The National Credit Union Administration continues to distribute recovered funds to credit unions across the country, but some in North Dakota believe they are being disregarded and deprived of more than $10 million.
The NCUA Aug. 29 said it will distribute
The Corporate System Resolution Program was established by the NCUA to stabilize, resolve and reform the corporate credit union system in the wake of the 2008 financial crisis.
Including the current distribution, the program has returned more than $2.6 billion to former members and paid-in-capital shareholders, and almost $292 million in dividends to shareholders.
None of those payments included North Dakota credit unions, however, as the NCUA has cited a "technicality" that precludes those institutions from the settlement, said Dakota Credit Union Association President and CEO Jeff Olson.
But the Association along with 30 credit unions in the state are working to convince the NCUA to release the recovered capital assets, he said.
In fact, the Association last week filed a claim for the money after the NCUA suggested it do so.
A little history: Prior to the financial collapse in 2008, the largest corporate credit union in the United States was U.S. Central Federal Credit Union, which provided services to other corporate credit unions – in effect acting as a corporate credit union's credit union. One of those it worked with was Midwest Corporate Federal Credit Union.
In early 2009, in response to investment losses incurred at U.S. Central, the NCUA implemented the Corporate Stabilization Program and placed U.S. Central into conservatorship.
The NCUA then slapped an additional insurance premium on federally insured natural person credit unions to make up for the investment losses at U.S. Central, which were estimated to
be close to $6 billion.
In October 2010, the NCUA issued Midwest Corporate a claim receipt for member contributed capital representing the value of membership capital account balances as of Nov. 20, 2008 and paid in capital. For North Dakota credit unions, those amounts were estimated at $10.5 million and $3.3 million respectively.
But Olson said the NCUA told the Association that because Midwest Corporate dissolved in 2011 and the legal existence of the charter was officially canceled three years later, Midwest Corporate members were ineligible to receive reimbursement.
The NCUA basically claims that because the corporate entity was liquidated, they have no legal path or a legal entity to pay back the recovered assets.
The Association asked the NCUA what happens to the assets then. "And they said 'we don't really know,'" Olson said.
An NCUA spokesman told American Banker the regulator's board, as liquidating agent, is reviewing recently filed claims against the U.S. Central Asset Management Estate pursuant to NCUA regulations.
In the meantime, the Association has enlisted some help in the form of its two senators.
In an Aug. 15 letter to the NCUA, North Dakota senators Kevin Cramer, who serves on the Senate Banking Committee, and John Hoeven encouraged the agency "to stay in close communication with the Dakota Credit Union Association as they work through the claims process to ensure all proper claims are satisfied to the greatest extent possible, and that these recovered assets are returned to their rightful owners."
The Association 6filed the claim last week, but Olson said attorneys for the group feel that move may be just one more "box to check" for the NCUA, and that the issue may ultimately end up in court.
Olson said the the financial crisis and the ensuing fallout had a negative impact on credit unions in the state. In fact, North Dakota has lost 16 credit unions through mergers since 2009.
"Clearly, the lost revenue, shared insurance premium assessments and ensuing regulations contributed to the consolidations," he said.
Now some of the smaller credit unions in North Dakota are tapped out in trying to recover the funds. "This is a last ditch hope for them," Olson said. "I don't know if they can hang on and give up any more legal fees."
