Two former Democratic members of the National Credit Union Administration are suing senior leaders of the Trump administration after they were fired by President Donald Trump in April, a suit whose outcome could have
The suit, filed Monday in the U.S. District Court for the District of Columbia by former NCUA board members Todd Harper and Tanya Otsuka, argues that President Trump, Treasury Secretary Scott Bessent, NCUA Executive Director Larry Fazio, remaining Republican board member Kyle Hauptman and White House staffer Trent Morse exceeded statutory authority and threatened financial stability by politicizing the previously bipartisan agency body.
"The President terminated the terms of Plaintiffs Todd M. Harper and Tanya F. Otsuka in the middle of their fixed terms as members of the Board of the NCUA, without explanation and without any cause," the lawsuit said. "That termination disregards the protections Congress established to preserve the Board's independence and threatens the integrity of a vital federal financial regulator."
The Treasury did not immediately respond to American Banker's requests for comment on the lawsuit. The NCUA declined to comment.
NCUA, the credit union industry's deposit insurer, was established in 1970 through the Federal Credit Union Act as an independent agency. While the agency was initially set up with a single director, the 1978 Credit Union Modernization Act modified the agency to consist of a three-member board whose members serve staggered six-year terms with no more than two members belonging to the same political party. NCUA manages over 4,000 credit unions around the country, which hold over $2 trillion of assets.
The administration's decision to remove the two Democratic board members ahead of their terms' expiration is the first time a president has removed an NCUA board member since the board's modern structure was established in 1978.
"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," Harper argued in a statement on the lawsuit Monday. "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."
Monday's lawsuit asks the court to rule on the legality of Harper and Otsuka's removals and whether or not their termination notification sent to them by the administration is legally valid. The suit also calls for the judge to halt any official action at NCUA taken by the administration in the removed members' absence and provide court fees, relief, wages and benefits to the removed members if the court deems they were improperly removed.
Former board member Todd Harper was appointed by Trump in 2019 and he later served as the NCUA board chair under President Biden, after being nominated to a six-year term. Tanya Otsuka, who was the first Asian American to join the board, was nominated by President Biden in 2023 and unanimously confirmed. Harper and Otsuka's terms would have extended until 2027 and 2029, respectively, before
At the time of their removal, the two members were sent identically worded emails informing them their positions were terminated immediately and did not mention reasons for the firings.
The legal filing states that the president overstepped his statutory authority when he removed the members without cause, and added that their removal leaves the board — which now consists of Chair Kyle S. Hauptman, who is also a defendant in the suit — without a quorum, hindering NCUA's ability to fulfill its statutory responsibilities.
The plaintiffs cite a Supreme Court precedent established in the 1935 case Humphrey's Executor v. United States, which provided members of multimember independent agency boards removal protections.
"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. This administration's actions fundamentally undermine the NCUA's independence and its ability to protect our financial system [and] has implications for other independent financial regulators like the FDIC and the Federal Reserve," Otsuka said. "Everyone who puts their money in a credit union or a bank has a stake in this lawsuit."
In Humphrey's Executor, the Supreme court ruled the president could not remove members of boards at independent agencies — specifically the Federal Trade Commission in that case. The precedent established in 1935 has been interpreted to apply to all such boards at independent agencies, but President Trump has been challenging the doctrine for some time. The president is already facing a similar legal challenge
The lawsuit also argues that the lack of quorum on the board makes any actions taken by the defendants illegal, citing the 1996 Swan v. Clinton case in which the D.C. Circuit Court ruled NCUA board members are removable only for cause and that the 1978 restructuring of the board supported an "inference of removal protection" during board members' terms.
"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," said Harper on Monday. "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."
