When President Trump issued his executive order that all pending regulations not yet effective were to be postponed by all federal regulatory agencies until his executive order is removed, there were two NCUA Board approved regulations that were caught up in the postponement demanded by the executive order.

One of the regulations that was not yet effective was a rule simplifying NCUSIF share insurance regulations by establishing a trust account category to provide coverage for funds in both revocable and irrevocable trusts.  This one was universally praised by credit unions when adopted.

The second regulation is a much more controversial and, frankly, unpopular one in credit union circles.  It is the succession planning rule that places a credit union examiner right in the middle of the board of directors’ fiduciary duty to put in place a well-prepared and qualified CEO at their credit union.  It also extends itself over into board succession and senior management selection.

Many credit unions see the succession planning rule as a dramatic overreach of a federal regulatory body into the day-to-day management, operation, compensation, benefits and selection process for federal credit unions.  There is great concern about a spill over of this rule to state chartered credit unions as well if they are federally insured.

It is impossible to separate hiring and retaining the executive talent of a credit union from the compensation, bonus and benefits structure that is center to recruiting and retaining quality executive talent.  The ability of a credit union examiner to disapprove a credit union’s succession plan is a small step from the examiner being able to tell a credit union who to hire, how to compensate the executive and whether its plan for its executive team’s construction is satisfactory to NCUA as its regulator.

The rule, when passed on a 2-1 vote with Mr. Hauptman voting against it last December in the waning days of the Harper chairmanship, was scheduled for an effective date in January 2026.

Therefore, it is caught up in the Trump executive order unless he makes the unlikely decision to rescind his executive order.

It appears that now Chairman Hauptman, with the executive order to back him up, is making moves toward either repealing the succession planning rule, rewriting it to be less onerous or extending its effective date much beyond 2026.

Just yesterday NCUA announced that it was opening a sixty-day comment period ending June 22 on these two rules that are not yet effective and seeking comment on whether they should be allowed to become effective as is, revised or rescinded.

While most credit unions are unlikely to voice any objection to the share insurance fund regulation establishing clarity on trust accounts, the succession planning rule is very likely to draw considerable comment to either revise it or repeal it in its entirety.

The question will be whether Chairman Hauptman, serving as a one-member NCUA Board, will be willing to repeal a regulation enacted when the board was at its full complement of three members last year.

The concern, of course, is whether the repeal might be challenged in court at some point in the future.  Of course, the rule itself might be challenged in court as well the first time some NCUA examiner issues a DOR or LUA against a credit union board for hiring someone the examiner would prefer they not hire or choose to put in place a benefits package that the examiner doesn’t like.

Chairman Hauptman, as we discussed in our Client Update last week, has authority and precedent to take any and all administrative, operational, personnel, supervisory, guidance, interpretative and agency leadership decisions while serving himself as a one-member NCUA Board as a result of executive action of the President of the United States.

He has presumed authority, although not precedent, to take regulatory action as well so long as he follows the federal Administrative Procedures Act with publication in the federal register, comment periods and publicly recorded action.

He certainly has the cover of the Trump executive order if he elects to move to delay the effective date of the succession planning rule or even to repeal it after going through the required procedures for rulemaking.

It will be interesting to see just how far Chairman Hauptman will go, with the Trump administration obviously watching as evidenced by the unprecedented removal of two NCUA Board Members just two weeks ago.

(It should be noted that, although two board members being terminated by the President during their terms is new for NCUA, President Trump has previously in this term removed Democrat board members from the Federal Labor Relations Board and the Federal Trade Commission.)

While some believe that the removal of board members of various federal boards and agencies is establishing a precedent that President Trump intends to use at some point to try to remove Fed Chairman Jerome Powell, the removal of regulatory board members and even single administrators such as the CFPB Director is generally recognized as an executive branch prerogative and has even been upheld in court as it relates to the CFPB Director.

There are court filings already under judicial review over the FLRB and FTC dismissals.  Although it will likely take months for these cases to be decided during which President Trump may even nominate his own appointees for these boards and commissions, these dismissals will certainly be litigated.

In fact, NCUA Board Members Harper and/or Otsuka could file legal challenges of their own to their dismissals.  Most observers seem to believe that they will await the court’s rulings in the FLRB and FTC cases before they take any legal action that would basically be repetitive of the same issue – presidential authority to remove sitting board members and commissioners in the executive branch.  Time will tell how these legal actions play out.

However, in the meantime, Chairman Hauptman is the NCUA Board.  The announced comment period on the two non-effective regulations seem to indicate that he is at least considering some action regarding these two rules in accordance with the President’s executive order.

Whether he ends up taking action and, if so, how extensive will the action be is the question of the day.

It does, however, at least give credit unions another opportunity to weigh in on the succession planning rule in particular.

If you have concerns about this rule or want to know a bit more about it, a copy of the final rule – not yet effective – can be accessed through the link below:

https://ncua.gov/files/agenda-items/succession-planning-final-rule-20241217.pdf

If you would like to comment on the rule, either suggesting changes or recommending that it be repealed, a brief statement to that effect can be registered on the formal comment page through the following link:

https://www.federalregister.gov/documents/2025/04/23/2025-06966/simplification-of-share-insurance-and-succession-planning-final-rules-solicitation-of-comments

The NCUA Board dynamic is an interesting one at this time.

