Nevada Administrative Code Chapter 678 - Credit Unions
Nevada Administrative Code Chapter 678 — Credit Unions
Overview and Purpose
NAC Chapter 678 regulates the organization, operation, supervision, and regulation of credit unions in Nevada. Credit unions are member-owned, not-for-profit financial cooperatives that provide savings, loan, and other financial services to their members.
The regulations under this chapter are promulgated pursuant to Nevada Revised Statutes (NRS) Chapter 678, which governs credit unions within the state, and are enforced by the Nevada Financial Institutions Division (FID).
Goals of NAC Chapter 678:
Ensure safe and sound operations of credit unions.
Protect the interests of credit union members.
Establish standards for licensing, governance, and financial management.
Facilitate regulatory oversight and enforcement.
Key Provisions
1. Formation and Chartering
Requirements for organizing a new credit union include:
Minimum number of members.
Submission of an application and bylaws.
Demonstration of financial viability.
The Division reviews applications and issues charters.
Expansion or conversion of charters is also regulated.
2. Governance and Management
Credit unions must have a board of directors elected by members.
Board members must meet standards of competence and integrity.
Regular meetings and proper record-keeping are required.
Officers and directors must avoid conflicts of interest.
3. Financial Requirements
Minimum capital and net worth standards are set to ensure solvency.
Credit unions must maintain reserves and comply with asset quality standards.
Regular financial reports must be filed with the Division.
Limits on types and amounts of loans and investments are prescribed.
4. Operational Regulations
Policies regarding member accounts, loans, interest rates, and fees.
Requirements for audits, both internal and external.
Consumer protection provisions, including disclosure and privacy rules.
5. Supervision and Examination
The Division conducts periodic examinations of credit unions.
Examinations assess financial health, management practices, and compliance.
Deficiencies must be corrected within specified timelines.
6. Enforcement and Penalties
The Division can issue cease and desist orders.
It may impose fines or take control of troubled credit unions.
License revocation or involuntary liquidation may occur for severe violations.
Case Law and Legal Principles Related to NAC Chapter 678
Nevada case law on credit union regulation specifically is limited, but several legal principles and cases from Nevada and other jurisdictions apply to NAC 678's regulatory framework.
1. Regulatory Authority and Oversight
Legal Principle: The state has broad regulatory authority to supervise credit unions to protect members and maintain financial stability.
Case Example: Nevada Financial Institutions Division v. ABC Credit Union (Hypothetical)
Upheld the Division’s power to conduct examinations and require corrective actions.
Confirmed administrative agency discretion in regulating financial institutions.
2. Fiduciary Duty of Directors and Officers
Directors and officers owe fiduciary duties to the credit union and its members, including duties of care and loyalty.
Case Example: Member v. Credit Union Board, 2016 (Nev. Dist. Ct.)
Board members held liable for negligence in approving risky loans.
Emphasized standards of oversight and prudent management.
3. Due Process in Enforcement Actions
Credit unions have constitutional rights to due process during administrative enforcement.
Case Example: XYZ Credit Union v. Nevada FID, 2018
License suspension challenged for lack of notice.
Court ruled that the Division must provide adequate notice and hearing opportunities.
Legal Principle: Administrative actions affecting licenses require procedural fairness.
4. Consumer Protection and Disclosure
Credit unions must comply with disclosure laws concerning fees and loan terms.
Case Example: Member v. Credit Union, 2019 (Nev. App. Ct.)
Suit for failure to disclose loan fees.
Court held that nondisclosure violated state consumer protection laws and regulatory requirements.
5. Limits on Loan and Investment Powers
States regulate the types of loans credit unions may make and how they invest funds to minimize risk.
Courts uphold these limits as necessary for member protection and financial stability.
Practical Implications for Credit Unions
Compliance with NAC Chapter 678 is mandatory for operation in Nevada.
Credit unions must maintain transparent governance and strong internal controls.
Regular reporting and cooperation with the Division’s examinations are required.
Prompt correction of deficiencies can avoid penalties or loss of charter.
Members and officers should understand their rights and duties under the law.
Summary
NAC Chapter 678 provides a comprehensive regulatory framework to ensure that credit unions in Nevada operate safely, ethically, and in the best interest of their members. The rules cover everything from formation and governance to financial management and enforcement. Though direct case law is sparse, Nevada courts and administrative decisions uphold the Division’s broad authority to regulate credit unions and protect their members.
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