The National Credit Union Administration has again denied credit unions in North Dakota nearly $14 million that they say is rightfully theirs.
The NCUA for years has been returning millions of dollars to credit unions as part of its ongoing effort to resolve the liquidation of four corporate credit unions after the financial crisis.
The issue in North Dakota revolves around the dissolution of U.S. Central Federal Credit Union, which provided services to other corporate credit unions, including Midwest Corporate Federal Credit Union.
In early 2009, in response to losses incurred at U.S. Central, the NCUA implemented the Corporate Stabilization Program and placed U.S. Central into conservatorship. The NCUA the following year issued Midwest Corporate a claim receipt representing the value of membership capital account balances as of Nov. 20, 2008, and paid in capital assets.
The Dakota Credit Union Association claims 28 North Dakota credit unions are owed $10.5 million in membership capital account assets and $3.3 million in paid in capital assets.
The NCUA board in 2021 authorized the reimbursement of the U.S. Central members, but North Dakota credit unions received letters stating they were ineligible to receive reimbursement because the Midwest corporate entity was dissolved in 2011 and the legal existence of the charter was officially canceled three years later.
So the Association, which represents credit unions in North Dakota and South Dakota, in early September of 2022 filed a claim for the money after the NCUA suggested it do so.
But in a letter dated Feb. 13, the NCUA said the North Dakota credit unions “failed to provide any factual or legal authority” that Midwest’s claim receipt was transferred to its former shareholders, including the North Dakota credit unions.
“This is very disappointing news,” said Dakota Credit Union Association President and CEO
Jeff Olson in a press release Wednesday. “First, what we had was essentially a government forced liquidation through the Corporate Stabilization Program, where corporate owners were forced to choose between recapitalizing after writing off millions in losses the previous year, to merge with another corporate or to liquidate.”
In its letter, the NCUA said it is providing an appeal process through agency review or judicial determination, both subject to deadlines and additional procedures.
Still, North Dakota credit unions are waiting for an answer to what happened to their assets. Olson said it is unclear if the NCUA kept the $10.5 million or distributed it elsewhere.
Harold Hagen, CEO of Hometown Credit Union in Hulm, North Dakota, said it is a “travesty” that the NCUA will not do “what is right.”
“The NCUA overreacted back in the recession of 2008 and forced the closure of many corporate credit unions,” Hagen said. “The fact that NCUA now refuses to pay, based on in my opinion, a technicality, is morally and ethically wrong.”
Hometown Credit Union’s share of those assets, if recovered, would be a big help to not only the institution but its members, Hagen said.
North Dakota credit unions affected by the issue will be meeting in the next few days to determine their next course of action, such as a lawsuit, Olson said.