Chartering and Field of Membership Manual, 24623-24628 [2014-09812]

Download as PDF mstockstill on DSK4VPTVN1PROD with PROPOSALS Federal Register / Vol. 79, No. 84 / Thursday, May 1, 2014 / Proposed Rules Eligible guarantee means a guarantee that: (1) Is written; (2) Is either: (i) Unconditional, or (ii) A contingent obligation of the U.S. government or its agencies, the enforceability of which is dependent upon some affirmative action on the part of the beneficiary of the guarantee or a third party (for example, meeting servicing requirements); (3) Covers all or a pro rata portion of all contractual payments of the obligated party on the reference exposure; (4) Gives the beneficiary a direct claim against the protection provider; (5) Is not unilaterally cancelable by the protection provider for reasons other than the breach of the contract by the beneficiary; (6) Except for a guarantee by a sovereign, is legally enforceable against the protection provider in a jurisdiction where the protection provider has sufficient assets against which a judgment may be attached and enforced; (7) Requires the protection provider to make payment to the beneficiary on the occurrence of a default (as defined in the guarantee) of the obligated party on the reference exposure in a timely manner without the beneficiary first having to take legal actions to pursue the obligor for payment; (8) Does not increase the beneficiary’s cost of credit protection on the guarantee in response to deterioration in the credit quality of the reference exposure; (9) Is not provided by an affiliate of the Board-regulated institution, unless the affiliate is an insured depository institution, foreign bank, securities broker or dealer, or insurance company that: (i) Does not control the Boardregulated institution; and (ii) Is subject to consolidated supervision and regulation comparable to that imposed on depository institutions, U.S. securities brokerdealers, or U.S. insurance companies (as the case may be); and (10) For purposes of §§ 217.141 to 217.145 and for purposes of subpart D of this part, is provided by an eligible guarantor. * * * * * Federal Deposit Insurance Corporation 12 CFR Chapter III Authority and Issuance For the reasons set forth in the preamble, part 324 of chapter III of title 12 of the Code of Federal Regulations is proposed to be amended as follows: VerDate Mar<15>2010 20:22 Apr 30, 2014 Jkt 232001 PART 324—CAPITAL ADEQUACY OF FDIC–SUPERVISED INSTITUTIONS 6. The authority citation for part 324 continues to read as follows: ■ Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 5412; Pub. L. 102–233, 105 Stat. 1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102–242, 105 Stat. 2236, 2355, as amended by Pub. L. 103–325, 108 Stat. 2160, 2233 (12 U.S.C. 1828 note); Pub. L. 102–242, 105 Stat. 2236, 2386, as amended by Pub. L. 102–550, 106 Stat. 3672, 4089 (12 U.S.C. 1828 note); Pub. L. 111–203, 124 Stat. 1376, 1887 (15 U.S.C. 78o–7 note). 7. In § 324.2, revise the definition of ‘‘eligible guarantee’’ to read as follows: ■ § 324.2 Definitions. * * * * * Eligible guarantee means a guarantee that: (1) Is written; (2) Is either: (i) Unconditional, or (ii) A contingent obligation of the U.S. government or its agencies, the enforceability of which is dependent upon some affirmative action on the part of the beneficiary of the guarantee or a third party (for example, meeting servicing requirements); (3) Covers all or a pro rata portion of all contractual payments of the obligated party on the reference exposure; (4) Gives the beneficiary a direct claim against the protection provider; (5) Is not unilaterally cancelable by the protection provider for reasons other than the breach of the contract by the beneficiary; (6) Except for a guarantee by a sovereign, is legally enforceable against the protection provider in a jurisdiction where the protection provider has sufficient assets against which a judgment may be attached and enforced; (7) Requires the protection provider to make payment to the beneficiary on the occurrence of a default (as defined in the guarantee) of the obligated party on the reference exposure in a timely manner without the beneficiary first having to take legal actions to pursue the obligor for payment; (8) Does not increase the beneficiary’s cost of credit protection on the guarantee in response to deterioration in the credit quality of the reference exposure; (9) Is not provided by an affiliate of the FDIC-supervised institution, unless the affiliate is an insured depository institution, foreign bank, securities broker or dealer, or insurance company that: PO 00000 Frm 00029 Fmt 4702 Sfmt 4702 24623 (i) Does not control the FDICsupervised institution; and (ii) Is subject to consolidated supervision and regulation comparable to that imposed on