Legal Battle Grows Over NCUA Takeover of People Trust Community CU

NCUA placed People Trust Community Federal Credit Union in conservatorship in January 2026, and that step has now escalated into a multi‑front legal fight led by former CEO Arlo Washington challenging the agency’s authority and process. At the same time, NCUA is moving toward liquidation and asset transfer, which Washington is trying to stop through emergency court relief.

What NCUA did and why

• On January 16, 2026, NCUA conserved People Trust Community FCU in North Little Rock, Arkansas, citing “unsafe and unsound practices.”

• NCUA’s public notice emphasized that member services would continue and that deposits remain insured up to $250,000 through the National Credit Union Share Insurance Fund.

• Behind the scenes, the confidential grounds for conservatorship reportedly included: sharply declining net worth, undercapitalization, unsafe and unsound conditions, recordkeeping problems, unsound lending practices, inadequate internal controls, and Bank Secrecy Act violations.

• Financially, People Trust had about 1,796 members and roughly $3.3 million in assets, with a net worth ratio around 2.05% and significant losses in 2024 and 2025, well below “well capitalized” levels.

The legal actions by former CEO Arlo Washington

• Former CEO (and founder) Arlo Washington quickly filed an “Application for Relief from Conservatorship” in federal court just days after the takeover, acting as a pro se litigant.

• Washington’s subsequent amended complaint seeks documents and internal records tied to NCUA’s decision to conserve the credit union, effectively challenging the factual and procedural basis for the action.

• He alleges that NCUA’s intervention was unjustified and has harmed both the institution and its members, and he is asking the court to scrutinize or unwind the agency’s decision.

Escalation: emergency bid to stop liquidation

• As the conservatorship progressed, NCUA moved toward liquidating People Trust and transferring or paying out its assets, a typical next step if a conserved credit union is not restored to viability.

• Washington has now sought an emergency order (temporary restraining order / preliminary injunction) in federal court to block what he characterizes as NCUA’s “purported liquidation” of People Trust.

• NCUA maintains that the conservatorship and any subsequent resolution actions are necessary to preserve the credit union’s assets and protect member interests.

Core legal issues in the dispute

The litigation is surfacing several key questions about NCUA’s authority and process:

• Statutory authority and deference: NCUA’s power to place a federally insured credit union into conservatorship or liquidation, and the level of judicial deference courts owe to NCUA’s “unsafe and unsound” and capitalization determinations.

• Due process and transparency: To what extent the CEO/board is entitled to notice, opportunity to respond, and access to the confidential grounds and examination material underpinning the conservatorship.

• Scope of judicial relief: Whether a district court can order NCUA to reverse or stay a conservatorship or liquidation decision, or is limited to narrower remedies such as compelling production of records.

• Timing and irreparable harm: In the emergency motion phase, whether liquidation would cause irreparable harm to People Trust, its leadership, or its community mission that justifies court intervention against a federal regulator.

Broader context for small credit unions

• People Trust’s conservatorship comes amid a rising number of interventions involving small, thinly capitalized credit unions, such as Copper & Glass FCU and a handful of other small institutions conserved in 2025.

• The case is drawing attention in the credit union industry press because it tests how aggressively NCUA will act when a relatively new, mission‑driven community credit union deteriorates financially, and how much pushback from local leadership courts will entertain.