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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.