depository institutions, U.S. securities brokerdealers, or U.S. insurance companies (as the case may be); and (10) For purposes of §§ 324.141 to 324.145 and of subpart D of this part, is provided by an eligible guarantor. * * * * * Dated: April 8, 2014. Thomas J. Curry, Comptroller of the Currency. By order of the Board of Governors of the Federal Reserve System, April 11, 2014. Robert deV. Frierson, Secretary of the Board. Dated at Washington, DC, this 8th day of April, 2014. By order of the Board of Directors. Federal Deposit Insurance Corporation. Robert E. Feldman, Executive Secretary. [FR Doc. 2014–09452 Filed 4–30–14; 8:45 am] BILLING CODE P NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Part 701 RIN 3133–AE31 Chartering and Field of Membership Manual National Credit Union Administration (NCUA). ACTION: Proposed rule with request for comments. AGENCY: The NCUA Board (Board) proposes to amend the associational common bond provisions of NCUA’s chartering and field of membership rules. Specifically, the amendments establish a threshold requirement that an association not be formed primarily for the purpose of expanding credit union membership. The amendments also expand the criteria in the totality of the circumstances test, which is used to determine if an association, which satisfies the threshold requirement, also satisfies the associational common bond requirements and qualifies for inclusion in a federal credit union’s (FCU) field of membership (FOM). The amendments will help to ensure FCU compliance with membership requirements. Additionally, NCUA proposes to grant automatic qualification under the associational common bond rules to certain categories of groups that NCUA has approved in the past after applying the totality of the circumstances test. SUMMARY: E:\FR\FM\01MYP1.SGM 01MYP1 24624 Federal Register / Vol. 79, No. 84 / Thursday, May 1, 2014 / Proposed Rules Comments must be received on or before June 30, 2014. ADDRESSES: You may submit comments by any of the following methods (Please send comments by one method only): • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. • NCUA Web site: http:// www.ncua.gov/ RegulationsOpinionsLaws/proposed_ regs/proposed_regs. html. Follow the instructions for submitting comments. • Email: Address to regcomments@ ncua.gov. Include ‘‘[Your name] Comments on Notice of Proposed Rulemaking Regarding Associational Common Bond’’ in the email subject line. • Fax: (703) 518–6319. Use the subject line described above for email. • Mail: Address to Gerard S. Poliquin, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314– 3428. • Hand Delivery/Courier: Same as mail address. Public Inspection: You may view all public comments on NCUA’s Web site at http://www.ncua.gov/Legal/Regs/ Pages/PropRegs.aspx as submitted, except for those we cannot post for technical reasons. NCUA will not edit or remove any identifying or contact information from the public comments submitted. You may inspect paper copies of comments in NCUA’s law library at 1775 Duke Street, Alexandria, Virginia 22314, by appointment weekdays between 9 a.m. and 3 p.m. To make an appointment, call (703) 518– 6546 or send an email to OGCMail@ ncua.gov. DATES: FOR FURTHER INFORMATION CONTACT: Sarah Chung, Staff Attorney, Office of General Counsel, at the above address or telephone (703) 518–1178. SUPPLEMENTARY INFORMATION: I. Background II. Summary of the Proposed Rule III. Regulatory Procedures mstockstill on DSK4VPTVN1PROD with PROPOSALS I. Background and Requirements of the Associational Common Bond NCUA has implemented the Federal Credit Union Act’s (FCU Act) FOM requirements 1 in its Chartering and Field of Membership Manual (Chartering Manual), incorporated as Appendix B to part 701 of NCUA’s regulations.2 NCUA also publishes this manual as an Interpretative Ruling and Policy Statement (IRPS). The current 1 12 2 12 U.S.C. 1759. CFR part 701, Appendix B. VerDate Mar<15>2010 17:07 Apr 30, 2014 Jkt 232001 version of the manual is published as IRPS 08–2, as amended by IRPS 10–1. Section 109 of the FCU Act provides for three types of FCU charters: (1) Single common bond (occupational or associational); (2) multiple common bond (multiple groups); and (3) community.3 Section 109 also describes the membership criteria for each of these three types of charters.4 Special rules apply to each type of charter. An FOM consists of those persons and entities eligible for membership for each type of charter. The Chartering Manual sets forth that a single common bond FCU consists of one group having a common bond of occupation or association.5 A multiple common bond FCU consists of more than one group, each of which has a common bond of occupation or association.6 This rule will not affect the current requirements for occupational common