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Friday, May 17, 2024

Credit union commission backs regulator over Blaine’s criticism

The state regulatory agency that oversees North Carolina’s credit unions is under fire from former State Employees’ Credit Union CEO Jim Blaine, who says it’s become an example of “regulatory capture” by the industry.

Blaine contends that the state Credit Union Division is asleep at the switch when it comes to supervising credit-union bylaw changes and actions that amount to bylaw change. He says SECU has changed rules making it harder for members to self-nominate themselves for serving on its board of directors.

That prompted discussion in recent months among the members of the state Credit Union Commission, a panel appointed by the governor that has the authority to “review, approve or modify any action” of the division’s administrator.

Blaine has been battling leadership of SECU for more than a year, challenging policy changes and financial performance. He contends the board acted last fall to make it harder for insurgent members to run for seats on the SECU board. Three nominees favored by Blaine were elected at the October annual meeting, but a Blaine ally, Susie Ford, says she was kept off the ballot.

State law gives the administrator of the Credit Union Division, Kristina Ray, the power to review and approve any amendment to a credit union’s bylaws.

Blaine contends some of SECU’s tactics are tantamount to bylaw changes and thus reviewable. Ray has not ruled on the changes.

His complaints prompted the Credit Union Commission to set up an ad-hoc subcommittee to determine its supervision powers. That report, which was discussed by the full commission at its meeting in Raleigh on Tuesday, didn’t go in Blaine’s favor.

The commission’s “authority to review the administrator’s decision [is] fairly limited,” said Jamie Applequist, the commission chairman. Applequist is a SECU executive.

The statute establishing the commission gives it authority to hear appeals of the administrator’s actions, but only if they come from a credit union that feels aggrieved by them.

Complaints from credit-union members “would be reviewed,” but “if the administrator stands by decision, there’s other legal alternatives depending on the complaint,” Applequist said.

He did not elaborate, but provisions in state regulations allow for appeals by those who contend the administrator has affected their “rights, duties and privileges.” That would trigger a hearing process under the Administrative Procedures Act.

There’s also a process to petition for a declaratory ruling from the administrator that’s open to people who need one to “comply with statutory requirements, division rules, or division policy.”

Applequist said the division typically received anywhere from zero to five requests for bylaw changes a month. Many “are housekeeping,” some are more substantive, and the approval process can involve “back and forth negotiations and discussion” between the division and the credit union involved, he said.

Blaine was CEO of SECU from the late 1970s to 2016, during which it grew to become the second-largest U.S. credit union. It is state-chartered and makes up a vast majority of N.C. credit union assets that are regulated by Ray. She is a former state banking examiner who joined the credit union division in 2019 and was appointed administrator in June 2023.

SECU, which has $54 billion in assets, is led by an 11-member volunteer board. Four directors are up for election in October. For the first time, the board plans to mail ballots to more than 2 million credit union members this year, hoping to spur more voting.

At the commission meeting, Blaine told members they’ve permitted an “anything goes” approach to bylaw changes.

He also criticized Ray for speaking at a legislative hearing in support of House Bill 410, which among other things would change credit union membership, lending and investment rules.

The bill passed the House almost a year ago on an 85-25 vote. It quickly stalled in the Senate.

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