NORTH LITTLE ROCK, Ark.--A former executive of People Trust Community FCU has asked a federal court to lift NCUA’s conservatorship of the $3.3-million People Trust Community FCU here, arguing the agency relied on an incomplete record, ignored vendor failures, and acted amid alleged conflicts of interest.
The filing was submitted by Arlo Washington, founder and former CEO of People Trust Community FCU, who is also a member of the credit union. Washington is seeking judicial relief under the Federal Credit Union Act following NCUA’s January 2026 order placing the credit union into conservatorship without advance notice or a hearing, the application alleges.
As CUToday.info reported, NCUA on Jan. 16, placed People Trust Community FCU into conservatorship. NCUA said it made its decision due to "unsafe and unsound practices" at the credit union.
In the application, filed with the United States District Court for the Eastern District of Arkansas, Western Division, Washington contends that operational problems cited by regulators were driven primarily by prolonged vendor and core-system failures — including ransomware disruption, service breakdowns, reconciliation errors, and reporting challenges — rather than management misconduct. He argues NCUA failed to intervene with vendors despite formal complaints and documentation submitted in 2025.
The filing also alleges examiner misconduct and conflicts of interest. Washington claims one NCUA examiner later joined a competing credit union, raising concerns about regulatory impartiality, and that another examiner’s family ties to a servicing credit union created potential financial and supervisory conflicts. The complaint further questions an external audit referral process that it says lacked transparency and independence safeguards.
Washington disputes NCUA’s assertion that unsafe and unsound conditions justified conservatorship, noting that People Trust’s capital decline stemmed from vendor costs, fraud losses tied to payment-system vulnerabilities, accounting charge-offs, and delayed grant funding.
NCUA Call Report data show the CU’s capital plunged from 7.75% in December of 2024 to 2.05% by September of last year.
Washington says management had launched remediation efforts — including a business-plan revision, ledger cleanup, vendor changes, and risk-reduction steps — before regulators took control.
The filing asks the court to stay conservatorship actions, order an expedited hearing, and ultimately dissolve the conservatorship or require NCUA to allow a full evidentiary response. Washington argues the action threatens a mission-focused institution serving low-income and minority communities, including what he describes as Arkansas’ only Black-owned credit union, and warns the decision could have broader implications for community-based financial access.
NCUA declined to comment when contacted by CUToday.info.