bonds. Associational Common Bond A single associational common bond consists of individuals (natural persons) and/or groups (non-natural persons) whose members participate in activities developing common loyalties, mutual benefits, and mutual interests.7 Separately chartered associational groups can establish a single common bond relationship if such groups are integrally related and share common goals and purposes.8 The Chartering Manual more specifically lists the individuals and groups eligible for membership in a single associational credit union. Eligible individuals and groups are natural and non-natural person members of the association, employees of the association, and the association itself.9 NCUA determines whether a group satisfies the associational common bond requirements for an FCU charter based on the totality of the circumstances.10 This test in the current rule consists of seven factors: 11 (1) Whether members pay dues; (2) Whether members participate in the furtherance of the goals of the association; 3 12 U.S.C. 1759(b). 4 Id. 5 12 CFR part 701, Appendix B (Chapter 2, Section II.A.1). A community FCU consists of persons or organizations within a well-defined local community, neighborhood, or rural district. 6 Id. 7 12 CFR part 701, Appendix B (Chapter 2, Section III.A.1). 8 Id. 9 Id. 10 12 CFR part 701, Appendix B (Chapter 2, Section III.A.1). 11 Id. PO 00000 Frm 00030 Fmt 4702 Sfmt 4702 (3) Whether the members have voting rights; 12 (4) Whether the association maintains a membership list; (5) Whether the association sponsors other activities; (6) The association’s membership eligibility requirements; and (7) The frequency of meetings. The Chartering Manual specifies certain examples that may or may not qualify as associational common bonds. Educational groups, church groups, student groups, homeowner associations, and consumer groups may qualify as associational common bonds.13 However, associations based primarily on a client-customer relationship do not meet associational common bond requirements.14 Multiple Occupational or Associational Common Bonds An FCU may be chartered to serve a combination of distinct, definable single occupational and/or associational common bonds.15 This type of credit union is called a multiple common bond credit union. Each group in the FOM must have its own occupational or associational common bond. These groups must be within reasonable geographic proximity of the credit union.16 The groups must be within the service area of one of the credit union’s service facilities and are referred to as select groups. A select group as a whole will be considered to be within a credit union’s service area when a majority of the persons in the select group live, work, or gather regularly within the service area; the group’s headquarters is located within the service area; or the group’s ‘‘paid from’’ or ‘‘supervised from’’ location is within the service area. II. Summary of the Proposed Rule Why is NCUA proposing this rule? Executive Order 13579 provides that independent agencies, including NCUA, should consider if they can modify, streamline, expand, or repeal existing rules to make their programs more effective and less burdensome. The amendments to the associational 12 To meet this requirement, members do not have to vote directly for an officer, but may vote for a delegate who in turn represents the members’ interests. 13 12 CFR part 701, Appendix B (Chapter 2, Section III.A.1). 14 Id. 15 12 CFR part 701, Appendix B (Chapter 4, Section IV.A.1.). 16 A multiple common bond credit union cannot include a trade, industry, or profession single occupational common bond or expand using single common bond criteria. E:\FR\FM\01MYP1.SGM 01MYP1 Federal Register / Vol. 79, No. 84 / Thursday, May 1, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS common bond requirements establish a threshold requirement that an association not be formed primarily for the purpose of expanding credit union membership. The amendments also improve and clarify the totality of the circumstances test so that FCUs will better understand it, and will provide regulatory relief for FCUs who want to add to their FOMs certain groups that qualify for automatic approval. Also, NCUA is concerned that the current totality of the circumstances test may not be sufficiently filtering out those groups that do not meet the associational common bond requirements. In this regard, the amendments also emphasize that the group added to an FCU’s FOM must meet the underlying common bond criteria. As noted above, FCUs must follow the associational requirements under the FCU Act and NCUA’s regulations. In an attempt to expand their potential FOMs beyond appropriate limits, however, a few FCUs have begun forming their own associations and adding independent