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Attorneys for Navy Federal Credit Union are raising national security concerns over the NCUA’s refusal to grant Share Insurance Fund coverage to overseas deposits made at Navy Federal Credit Union as part of its newly won contract to operate financial institutions abroad.
“In the ordinary course, it would be unusual for Federal agencies to narrowly interpret their authorizing statutes to disregard the interests of national defense,” attorney from WilmerHale wrote in a memo to credit union officials, arguing that the NCUA can insure the deposits.
The Overseas Military provides banking services through the operation of Community Bank—a partnership between the Pentagon and a financial institution. Bank of America operated the program for more than 40 years; in September Navy Federal was awarded the contract to operate the bank. However, the NCUA said under federal law, it cannot insure deposits made at the Community Bank.
But in their memo, Navy Federal’s attorneys said, “The Community Bank is not a separate legal entity, but rather, a program of the DOD, and classified as a national security program essential to DOD and force readiness.”
Taking the Battle to Capitol Hill
Navy Federal and officials from the Defense Credit Union Council are asking for Congress’s help in solving the fight.
Navy Federal President/CEO Mary McDuffie requested a meeting with Senate Armed Services Committee Chairman Sen. Jack Reed, D-R.I., to discuss the matter.
At the same time, the Defense Credit Union Council is urging others in the credit union community to contact their member of Congress, saying that the plan sets a dangerous precedent.
Navy Federal’s Argument
Navy Federal’s attorneys contend that federal law allows deposits made at the Community Bank to be insured even if servicemembers making the deposits are not members of Navy Federal.
They said that the NCUA has the power to determine how expenses incurred from the Share Insurance Fund may be used. In addition, they said, a federally insured credit union is authorized to act as a depository and financial agent of the federal government. And, they said, the Share Insurance Fund may legally insure deposits made when a credit union is acting as an agent of the federal government.
DCUC Counters
However, in a message to members posted on the DCUC website, council President/CEO Anthony Hernandez wrote that in order to make the contract work, Congress would have to change the Federal Credit Union Act to allow the NCUA to insure deposits made by servicemembers who are not members of Navy Federal.
“These concerns and changes are something DCUC cannot fight alone, and industry leaders can no longer afford to sit on the sidelines,” he wrote.
NCUA