As I stated in last week’s Client Update, I have some experience with the one-member board issue.

While I was serving as NCUA Chairman from 2001-2004, at the end of December 2001 President George W. Bush terminated Democrat Board Member Yolanda Wheat’s service on the NCUA Board at the same Democrat Geoff Bacino’s one-year recess appointment to the NCUA Board expired.

That left me as a one-member board while serving as NCUA Chairman.

At that time we established a precedent by taking several actions while serving as chairman of the one-person NCUA Board to create a precedent that – if this ever happened again for whatever reason – the agency would not be stymied in doing its job and could function with a one-member board until the three-member board was reestablished with future appointments.

A formal NCUA Board meeting was held.  I took administrative and operational action including voting on agency matters, signing various documents on behalf of the board, took personnel actions, oversaw the staff and made sure the agency fully functioned in its role as regulator of all federal credit unions and the insurer of all federally insured credit unions.

It was our position at the time, and certainly the same would apply now, that Congress – when establishing these agencies – did not want them to shut down because two board seats are vacant whether it be by dismissal, resignation, retirement, death or natural disaster.  They are fundamentally safety and soundness agencies that should be expected to do their job for the depositors in federally-insured credit unions.

Simply stated, you just cannot have a federal safety and soundness agency unable to function.

As at that time, Chairman Hauptman last week announced that all delegations of authority to the various departments remain in place.  Field of membership expansions will be considered and approved.  As will mergers.  Prohibition orders will be issued, as will credit union and examiner guidance.  Exams will continue.  Appeals will be heard.

If you will remember from last week’s Client Update, the only thing I did not do as the one-member board was to actually formally approve a regulation.  It was not because I did not feel I had the authority to do so.  There was simply no pending regulation that required action or repeal during the time I served as NCUA Chairman and as the one-member board.

I am, however, very confident that the NCUA Chairman could act to approve or rescind a regulation if he or she chose to do so while serving as the one-member board.   As an opponent of unnecessary regulatory burden on credit unions, I chose not to set the precedent of approving a regulation, although all legal research and indications I received at the time were that I had the authority to do so.

As he publicly stated in his staff directive of last week, Chairman Hauptman and the NCUA staff are aware of this clear precedent and are utilizing it to continue the work of NCUA as the safety and soundness regulator of federal credit unions and the insurer of all federally-insured credit unions.

So, again we remind you that, with that precedent in place, where credit unions with issues pending before NCUA are concerned, any such actions as exam resolutions, supervisory appeals, charter applications, field of membership expansions or mergers should not be impacted in the least by a one-member board.

But Chairman Hauptman’s issuance of a comment period on the share insurance rule and particularly the succession planning rule indicates that he is at least considering some regulatory actions during the period he serves as a one-member board.

How activist he actually becomes in delaying, revising or repealing regulation remains to be seen.

Remember that Chairman Hauptman’s term on the NCUA officially expires in August this year.

He could be allowed to continue to serve by President Trump in holdover status as long as the President does not nominate a new NCUA Board Member and likely Chairman to take his place.

Or, based upon the questionable legal basis upon which President Biden nominated Todd Harper to a second successive term during his administration and the subsequent Senate confirmation of the Harper re-nomination even though the law was quite clear about board members being limited to one term, Mr. Hauptman could be re-nominated.

Another very real possibility is that President Trump will nominate a new NCUA Chairman, probably along with two new board members, around the time of the Hauptman term expiring in late summer.  Upon confirmation by the Senate, it is conceivable you could have a completely new NCUA Board and Chairman by fall.

This is going to be fascinating to watch as it plays out.

What is the impact of all of this on the independence of NCUA as a regulator?

As stated in our last week’s Client Update, “independence” seems to be in the eyes of the beholder.  Or at least in the eyes of the administration in power.

Each of the past two administrations have taken considerable action – even some that critics have claimed go beyond what the law intended to allow – that have made independent agencies like NCUA, FDIC, FTC, NFRB, FHFB and others much more led by appointees in line with the administration’s regulatory philosophy.

Regulatory agencies were never completely independent of the administration because each administration has long been able to designate which board member or commissioner at a federal agency will serve as Chairman.  Each administration has been allowed to have a majority on a federal agency board or commission.

Politics has always been present in the regulatory agencies, despite their being called independent.

The challenge is to analyze the politics and to see where it is leading the regulatory environment.

We will continue to watch that for you with our unique experience in this realm.

In the meantime, if you feel so inclined, we encourage you to file a comment on the succession planning rule.  It can be as simple as “This rule needs to be repealed as an overreach of federal agency authority in the fiduciary responsibility of credit union officials to make their own strategic leadership decisions.”

Or you can study the rule and specifically mention certain sections that give you concern.

Either way, the opportunity has presented itself to possibly revisit one of NCUA’s most controversial rules of recent years.  If you feel strongly enough to comment, we encourage you to take advantage of this opportunity to do so.

Until next time.

Dennis Dollar