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Samantha: Hello, this is Samantha Shares.

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This episode covers N C U A’s Enforcement
Manual on Letters of Understanding

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and agreement – also known as L U A’s.

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The following is an audio version of
that advisory and the press release.

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This podcast is educational
and is not legal advice.

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We are sponsored by Credit Union
Exam Solutions Incorporated, whose

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team has over two hundred and
Forty years of National Credit

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Union  Administration experience.

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We assist our clients with N C
U A so they save time and money.

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If you are worried about a recent,
upcoming or in process N C U A

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examination, reach out to learn how they
can assist at Mark Treichel DOT COM.

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Also check out our other podcast called
With Flying Colors where we provide tips

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on how to achieve success with N C U A.

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And now the Enforcement manual on L U A’s.

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What is a Letter of
Understanding and Agreement?

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An L U A is a bilateral document
signed by the credit union's board of

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directors and the regional director (RD).

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The credit union agrees to take, or not
take, a certain specified action(s).

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RDs often issue L U As when
credit unions have not adequately

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responded to less severe measures,
such as Documents of Resolution.

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N C U A also requires L U As for newly
chartered credit unions and for the

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granting of permanent special assistance.

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Delegation of Authority SUP 16 authorizes
RDs to enter into L U As with elected and

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appointed officials of FCUs and FISCUs.

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RDs discuss and negotiate publication with
credit unions to prevent unfair surprises

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to credit unions and their officials.

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The

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RDs will address the issue of publication
in every L U A between N C U A and

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a credit union by including one of
the following three provisions:2

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1.

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This L U A will not be published.

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2.

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This L U A will be published.

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3.

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The RD is reserving for a reasonable time
his/her right to publish this L U A.3•

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2 Minor modifications and variations
of the listed provisions that clearly

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communicate the same ideas are acceptable.

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3 This third provision can also
specify the period of time within

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which the RD will decide whether to
publish the L U A or can correlate

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publication to a specified event (or
the failure of an event to occur).

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a.

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Required Letter of Understanding
and Agreement provisions

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This section is redacted.

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b.

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Published Letter of
Understanding and Agreement

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The FCU Act §206(s)(1)(A), 12 U.S.C.

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§1786(s)(1)(A), requires the N C U A
Board to publish and make available

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to the public "any written agreement
or other written statement for which a

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violation may be enforced by the Board
unless the Board, in its discretion,

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determines that publication would
be contrary to the public interest."

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L U As must be published if violations
are to be considered enforceable.

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The N C U A Board may take
administrative actions against credit

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unions or officials when they fail
to meet terms of published L U As.

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Violations of the terms of a published L
U A alone are grounds for administrative

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action and, although not required,
the L U A should include language

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to that effect as stated above.

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N C U A may enforce a published L U
A by bringing an enforcement action,

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such as a cease and desist order
or civil money penalty, and proving

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noncompliance with the published L U A.

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These publication requirements
apply to all L U As, including those

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issued to newly chartered credit
unions, as well as those issued in

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connection with special assistance.

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N C U A may take an enforcement action,
even if the L U A is not published,

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if the credit union fails to comply
with the terms of the L U A and the

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credit union's conduct constitutes a
material safety and soundness violation

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or violation of law or regulation.

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While not required by the delegation,
the regions should provide the Office

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of General Counsel and E&I with a
draft of an L U A considered for

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publication two business days prior
to its delivery to the officials

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of the credit union for signature.

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c.

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Non-Published Letters of
Understanding and Agreement

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Non-published L U As are not enforceable.

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The mere violation of a non-published
L U A is not grounds for a formal

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enforcement action, but may serve as the
basis for developing grounds for a formal

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enforcement action if underlying safety
and soundness concerns or violations

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of statutes or regulations exist.

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The FCU Act provides that N C
U A may enforce the terms of an

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unpublished L U A if the N C U A
Board approves non-publication based

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upon a finding that publication would
be contrary to the public interest.

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If the RD recommends to the N C U A
Board that an L U A not be published

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because publication would be contrary
to the public interest, and the N C

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U A Board issues this determination,
the L U A will still be enforceable.

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The RD's recommendation must clearly
show why publication would be

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contrary to the public interest.

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The FCU Act requires a quarterly
written report to Congress to summarize

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all non-published L U As that are
enforceable under this exception.

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This exception to publication
should be used rarely and only when

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conditions justify a conclusion that
non-publication is in the public interest.

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d.

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L U As with Federally Insured
State-Chartered Credit Unions (FISCUs)

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N C U A may independently or jointly with
the S S A’S issue an L U A to a FISCU.

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The requirement for publication applies
if N C U A attempts to take action based

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on a violation of the terms of the L U A.

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Therefore, RDs will include one of
the three publication provisions

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discussed above in all L U As issued
jointly with N C U A and a S S A’S

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This concludes the N C U A’s
Enforcement manual on L U A’s.

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If your Credit union could use assistance
with your exam, reach out to Mark Treichel

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on LinkedIn, or at mark Treichel dot com.

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This is Samantha Shares and
we Thank you for listening.