Editor’s Note: This story is being updated as new information becomes available.
WASHINGTON–A lawsuit has been filed against the Trump Administration challenging the firings of NCUA board members Todd Harper and Tanya Otsuka.
The complaint, filed by Vincent Levy of Holwell Shuster & Goldberg LLP, New York in the United States District Court for the District of Columbia, offers additional details around the firings and alleges that neither plaintiff was provided any reasons for the termination nor did the one-sentence emails informing them of the dismissal “attempt to assert a basis for cause. Nor could they.”
The suit alleges both Harper and Otsuka are entitled under the Federal Credit Union Act to serve their “remainders of their terms as Members of the National Credit Union Administration Board” as board members serve six-year terms and “may only be removed for cause.”
Both Harper and Otsuka have issued statements following the filing, which are reported below.
The suit which names as defendants Treasury Secretary Scott Bessent; NCUA Executive Director Larry Fazio; NCUA Chairman Kyle Hauptman; Deputy Assistant to the President Trent Morse, and President Trump, says there is a “half century of binding Supreme Court precedent upholding materially identical protections for members of multimembers boards of independent federal agencies,” and that the termination was “unlawful.”
Attorney: ‘Violates Congress’ Intent’
Attorney Vincent Levy said in a statement, “The termination of Todd Harper and Tanya Otsuka from the NCUA Board violates Congress’s intent in creating an independent financial regulator. This lawsuit seeks to vindicate Congress’s intent and to preserve the integrity of the financial markets.”
How Firings Transpired
According to the complaint, on April 15 at 7 p.m., Deputy Assistant to the President Trent Morse sent an email to Harper reading, “On behalf of President Donald J Trump, I am writing to inform you that your position on the National Credit Union Administration is terminated, effective immediately. Thank you for your service.”
The complaint says Harper’s government email account had been discontinued earlier that evening and the message “which was sent to the wrong address, did not reach him until it was forwarded on April 17.”
At 7:01 p.m on April 15th, the complaint alleges Otsuka was sent the same email.
Lack of Quorum
While NCUA has said the single-person NCUA board that now remains in the person of Kyle Hauptman constitutes a quorum, the lawsuit alleges otherwise.
“The President’s removal of Mr. Harper and Ms. Otsuka has left the NCUA Board without a quorum, rendering it unable to implement Congress’ mandate in full,” the suit states. “Only one Board Member, Defendant Kyle S. Hauptman, remains as both the agency’s sole Board Member and its Chairman. But the Federal Credit Union Act vests the powers of the agency in ‘the Board,’ not in any one individual, with a quorum requiring a majority of the board. And ‘the agreement of at least two of the three Board members is required for any action by the Board. With only a single Member purporting to exercise authority, the NCUA cannot continue carrying out the supervisory, regulatory and institutional functions that Congress intended to be exercised by a Board composed of at least a majoriity of its members.”
The suit asks the court to order that plaintiffs Harper and Otsuka cannot be removed from the board and that they be returned to their positions, including with all wages and benefits owed to them.
Harper: ‘You Stand Up and Push Back’
“Having grown up in a neighborhood next to Chicago’s industrial East Side, I learned early on that when someone begins a fight, you stand up and push back for what’s right,” said Harper in a statement accompanying the filing of the lawsuit. “What’s right is protecting consumers and their deposits by maintaining an independent, three-member NCUA Board guided by expert judgement in line with the Federal Credit Union Act’s mandates and other statutory requirements.
“That’s why I joined my fellow NCUA Board Member, Tanya Otsuka, in filing this important legal proceeding against the Trump Administration. The President’s unprecedented and unlawful decision to terminate two-thirds of the NCUA Board legally serving within their Senate-confirmed terms and without providing any cause should concern everyone who uses a federally insured financial institution like a credit union or a bank.
“In creating the NCUA, the FDIC, and the Federal Reserve, Congress adopted organizational protections to insulate financial institution regulation and supervision from partisan politics and preserve the integrity of our financial markets. And in 1978, Congress clearly determined that a credit union watchdog operating with three members—instead of a single administrator—was the better way to insure deposits, protect consumers, charter new credit unions, and maintain the system’s safety and soundness.
Ensuring ‘Stability’
“In those amendments, Congress also sought to ensure stability in policymaking by staggering NCUA Board terms,” Harper continued in his statement.” This structure promotes continuity, expertise and independence. Dismantling the existing system of checks and balances established by Congress to protect credit union consumers and their deposits, as well as taxpayers from losses to the Share Insurance Fund, is risky, ill-advised and imprudent.
“Credit union members need a strong, independent watchdog. That’s why we’re seeking relief to restore the Board’s lawful composition and preserve the independence Congress mandated. Our failure to take these actions could pave the way to the consolidated regulation of credit unions and banks and lead to the demise of our nation’s vibrant credit union movement focused on its mission of meeting the credit and savings needs of members, especially those of modest means.”
Otsuka: A System ‘Built on Trust’
In her statement accompanying the filing of the suit, Otsuka said, “Our banking system is built on trust—people need to be confident that their hard-earned money will be there when they need it. When people lose that sense of trust, it can reverberate across the financial system and lead to financial crises that end up costing people their homes, jobs, and financial security.
“The National Credit Union Administration (NCUA) plays a key role in maintaining trust in the financial system. The NCUA protects Americans’ deposits in credit unions, just like the FDIC protects deposits in banks. We watch out for the 142 million people and businesses that use a credit union for a checking or savings account, a credit card, or a car loan. Credit unions are nonprofit financial institutions created to help all communities access the financial system.
Independent for a Reason
“Congress created the NCUA Board to be independent, because whether your money is safe in a credit union shouldn’t have anything to do with politics. Weakening financial watchdogs like the NCUA puts people’s money at risk and makes it harder and more expensive to pay your bills, start a new business, or buy a home.
“That is why my fellow Board Member Todd Harper and I are challenging the Trump Administration’s attempt to illegally remove us before our Senate-confirmed terms expire. This administration’s actions fundamentally undermine the NCUA’s independence and its ability to protect our financial system. It also has implications for other independent financial regulators like the FDIC and the Federal Reserve.
“Working people, families, and businesses, large and small, need to have confidence in the banking system so that we have a strong and stable economy. Everyone who puts their money in a credit union or a bank has a stake in this lawsuit.”
America’s Credit Unions Responds
Following the filing of the suit, America’s Credit Unions’ President and CEO Jim Nussle issued a statement saying, “America’s Credit Unions is closely reviewing the lawsuit filed by former NCUA Board members Todd Harper and Tanya Otsuka challenging their dismissals. Our position remains firm in that credit unions’ federal regulator should be an independent, bipartisan board. As the administration has yet to propose nominations to fill the two current vacancies, we continue to engage the NCUA to gain further insights as to what initiatives or actions Chairman Hauptman will take as a one-member board. Recently, we have seen similar legal challenges across various federal agencies that have experienced similar dismissals. We will continue to act in the best interest of our member credit unions and their 142 million members.”