The National Credit Union Administration (NCUA) on Jan. 14 placed People Trust Community Federal Credit Union of North Little Rock into conservatorship, citing “unsafe and unsound” practices.
Founder and former CEO Arlo Washington, whose journey to launch the credit union in 2022 was the subject of an Academy Award-nominated documentary film, pushed back against the NCUA’s claims. In a federal court filing, he said the credit union’s problems are the result of vendor failures, not mismanagement, and asked a judge to stay the conservatorship.
The NCUA’s conservatorship order cited recordkeeping concerns, unsound lending practices, inadequate internal controls, failure to report suspicious transactions, and undercapitalization, according to Washington’s filing.
Washington told Arkansas Business he was “blindsided” by the regulatory agency’s decision because he’d been working with the NCUA to address People Trust’s issues. “I felt like there should have been some type of notice,” he said. “There should have been some due process.”
The credit union has 1,796 members and assets of $3.28 million, according to the NCUA. Members are now being serviced by the NCUA at an Arkansas Federal Credit Union (AFCU) branch at 17500 Cantrell Rd. in Little Rock. AFCU is providing space for the regulatory agency and is not involved in daily operations of People Trust.
People Trust is federally chartered as a low-income designated credit union serving Pulaski and Saline counties. It gained notoriety as the only Black-owned credit union in Arkansas and the first minority-owned credit union in the state in 40 years.
The conservatorship “seeks to resolve operating issues at the credit union with the goal of protecting member assets and seeking a resolution to identified problems,” the NCUA said in a news release. Possible outcomes include a return to member control with a new advisory board, merger with another credit union, and liquidation.
There was no timeframe for how long the conservatorship will last.
Ransomware Attack
Washington said People Trust’s problems began six months after it was chartered, when its core processing system, FIS Mercury, experienced a ransomware incident.
The attack caused a full operational disruption lasting nearly two months, Washington said in the court filing. Throughout 2023 and 2024, vendor systems continued to fail, which prevented reliable reconciliation, created processing delays and errors, and hindered the institution’s ability to produce accurate regulatory reports.
As a result of insecure payment systems, People Trust suffered fraud losses. The credit union’s financial condition deteriorated further due to rising IT expenses, operational inefficiencies and negative share charge-offs, which happen when a credit union account is overdrawn and deemed uncollectible. People Trust’s net worth ratio at one point fell below 2%, the lowest level categorized by the NCUA. Well-capitalized credit unions have a net worth ratio of 7% or higher.
Washington told Arkansas Business that People Trust had a capital buffer of about $800,000 or $900,000 and was rolling out a plan to stabilize its capital structure. He said the NCUA assured People Trust in December that it would have time to implement the plan.
But in January, the NCUA placed the credit union into conservatorship.
“We weren’t facing imminent failure,” Washington said. “We just needed time to implement our plan.”
Conflicts and Mixed Signals
The court filing alleges that NCUA examiners who reviewed People Trust’s financial condition had potential conflicts of interest.
One examiner who issued findings affecting People Trust’s supervisory standing and capital position left the NCUA in August 2025 and returned to his former employer, Telcoe Federal Credit Union of Little Rock, as senior vice president of lending. Another NCUA examiner was identified as the wife of an Arkansas Federal Credit Union executive.
Washington’s filing also accuses the NCUA of inconsistent supervision. Four examiners reviewed the credit union’s financial condition over a two-year period and each examiner issued directives that overlapped or conflicted with prior requirements, making compliance difficult, the filing said.
Washington said he attempted to flag supervisory inconsistencies through formal channels, but the NCUA did not respond.
Washington filed his complaint against the NCUA on Jan. 23, arguing that the agency’s action was disproportionate to actual risk and that less restrictive alternatives, such as civil money penalties and capital directives, were not considered.
He argued that the conservatorship is arbitrary and capricious under the Federal Credit Union Act because it was based on an incomplete record that excludes evidence about vendor failures and examiner conduct.
The case in U.S. District Court for the Eastern District of Arkansas was first assigned to Judge Lee P. Rudofsky, who recused. It was reassigned to Judge Brian S. Miller.
No response had been filed Tuesday morning.
This article clarifies that Arkansas Federal Credit Union is not servicing People Trust customers, it is only providing branch space for the NCUA to service People Trust customers.
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