Credit union enforcement orders
The Division of Finance and Corporate Securities issues enforcement orders against
credit unions when it identifies specific concerns that must be immediately addressed to ensure the safety
and soundness of the financial institution. The division may issue the orders independently or
jointly with other state or federal regulators, such as the National Credit Union Association (NCUA).
The orders result from an examination or investigation and
require the financial institution to take corrective action or stop certain
activities. They typically include timelines for making required changes or
improvements. For example, an order may contain a requirement that the institution
improve capital levels and return to a "well-capitalized" status
within 120 days.
The number of administrative enforcement orders tends to
increase during economic downturns and recessions because of the economy's
impact on financial institutions, especially around increases in problem loans,
and a reduction in earnings and capital.
In most cases, the division negotiates the order with the
financial institution, and the institution has agreed to make the changes
and meet the timelines. Because it takes time for the institution to make
the changes and ensure it is back on solid financial footing, an enforcement
order is typically in place for at least 18 to 24 months. If the institution
does not make the requested changes within the timelines, the division may
consider other regulatory action, depending on the situation and the institution's
efforts to correct the areas of concern. Many institutions that are the subject
of an order eventually have the order lifted and continue to operate successfully
in their communities.