Part 708b.203 of NCUA's Rules and Regulations describes our procedures and notice requirements for federally-insured, state-chartered credit unions to convert to private insurance if all the following conditions are met:
- State law permits private share insurance.
- Regional Director approves the conversion.
- Affirmative vote of the majority of the credit union's members who vote on the proposition, provided at least 20 percent of the total membership participates in the voting.
If the conversion is approved, the credit union is required to allow members to be able to withdraw their money without an early withdrawal penalty. Here is what is stated in the NCUA manual:
The credit union will, at any time before the effective date of conversion, permit all members who have share certificates or other term accounts to close the federally-insured portion of those accounts without an early withdrawal penalty.
At the bottom of last week's post I included a poll asking readers if they would join a credit union that only has ASI (private) insurance. Out of 528 votes, 90% voted NO to this question.
It'll be interesting to see how the vote goes at Velocity Credit Union. I know of another Texas credit union that tried to convert to private insurance in 2007, and the members rejected the conversion. After last year's financial crisis, I would think concerns over private deposit insurance would have only increased.