associations to their FOMs that may not fully satisfy the intent of the associational common bond rules. This is discussed more fully below. Automatic Approval NCUA has historically approved certain associations almost without exception due to their structure, practices, and functions, and because they easily satisfy the Chartering Manual’s requirements. For example, churches are consistently recognized as valid associations based on the associational common bond requirements. Likewise, labor unions, scouting groups, electric cooperatives, and homeowner associations are regularly approved for inclusion due to their natural cooperative structures. By the nature of these groups, members consistently participate in activities developing common loyalties, mutual benefits, and mutual interests to further the goals and purposes of the association. Therefore, religious organizations including churches, homeowner associations, scouting groups, electric cooperatives, and labor unions will be automatically included in an FCU’s FOM if it chooses to add the groups, as long as such groups meet service area and other related requirements. Additionally, NCUA proposes to automatically approve associations that have a mission based on preserving or furthering the culture of a particular national or ethnic origin for the same reasons stated above. However, it should be noted that only regular members of these groups will be VerDate Mar<15>2010 17:07 Apr 30, 2014 Jkt 232001 approved. NCUA will not automatically approve honorary or other classes of non-regular members. Based on NCUA’s experience, alumni associations are also regularly approved for inclusion in FOMs. Consequently, the proposed rule allows alumni associations to be automatically approved. Members of the alumni association need not have attended the college or university if the association’s bylaws permit them to join. The automatic approval of the above associations provides regulatory relief for FCUs as they will no longer be required to obtain and review the association’s bylaws, and, for the same reason, will result in more efficient use of NCUA’s resources. Further, NCUA is requesting public comment on if NCUA should automatically approve any other categories of associations that are not included above. NCUA has not deleted the descriptions and examples of associational common bonds in the Chartering Manual, and has now categorized such descriptions and examples as additional information. NCUA has also clarified that health clubs do not qualify under the associational common bond, including YMCAs, because these health clubs function primarily on a client-customer relationship. An FCU should consider this additional information regarding whether a group qualifies as having an associational common bond. Associational Group Quality Assurance Review In order to prevent abuses of the membership system, NCUA is currently reviewing the way associational groups are formed and operated. Prior to the issuance of IRPS 99–1, NCUA chartering policy specifically stated that associations formed primarily to obtain an FCU charter do not have a sufficient associational common bond. Since IRPS 99–1, NCUA chartering policy states that the common bond for an associational group cannot be established simply on the basis that the association exists. NCUA is now finding a few FCUs are forming associations for the primary purpose of facilitating credit union membership. NCUA has found that some of these associational groups do not comply with their own bylaws or their bylaws do not reflect current practices. Prior to IRPS 99–1, NCUA chartering policy specifically stated that all associational common bonds must include a definition of the group that may be served based on the effective date of the association’s charter, bylaws, and a geographic limitation. Since IRPS PO 00000 Frm 00031 Fmt 4702 Sfmt 4702 24625 99–1, NCUA chartering policy has not included a geographic limitation. Without the geographic limitation, NCUA is finding that associational groups, in conjunction with or at an FCU’s instigation, are adding members outside of the FCU’s historical operating area to increase FCU membership. This practice does not comply with the limitations in the Chartering Manual. Other associations have changed significantly since they were added to an FCU’s FOM, and no longer meet the criteria for the totality of the circumstances test they once met. NCUA is currently reviewing several associations. If any of these associations no longer meet the totality of the circumstances test or an association is not operating according to their official bylaws in a way that impermissibly affects credit union membership, NCUA will remove the association from the FCU’s FOM. Threshold Requirement Regarding the Purpose for Which an Association