Administrative
Orders and LUAs
Administrative Orders - Administrative Orders are formal enforcement orders issued
by the NCUA pursuant to Section 206 of the Federal
Credit Union Act (FCUA) (12 U.S.C. § 1786). Generally, NCUA
issues Administrative Orders when it finds that a credit union
and/or persons affiliated with a credit
union have violated a law, rule or regulation,
or engaged in an unsafe or unsound practice. The three most common
orders issued
by NCUA include: (1) an Order to Cease and
Desist, which requires a party to take action (or refrain from
taking action), including
making restitution; (2) an Order of Prohibition,
which prohibits a party from ever working for a federally insured
financial institution;
and (3) an Order Assessing Civil Money Penalties.
Prior to the issuance of an Administrative Order, the FCUA provides
due process rights,
which include the ability to have an administrative
hearing before the Office of Financial Institution Adjudication,
and to appeal
the agency's decision to issue an order to the
U.S. Circuit Court
of Appeals.
LUAs - Letters of Understanding and Agreement (LUAs) are supervisory tools used
by NCUA. An LUA is essentially a contract between
NCUA and a credit union and/or its officials, in which the credit
union or officials
agree to take, or not take, certain specified
actions. Normally, LUAs are negotiated when credit unions have not
adequately responded
to less severe measures, such as Documents of
Resolution. NCUA also requires LUAs for newly chartered credit unions
and to grant permanent
special assistance.
The FCUA requires that the NCUA
Board publish and make available to the public
“any written agreement or other written statement
for which a violation may be enforced
by the Board unless the Board, in its discretion,
determines that publication would be contrary
to public interest.” Violations of
the terms of a published LUA constitute grounds
for administrative actions. The NCUA Board may
therefore take administrative actions
against credit unions or officials that fail to
comply with the terms of published LUAs.
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