A proposed NCUA regulation about insurance conversions strikes at the heart
of the dual chartering system. The new rule would put all control for conversions
from the NCUSIF to private insurance completely in the purview of NCUA.
The rule attacks the fundamental principal of free speech by directing any
credit union that would propose to convert to first get NCUA approval for any
communications with members about this issue. In the words of the rule’s
“The proposed rule will also place approval and disclosure requirements
on ‘share insurance communications’ defined in the proposed rule
as any written communication that: is made by or on behalf of a federally
insured credit union, is intended to be read by two or more credit union members;
and mentions share insurance conversion or termination. The term covers communications
delivered or made available before, during, and after the credit union board
of directors decides to seek conversion or termination. The term includes,
but is not limited to, communications delivered or made available by mail, e-mail,
and Internet website posting.” (Underlining added)
The rule makes NCUA the censor of any communications a credit union would have
on this issue. NCUA is a party with a vested interest in these decisions. This
rule places all authority to communicate on this topic in the hands of one side
of the issue.
Dual chartering has been fundamental in creating a credit union system with
real choices and the ability to adapt to changing circumstances. Credit union
history is full of examples where credit unions benefit from choice including
share deregulation, real estate lending powers, share-draft authority, field
of membership, taxation and even regulatory burden. In every one of these situations
and many others, one system pioneered solutions or provided options not available
to the other.
This rule, through the insurance authority, would neuter an important factor
in creating a true choice of charter for credit unions, that is the right to
choose private share insurance for members.
More importantly, it becomes a precedent for other rule-making efforts to control
credit union’s ability to communicate with their members in an open and
free manner. Only NCUA’s version of events would be allowed in this instance.
The comment period ends on September 27. I believe all credit unions should
respond to this effort to limit credit union’s right to fully communicate
with members. While only a limited number of credit unions may be affected by
the application of the proposal today, this rule is an example of how freedoms
are lost – one small step at a time.