Is Formed As a threshold matter, when reviewing an application to include an association in an FCU’s FOM, NCUA will determine if the association has been formed primarily for the purpose of expanding credit union membership. If NCUA makes such a determination, then the analysis ends and the association is denied inclusion in the FCU’s FOM. If NCUA determines that the association was formed to serve another separate function as an organization,17 then NCUA will apply the totality of the circumstances test to determine if the association satisfies the associational common bond requirements. Totality of the Circumstances NCUA proposes to amend the criteria in the totality of the circumstances test for evaluating compliance with the associational common bond requirements. Clarifying and expanding the totality of the circumstances test will better ensure that all associations or groups (the terms ‘‘association’’ and ‘‘group’’ are used interchangeably) have the requisite associational bond. As part of the totality of the circumstances test, NCUA considers all criteria together, and the presence or absence of any one factor is not determinative of the membership eligibility of an association. NCUA is expanding the totality of the circumstances test by adding an 17 In furtherance of this requirement, the association must have been operating as an organization independent from the requesting FCU for at least one year prior to the request to add the group to the FCU’s FOM. E:\FR\FM\01MYP1.SGM 01MYP1 24626 Federal Register / Vol. 79, No. 84 / Thursday, May 1, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS additional criterion regarding corporate separateness. Specifically, as part of the revised analysis, NCUA will review if there is corporate separateness between the association and the FCU. The association and the FCU must operate in a way that demonstrates the separate corporate existence of each entity. NCUA will consider several factors in determining if corporate separateness exists between an association and an FCU. The presence or absence of any one factor is not determinative. The factors NCUA will consider are as follows: • Their respective business transactions, accounts, and records are not intermingled; • Each observes the formalities of its separate corporate procedures; • Each is adequately financed as a separate entity in light of normal obligations reasonably foreseeable in a business of its size and character; • Each is held out to the public as a separate enterprise; and • The group maintains a separate physical location, which does not include a P.O. Box or other mail drop or on premises owned or leased by the FCU. Qualified associations already within an FCU’s FOM are grandfathered and will not be subject to the corporate separateness criterion. While NCUA has added this additional criterion to the totality of the circumstances test, NCUA has not removed any of the current criteria in the current totality of the circumstances test. However, the Board clarifies that after examining an association’s purpose as a threshold matter, NCUA’s primary focus under the totality of the circumstances test will be on the following criteria: (1) Whether the association provides opportunities for members to participate in the furtherance of the goals of the association; 18 (2) whether the association maintains a membership list; (3) whether the association sponsors other activities; and (4) whether the association’s membership eligibility requirements are authoritative. As part of applying the totality of the circumstances test, NCUA will also consider whether an FCU enrolls a 18 With respect to this criterion, the current totality of the circumstances test reads ‘‘whether members participate in the furtherance of the goals of the association.’’ The revised criterion reads somewhat differently in that it clarifies that the criterion is satisfied if the association provides members with opportunities to participate in the furtherance of the goals of the association even if a member does not necessarily choose to participate. This change in language is simply a clarification. VerDate Mar<15>2010 17:07 Apr 30, 2014 Jkt 232001 member into an association without the member’s knowledge or consent. If an FCU enrolls members who do not knowingly and voluntarily join the association then this will reflect negatively on the association’s qualification for FCU membership, as it appears that the members do not truly support the goals and mission of the association. An FCU may pay a member’s associational dues if the member has given consent. significant economic impact on small credit unions. B. Paperwork Reduction Act Grandfathering in Associations NCUA will grandfather in existing members from all qualified associations currently part of an FCU’s