In the previous article, I outlined the unprecedented action this young credit union took to oppose NCUA’s efforts at forced liquidation. The credit union’s legal challenge stated in part:
“NCUA knowingly, intentionally attempted to summarily liquidate and revoke the charter of KAPFCU with total and reckless disregard for the truth.”
“The publication of the order of liquidation and revocation is defamatory, casts KAPFCU in a false light, and has caused an erosion of public confidence. For these reasons, if the rushed liquidation is allowed to continue, KAPFCU will suffer irreparable harm.”
The Roots of Black Belief
Recently a friend shared reflections on Martin Luther King’s last sermon. It was given on April 3, 1968, to support the Memphis garbage workers (“I am a Man”) strike.
It is remembered as the “I have been to the Mountaintop” speech as King was killed the next day. Those final words were prophetic, but there were many other truths he spoke that are relevant to this day. I believe these are why Kappa Alpha Psi FCU stood up to the NCUA.
King said in part:
“. . .we’ve got to strengthen black institutions. (That’s right, Yeah) I call upon you to take your money out of the banks downtown and deposit your money in Tri-State Bank. (Yeah) [Applause] We want a “bank-in” movement in Memphis. (Yes) Go by the savings and loan association. I’m not asking you something that we don’t do ourselves in SCLC. Judge Hooks and others will tell you that we have an account here in the savings and loan association from the Southern Christian Leadership Conference. We are telling you to follow what we’re doing, put your money there. [Applause] You have six or seven black insurance companies here in the city of Memphis. Take out your insurance there. We want to have an “insurance-in.” [Applause] Now these are some practical things that we can do. We begin the process of building a greater economic base, and at the same time, we are putting pressure where it really hurts. (There you go) And I ask you to follow through here. [Applause]
“Now the other thing we’ll have to do is this: always anchor our external direct action with the power of economic withdrawal. Now we are poor people, individually we are poor when you compare us with white society in America. We are poor. Never stop and forget that collectively, that means all of us together, collectively we are richer than all the nations in the world, with the exception of nine. Did you ever think about that? After you leave the United States, Soviet Russia, Great Britain, West Germany, France, and I could name the others, the American Negro collectively is richer than most nations of the world. We have an annual income of more than thirty billion dollars a year, which is more than all of the exports of the United States and more than the national budget of Canada. Did you know that? That’s power right there, if we know how to pool it.
“Let us rise up tonight with a greater readiness. Let us stand with a greater determination. And let us move on in these powerful days, these days of challenge, to make America what it ought to be. We have an opportunity to make America a better nation. (Amen)”
NCUA Pre-empts the Court:
On Friday, August 13, 2010, NCUA filed a brief in the DC Federal Court of Judge Emmet Sullivan responding to the complaint by Kappa Alpha Psi FCU challenging NCUA’s liquidation order of August 3. Several hours later, NCUA carried out the liquidation, mailing checks to the savers and assigning loans to the agency’s asset management unit.
The credit union had until noon, Monday, August 16, 2010 to file its reply to NCUA’s brief. NCUA’s liquidation nullified further court review. Why liquidate the credit union before the court’s expedited legal process had even run its course?
The credit union was serving the mission of the largest black professional fraternity using a virtual business model. No checking accounts, no ATMs, and no debit card withdrawals. Just regular savings to fund loans to students and black professionals to support “achievement”–a fraternity goal.
The risk of any NCUSIF loss was de minimus. The credit union’s lawyers were pro bono. Their goal was to merge the credit union, if NCUA wanted to cancel the charter. They sought an impartial hearing for this request. Their motive was to preserve the pride and dignity of their fraternal colleagues who began the effort and to continue a credit union offering for members.
NCUA held all the resources and power and used it to destroy this new charter.
A Legal Precedent
Their efforts to appeal NCUA’s unilateral actions may however have lasting value. For the credit union’s lawyers were not credit union attorneys. They had no prior experience to know how unprecedented their challenge would be. But their effort may have shown a legal path that could benefit members in the years to come.
Credit unions are member-owned, one-person, one-vote. The lawyers argued that NCUA’s actions violated two individual constitutional rights: due process and equal protection. Could this black-sponsored credit union have identified a legal standard that could benefit every credit union member which is subject to arbitrary NCUA dictates? Could NCUA have erred on both the facts of the case as well as the law?
Or was this just a little regulatory nuisance that NCUA wanted to dispose of quickly?
When creditunions.com reported these events in August 2010, more than 9,000 views were recorded. Almost 100 comments were filed. Many similar experiences of regulatory arrogance were recounted in these posts.
The Continued Use of Summary Authority to the Present Day
Kappa Alpha Psi FCU was not the only credit union to find its charter abruptly ended.
In September 2010, NCUA without warning liquidated five corporate credit unions with total assets of over $67 Bn. The agency stated any appeal efforts would risk personal liability—the credit unions were marched straight to NCUA’s chopping block.
Other credit unions were subjected to this authoritarian power mode even though the economic crisis was almost a year into recovery. The $846 million Arrowhead CU in June 2010, was conserved to remove a management team that challenged examiners’ exaggerated estimates of loan losses. Others were forced to merge, including the $600 million USA FCU into Navy FCU in September 2010.
But these were not just crisis incidents. NCUA continued to use this unchecked authority to end credit union charters without due process. On April 5, 2016, NCUA simultaneously liquidated six Philadelphia credit unions ending 308 total years of operations. These six were given no appeal rights.
These credit unions had been through economic thick and thin for decades, and their total size — $4.8 million — could not pose a serious threat to the share insurance fund. They reported an average net worth of 17.0%.
NCUA performed another instant liquidation on May 29, 2020 of IBEW Local Union 712 Federal Credit Union in Beaver, Pennsylvania. According to CUToday, “Chartered in 1964, IBEW Local Union 712 served 2,935 members and had assets of approximately $14.8 million according to the credit union’s most recent Call Report. NCUA did not provide a reason for the liquidation.”
This regulatory silence and lack of accountability continues to this day, for example in all conservatorships in which NCUA takes total control of the credit union from the board and members. When recently asked about the status of Municipal CU in New York, NCUA’s Office of External affairs stated: “we do not comment on our efforts or conditions related to conserved credit unions.”
The Journey to the Promised Land
Is Kappa Alpha Psi FCU’s fate just another instance of a decade’s long ongoing abuse of NCUA authority?
Does this credit union’s unmatched courage taking a stand have any meaning today?
Why did these credit union novices fight when others did not dare?
I believe their actions were living out the charge that King gave that final day in Memphis:
“We just need to go around to these massive industries in our country (Amen), and say, “God sent us by here (All right) to say to you that you’re not treating His children right. (That’s right) And we’ve come by here to ask you to make the first item on your agenda fair treatment where God’s children are concerned.”
NCUA does not respect members’ rights. Be they black, brown, or white; young, old or in between; male or female. When member-owned institutions, created through volunteer labor, are summarily closed or merged, the systemic failure that allows this will either be changed or there will be no more cooperative movement.
Injustice, whether by public or private organizations, always targets the vulnerable first. Be they the economically fragile, or the uninformed and unempowered. When violation of rights is left unchallenged, the inequities will extend across the entire population.
Will Kappa Alpha Psi’s stand make a difference today? I think hearing again this promise should inspire everyone to realize change is possible-even in those exercising unchallenged power.
Yes, I believe Kappa’s example will be remembered.