Credit Union Board Modernization Act – A Legislative Victory

Last week, the bi-partisan Credit Union Board Modernization Act (CUBMA) became law as part of the 21 ^st Century Road to Housing Act (Act). Although the President did not sign the Act, the legislation automatically became law ten days after it was transmitted from Congress.

CUBMA has been a legislative priority for America’s Credit Unions and its legacy organizations for many years. This victory is a result of the Legislative Advocacy team’s persistent contact with federal legislators and relationships developed by the leagues and individual credit unions. The House version of the bill was introduced by Representative Juan Vargas [D-CA-52] and Representative Bill Huizenga [R-MI-4]. The Senate version was introduced by Senator Bill Hagerty [R-TN] and Senator Lisa Blunt Rochester [D-DE]. Both versions of the bill accumulated a number of cosponsors as Congress listened to its credit union constituents and added their support.

Our internal, back-of-a-napkin calculations tell us that if it takes 20 hours to prepare a board meeting packet (we may be underestimating!) and 25 percent of eligible credit unions take advantage of the maximum benefit of CUBMA, it will save a total of 160,320 person hours, or 6,680 days  of staff and board time.

CUBMA amends the Federal Credit Union Act (FCU Act) to allow federally-chartered credit unions to hold a minimum of six board meetings a year instead of the previously required twelve. It still requires that at least one meeting must be held per fiscal quarter. Federal credit unions with a “composite rating of either 3, 4, or 5 under the Uniform Financial Institutions Rating System (or an equivalent rating under a comparable rating system)” or “with a capability of management rating under such composite rating of either 3, 4, or 5” must continue to hold board meetings monthly. De novo credit unions (i.e., newly chartered) are required to hold monthly board meetings for the first five years of existence.

It is important to remember that the decision to reduce board meetings is optional. A credit union that is growing rapidly or introducing new business lines may wish to continue to hold monthly board meetings to stay in close contact with its leadership. The number of meetings is also optional, as long as there is a minimum of six. If a credit union finds it preferable to hold eight or ten meetings per year, that flexibility can be built into its bylaws.

Speaking of bylaws, let’s discuss how this change in the FCU Act flows down to individual credit unions. The change in statute does not automatically change the FCU Model Bylaws. As such, federally-chartered credit unions should continue to follow their existing bylaws until NCUA updates the Model Bylaws. Once that occurs, credit unions may adopt those new bylaws.

A credit union could reach out to CURE to amend its bylaws, but may need to wait for the NCUA to act.

CUBMA amends the FCU Act, so its changes will apply only to federally chartered credit unions. However, some state credit union acts have wild card statutes that could allow them to request parity with this new law.

Is 20 hours an accurate (or ridiculous) amount of time to prepare a board meeting packet? Does your credit union plan to make changes under CUBMA? How long will it take for the NCUA to act? If you have questions (or answers!) reach out to us at [email protected].