membership. NCUA will consider if there are any associations in an FCU’s FOM that need to be removed because they no longer meet the totality of circumstances test on a case-by-case basis. If an association that is in an FCU’s FOM undergoes significant changes that result in the group no longer meeting the totality of the circumstances test, the FCU should notify NCUA’s Office of Consumer Protection, Division of Consumer Access, to determine whether the group should be removed from the FOM or if such non-compliance can be cured. The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in which an agency by rule creates a new paperwork burden on regulated entities or modifies an existing burden.21 For purposes of the PRA, a paperwork burden may take the form of either a reporting or a recordkeeping requirement, both referred to as information collections. This proposed rule primarily requires the same information previously required and changes none of the forms listed in the Chartering Manual. Therefore, this proposed rule will not create new paperwork burdens or modify any existing paperwork burdens. C. Executive Order 13132 Does the proposed rule create any new burdens for FCUs? NCUA does not believe that the proposed requirements pertaining to the associational common bond provisions will add a significant administrative burden for FCUs. NCUA expects that the proposed changes will simplify the process of evaluating the existence of a qualifying associational common bond. FCUs will no longer have to include supplemental documentation, such as bylaws, with requests to serve preapproved associational groups. III. Regulatory Procedures A. Regulatory Flexibility Act The Regulatory Flexibility Act requires NCUA to prepare an analysis to describe any significant economic impact a regulation may have on a substantial number of small entities.19 For purposes of this analysis, NCUA considers small credit unions to be those having under $50 million in assets.20 This rule would affect relatively few FCUs and the associated cost is minimal. Accordingly, NCUA certifies the rule will not have a 19 5 U.S.C. 603(a). Ruling and Policy Statement 03–2, 68 FR 31949 (May 29, 2003), as amended by Interpretative Ruling and Policy Statement 13–1, 78 FR 4032 (Jan. 18, 2013). 20 Interpretive PO 00000 Frm 00032 Fmt 4702 Sfmt 4702 Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. In adherence to fundamental federalism principles, NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order. This rule will not have a substantial direct effect on the states, on the connection between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. NCUA has determined this rule does not constitute a policy that has federalism implications for purposes of the executive order. D. Assessment of Federal Regulations and Policies on Families NCUA has determined that this proposed rule will not affect family well-being within the meaning of Section 654 of the Treasury and General Government Appropriations Act, 1999.22 List of Subjects in 12 CFR Part 701 Credit, Credit unions, Reporting and recordkeeping requirements. By the National Credit Union Administration Board on April 24, 2014. Gerard S. Poliquin, Secretary of the Board. For the reasons stated above, NCUA proposes to amend 12 CFR part 701, Appendix B as follows: 21 44 U.S.C. 3507(d); 5 CFR part 1320. Law 105–277, 112 Stat. 2681 (1998). 22 Public E:\FR\FM\01MYP1.SGM 01MYP1 Federal Register / Vol. 79, No. 84 / Thursday, May 1, 2014 / Proposed Rules including any legal documents required by the state or other governing authority. The associational sponsor itself may also be included in the field of membership—e.g., ‘‘Sprocket Association’’—and will be shown in the last clause of the field of membership. PART 701—ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS 1. The authority for part 701 continues to read as follows: ■ Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759, 1761a, 1761b, 1766, 1767, 1782, 1784, 1786, 1787, 1789. Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 3601–3610. Section 701.35 is also authorized by 42 U.S.C. 4311–4312. 