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Washington
Judge dismisses Kappa Alpha Psi suit v. liquidation
WASHINGTON (11/10/10)—Kappa Alpha Psi FCU’s attempt to reverse the National Credit Union Administration’s (NCUA) August liquidation order was rejected in U.S. Federal Court on Tuesday. NCUA director of public and congressional affairs John McKechnie told News Now that “the judge's ruling in the Kappa Alpha Psi case speaks for itself. Beyond that, NCUA has no further comment except to say that we are pleased that the judge reaffirmed the validity of our actions in the matter." Kappa Alpha Psi was a community development credit union and was affiliated with the African-American fraternity of the same name. The credit union, which operated online and served fraternity members and affiliated organizations, was established on Nov. 4, 2004. The NCUA in early August ordered the liquidation of the $750,000 asset credit union due to the credit union's inability to generate consistent operational profits, build its net worth position, grant quality loans and adequately collect on delinquent loans. The credit union reported a net worth ratio of 0.58% as of Dec. 31, 2009. The NCUA requires newer credit unions to be "adequately capitalized" with a 6% net ratio within 10 years of its charter. Kappa Alpha Psi challenged the liquidation, claiming that its net worth ratio was affected by "full accrual accounting" and NCUA's assessments related to its Temporary Corporate Credit Union Stabilization Fund. The credit union said it saw a "significant drop" in its net worth ratio between 2007 and 2009 that "was attributable to 'full accrual' accounting and NCUA assessments related to its ongoing corporate credit union system resolution plan. The NCUA formally carried out the liquidation orders on Aug. 13, while Kappa Alpha Psi was also bringing an injunction request to court. The credit union dropped the injunction after the NCUA redistributed its assets to the former credit union’s members.


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