The Texas Credit Union Department placed the Edinburg Teachers Credit Union into conservatorship last month, though the details behind the decision remain confidential.
The department announced on March 26 that the National Credit Union Administration was appointed the credit union’s conservator, a move through which the primary regulator takes possession of the credit union “to protect the membership’s interests,” according to a news release issued by the department.
“Those actions are taken to protect the shareholders and ensure the compliance of either Texas state law or federal law,” John J. Kohloff, TCUD commissioner said on Wednesday. “Obviously banks and credits unions have to deal with both.”
Kohloff said the purpose of appointing a conservator to take over the operations of the credit union was to get them back in compliance.
“If you want to think of a bankruptcy term, a conservatorship would be doing a bankruptcy where you’re going through the process to rehab an entity, a corporation,” Kohloff said. “A receivership would be the next step which is a liquidation so it would be like a bankruptcy where you’re liquidating the assets of an entity.”
He reiterated, though, that the purpose was to rehab an institution, avoiding liquidation, and turning it back over the members.
The National Credit Union Association assured in their own news release issued at the time of their appointment that service for the credit union’s 12,572 members would remain uninterrupted during the conservatorship, though it’s unclear how long that will last.
“Any time you take an institution into conservatorship, it depends on what the issues are that’s driven it into conservatorship and how long it takes to correct those things,” Kohloff said regarding the lack of timeframe, “and obviously that can differ.”
The credit union has $106 million in assets and $82 million in deposits, according to the news release issued by the TCUD.
Deposits at the ETCU are protected by the National Credit Union Share Insurance Fund, according to their news release which added that the Share Insurance Fund insures individual accounts at the ETCU with up to $250,000 and insures a member’s interest in all joint accounts combined up to $250,000.
“The Share Insurance Fund also separately protects IRA and KEOGH retirement accounts up to $250,000,” the release further stated.
A spokesman for the National Credit Union Administration said they could not provide further comment on the conservatorship.
Kohloff also said he could not provide details as to why the credit union was placed into conservatorship, citing the Texas finance code which states that a conservatorship order and documents relating to the order are confidential.
Those can only be disclosed in a legal proceeding related to the other or as otherwise authorized by law.
Officials at the credit union itself did not respond to a request for comment.