Is Dual Chartering Possible with One Source for Truth?

A proposed NCUA regulation threatens to limit credit unions' freedom of speech. All credit unions should respond to this proposed regulation to limit credit union’s right to fully communicate with members.


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 preamble

“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.




Sept. 20, 2004


  • I couldn't agree more with Mr. Filson. His subject is share insurance but the same concerns about NCUA's conflict of interest obtain in the case of charter conversions. NCUA cannot serve objectively as the arbiter of the process when a successful conversion will diminish its fund. It launched a set of oppressive rules in February to try to stop conversions, and is now proposing even more bizarre and burdensome regulations. Charter conversions are of interest to only a few credit unions but, as Mr. Filson points out, it's another freedom that may be lost -- one step at a time -- if NCUA continues to play prosecutor AND judge.
  • The proposed rule is an example that NCUA is not objective when it comes to decisions which affect its cash flow. Other financial regulators do not behave this way. Clearly, proposals like this make one want to exit the system before they are trapped.