Sarah Snell Cooke, Founder/CEO, The Credit Union Connection
The NCUA’s so-called deregulation project is not simply the agency getting out of credit unions’ way. It’s changing the rules while taming down the furor by labeling it as deregulation, a term every credit union leader loves (rightfully so).
On April 21, the NCUA dropped its tenth round of deregulation proposals, targeting regulations governing credit union conversions to mutual savings banks and mergers into banks. The agency wants to eliminate what it calls “unduly burdensome and duplicative requirements” and let credit union boards “exercise their fiduciary duties and business judgment rather than imposing a rigid, agency-defined process.”
Essentially, the agency wants to make it easier for credit unions to convert to banks. Comment deadline is June 22. Let the agency know your thoughts!
Here are NCUA’s proposed changes
The proposal includes six changes to Part 708a, the regs governing conversions and mergers:
Change 1: Remove the definition of “clear and conspicuous” from disclosure notices, giving credit unions “flexibility” in how they design conversion disclosures. It would also eliminate the narrative about how the deal came about – meaning a CEO could be pushing the conversion to simply cash out; the agency obviously should have an interest in the narrative to ensure the integrity of the process.
Change 2: Eliminate the newspaper publishing requirement for pre-vote notices, replacing it with website-only notifications. As a former journalist, this kinda makes me sad, but it’s irrelevant today. And, how about requiring that it be included in credit unions’ member newsletters and other media outlets? After 27 years working on websites, I know people do not come to a site unless they’re directed there one way or another. For credit union sites, it typically performs as a gateway to mobile banking on a computer. (Another one of my pet peeves, but I’ll save it for another time.)
Change 3: Streamline due diligence reporting requirements to focus on “substantive outcomes” rather than detailed processes. This one, I’ll have to see the devil in those details. Perhaps the ‘guidance’ in the reg could be published by the NCUA elsewhere, but then that would not be deregulation, would it?
Change 4: Remove prescriptive formatting requirements for member disclosure statements. Gee, let’s publish in a size 6 font and check members’ eyesight rather than their understanding of what will happen to their capital and, eventually, their voting rights. The vast majority – if not all – convert from mutual savings banks to commercial banks.
Change 5: Eliminate plain language determining factors that help ensure members can understand what they’re voting on. Redundancy does exist in this rule, but when doesn’t it, I mean, and defining ‘plain language’ is clarifying and not redundant.
Change 6: Remove voting guidelines that provided structure for conducting fair member votes. This is blatantly weakening member protections that get at the heart of the credit union business philosophy.
The stated goal? Simplify compliance, reduce administrative costs and modernize the conversion process while ensuring members receive “clear and effective disclosures.” Something smells fishy about this one.
Why These Rules Existed in the First Place
Let’s be clear about what happens during a credit union conversion: member ownership disappears. We experienced this in the 2000s when more than a dozen credit unions converted to MSBs, and most, eventually, into stock banks. It was highly contentious then, and it should be now.
Credit unions are cooperatives. Members own the institution. When you deposit money, you’re not just a number; you’re a member-owner with a stake in the organization’s success. Credit unions’ capital belongs to the members collectively.
When a credit union converts to a mutual savings bank, that ownership structure changes fundamentally. Members become customers. No more one-member, one-vote. The capital that members built over decades is now the property of the bank.
The existing regulations weren’t created to make life difficult for credit union boards (though I’m sure some boards see it that way). They were designed to ensure members understood what they were voting on and had adequate information to make an informed decision about dissolving their cooperative ownership.
They were put in place because illegible fonts and cheerleading for the conversions were happening in the conversion notices. Incomprehensible banking jargon was included to throw off members. Board members were not fully aware of the consequences of becoming an MSB, nor did they review any alternatives.
The Member Capital Question Nobody Wants to Talk About
Members built that capital. Every dollar of net worth in a credit union belongs to the members. It was accumulated through their business, their loyalty, their dividends (or lack thereof) and their participation in a financial cooperative.
When conversion happens, that changes hands. In a mutual savings bank structure, members technically become “mutual owners,” but the practical reality is different from credit union membership. There’s no one-member, one-vote democratic governance. Members don’t elect the board the same way they do at a credit union.
The mutual savings bank structure is only a resting place before they convert to stock ownership. When that happens, the capital that credit union members built can be used to create shareholder value for investors who had nothing to do with the original cooperative. Executives often receive stock options or equity stakes as part of these second-step conversions. Quite the incentive to push a credit union conversion/merger!
Why the Compliance Changes Matter More Than You Think
From a compliance perspective, removing disclosure requirements and formatting standards sounds like a win. No more wrestling with prescriptive regulations. No more worrying about whether your conversion notice meets specific layout requirements.
If these regulations were burdensome, was it because they were poorly designed, or because they were designed to make conversion difficult?
But here’s the question credit union boards should be asking: If these regulations were burdensome, was it because they were poorly designed, or because they were designed to make conversion difficult?
Conversion should require extensive disclosure, documented due diligence, and clear communication. Asking members to vote on dissolving their cooperative ownership is one of the most consequential decisions a credit union can make. The regulatory framework reflected that significance.
When you remove the definition of “clear and conspicuous,” you’re not just providing flexibility: You’re opening the door to disclosures that are technically compliant but difficult for average members to understand.
When you streamline due diligence reporting, you’re reducing the documentation that shows whether the board actually considered alternatives or just went with management’s recommendation.
When you eliminate plain language standards, you’re making it easier to bury critical information in legal terminology that requires a law degree to decode.
The newspaper thing? Fine. But the rest of these changes reduce member protection in ways that have nothing to do with modernization and everything to do with less scrutiny on the conversion process.
What Credit Unions Should Actually Do
The NCUA is accepting comments on this proposal through June 22, 2026. If you’re a credit union leader who thinks some of these changes go too far, now’s the time to say so.
Submit your comments here: Federal Register portal.
Here’s what’s worth telling the NCUA
The newspaper requirement is outdated. Most members get their information online. This change makes sense.
But removing member protections doesn’t. The definition of “clear and conspicuous,” the plain language standards, the formatting requirements, the due diligence documentation—these aren’t red tape. They’re transparency safeguards that ensure members of cooperative financial institutions that they have ownership in understand what they’re voting on when a conversion or merger into a bank is proposed.
Conversion should require extensive disclosure. Members are voting to dissolve their ownership and transfer the collective capital to a different corporate structure. That’s a fundamental change in the institution’s purpose and governance. The regulatory framework should reflect that significance.
Member capital deserves protection. Credit union members built the capital through their business and loyalty. When a credit union converts, its capital remains with the new banking entity and benefits other stakeholders. Members have a right to full transparency about what happens to their collective wealth.
You can submit comments through the Federal Register portal or directly to the NCUA at regulations.gov. Trade associations like America’s Credit Unions and the Defense Credit Union Council are also collecting feedback from members to submit coordinated responses.
Here’s your plain English
The NCUA’s deregulation proposal is not beneficial to anyone except those who want to steal their members’ capital.
By removing the disclosure standards, plain language requirements, and due diligence documentation that protect members during conversions, credit unions could become less member friendly.
The decision to convert should never be streamlined at the expense of member transparency and protection.
Agree or not, be sure to make your voice heard. Comment before June 22 here: Federal Register portal