichel said. Hauptman "had to vote for the conservatorship because the board is not allowed to delegate" such actions, he said.
Aldersgate was created in 1962 to serve church members, employees, local pastors, clergy and ministers of the Illinois Great Rivers Conference of the United Methodist Church. It had assets of $10.6 million, according to its most recent call report, which listed $10.3 million in consumer loans and $260,000 in cash as of March 31.
The credit union raised red flags by listing zero delinquencies and charge-offs for loans in the past five years, which Treichel called "almost a mathematical impossibility."
"It was quick, and they moved to take it over and liquidate it," he said.
NCUA has adopted the position that
The NCUA has claimed that during the Bush administration, then-chairman Dennis Dollar acted as a sole board member in which he held a board meeting, voted, and took several actions, both administrative and operational. NCUA quoted Dollar as saying that in 2002, the regulator established the precedent
Tim Oppelt, a partner at Styskal, Wiese & Melchione, LLP in Glendale, California, said NCUA is doing what it needs to do to manage the credit union financial system even though many disagree that a single member makes a quorum.
The decision to liquidate Aldergate "probably is not overly controversial if the credit union was insolvent," Oppelt said. "But from the perspective of the rule of law, the NCUA continuing to operate with a one-person board is troubling."
"There is a lot that happens in credit union land that doesn't happen in other places, and it's a small enough town that there isn't a big fight about it," he said.
When a credit union is taken over, the company's management has 10 days to file a lawsuit arguing that the action was arbitrary and capricious under the Administrative Procedure Act, Treichel said. NCUA typically conducts a post-mortem review on liquidations of material losses, by the office of examination and insurance, or the inspector general, depending on the size of the loss.
Hauptman has served as the NCUA's vice chairman since 2020 and was named chair by Trump in January. He previously was an economic policy advisor to Sen. Tom Cotton, R-Ark., and a staff director on the Senate Banking Committee's subcommittee on economic policy. He served on President Trump's transition team in 2016.
Because a quorum requires a minimum number of members to be present to make the proceedings valid, several lawyers said that a meeting of one member doesn't meet the requirements.
Asked if one member meets the definition of a quorum, Oppelt responded: "No. I believe strongly in the English language."
