SAN DIEGO – There might be a difference between the mindset of the government and that of credit unions, but that doesn't mean their relationship has to be adversarial. With the right tools and know-how, experts say credit unions can learn to work through the strengths and weaknesses of the regulatory process and create a workable relationship with their regulator. Speaking at CUES' 2001 Directors Conference here, NCUA veterans Richard Schulman, Esq. and Mike Riley, president of D. Michael Riley & Associates, took attendees through some strategies they said could be conducive to making CUs' relationship with NCUA a win-win situation. "Most credit unions are intimidated by NCUA," said Schulman in an interview with Credit Union Times. "They feel they have no recourse whatsoever with the agency." In addition to his 11 years of working with NCUA, Schulman also served for three years as Associate General Counsel on the regulatory side of the Office of General Counsel. There he was responsible for supervising NCUA's regulatory program and issuing legal opinions to NCUA and outside parties. Schulman is currently a partner at Roach & Carpenter, Boston, and represents federal and state-chartered CUs. Riley worked with NCUA for 22 years. From 1985-1994, he was Director of the Office of Examination and Insurance, and president of the NCUSIF. Nowhere is credit unions' attitude toward NCUA more apparent than in the examination process, Schulman and Riley concurred. "Most credit unions are in the dark" when it comes to questioning NCUA or their examiner, Schulman said. When it comes to an examiner's report, Schulman advises credit unions "do not agree to something you think is unfair or will run you a lot of expense. If you're being asked to sign something that makes you cringe, you should think about it for a couple of days. There's nothing NCUA can really do to make you sign something right away. "There's always a way to negotiate a change in your examination report as long as you have the right people that know how to approach the agency and can get the attention of the right person who can negotiate change," said Schulman. Still, advised Riley, "Credit unions need to be careful when deciding when to take NCUA on. Even when you think you're right, there's no guarantee you're going to win. It's rare a credit union gets a 100% win. Credit unions have to remember that they're dealing with an agency that has enormous deep pockets." What makes the NCUA examinations so frustrating for credit unions, said Schulman, is the number of examiners the agency has who are all specialists. What's more, he said. "The feedback credit unions get from the examiners is not as helpful as it needs to be. There's no coordination among the examiners. You have multiple examiners going into a credit union at varying times throughout the year. This is detrimental to a credit union, especially a small one." Exacerbating the situation, said Riley, is the length of time a credit union has to wait before it receives the examiner's report. Riley said this essentially makes the report "worthless." "NCUA has too many people making too many reports on too many things," said Riley. When it comes to deciding whether a credit union should follow an examiner's recommendations, Schulman said, "The credit union CEO has the responsibility to determine if the credit union should do something in whole or in part. There's room for negotiation in a lot of things with an examiner, but a credit union has to decide what things it wants to negotiate over. The credit union has to look at the situation sometimes as small victories." Schulman and Riley also agree that the credit union shouldn't do document resolution at the same time the examination is being conducted. Instead, the credit union CEO and board should spend whatever time it needs, with an outside auditor or attorney if necessary, to review the report. "If it's a substantive issue, the credit union at some point should have someone outside the credit union look at the report and give their reasonably unbiased view." Then again, said Schulman, if it's a small issue sometimes it's better to accept the report's recommendation. -

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