2. Section III.A.1. of Chapter 2 of appendix B to part 701 is revised to read as follows: ■ Appendix B to Part 701—Chartering and Field of Membership Manual mstockstill on DSK4VPTVN1PROD with PROPOSALS * * * * * III.A.1—General A single associational federal credit union may include in its field of membership, regardless of location, all members and employees of a recognized association. A single associational common bond consists of individuals (natural persons) and/or groups (non-natural persons) whose members participate in activities developing common loyalties, mutual benefits, and mutual interests. Separately chartered associational groups can establish a single common bond relationship if they are integrally related and share common goals and purposes. For example, two or more churches of the same denomination, Knights of Columbus Councils, or locals of the same union can qualify as a single associational common bond. Individuals and groups eligible for membership in a single associational credit union can include the following: • Natural person members of the association (for example, members of a union or church members); • Non-natural person members of the association; • Employees of the association (for example, employees of the labor union or employees of the church); and • The association. Generally, a single associational common bond does not include a geographic definition and can operate nationally. However, a proposed or existing federal credit union may limit its field of membership to a single association or geographic area. NCUA may impose a geographic limitation if it is determined that the applicant credit union does not have the ability to serve a larger group or there are other operational concerns. All single associational common bonds should include a definition of the group that may be served based on the association’s charter, bylaws, and any other equivalent documentation. Applicants for a single associational common bond federal credit union charter or a field of membership amendment to include an association must provide, at the request of NCUA, a copy of the association’s charter, bylaws, or other equivalent documentation, VerDate Mar<15>2010 17:07 Apr 30, 2014 Jkt 232001 III.A.1.a—Threshold Requirement Regarding the Purpose for Which an Associational Group Is Formed and the Totality of the Circumstances Criteria As a threshold matter, when reviewing an application to include an association in a federal credit union’s field of membership, NCUA will determine if the association has been formed primarily for the purpose of expanding credit union membership. If NCUA makes such a determination, then the analysis ends and the association is denied inclusion in the federal credit union’s field of membership. If NCUA determines that the association was formed to serve some other separate function as an organization, then NCUA will apply the following totality of the circumstances test to determine if the association satisfies the associational common bond requirements. The totality of the circumstances test consists of the following factors: 1. Whether the association provides opportunities for members to participate in the furtherance of the goals of the association; 2. Whether the association maintains a membership list; 3. Whether the association sponsors other activities; 4. Whether the association’s membership eligibility requirements are authoritative; 5. Whether members pay dues; 6. Whether the members have voting rights; To meet this requirement, members need not vote directly for an officer, but may vote for a delegate who in turn represents the members’ interests; 7. The frequency of meetings; and 8. Separateness—NCUA reviews if there is corporate separateness between the group and the federal credit union. The group and the federal credit union must operate in a way that demonstrates the separate corporate existence of each entity. NCUA will consider several factors in determining if corporate separateness exists between a group and a federal credit union. The presence or absence of any one factor is not determinative. The factors NCUA will consider are as follows: • Their respective business transactions, accounts, and records are not intermingled; • Each observes the formalities of its separate corporate procedures; • Each is adequately financed as a separate entity in the light of normal obligations reasonably foreseeable in a business of its size and character; • Each is held out to the public as a separate enterprise; and • The group maintains a separate physical location, which does not include a P.O. Box or other mail drop or on premises owned or leased by the federal credit union. NCUA considers all of the totality of the circumstances test factors together. No one factor alone is determinative of membership eligibility as an association. The totality of the circumstances controls over any PO 00000 Frm 00033 Fmt 4702 Sfmt 4702 24627 individual factor in the test. However, NCUA’s primary focus will be on factors 1– 4. III.A.1.b—Pre-Approved Groups NCUA automatically approves the below groups as satisfying the associational common bond provisions. However, if NCUA finds that, for any reason, any such group does not satisfy the associational common bond provisions, then such group may be removed from the relevant federal credit union fields of membership, if appropriate. NCUA only approves regular members of an approved group. Honorary, affiliate, or nonregular members do not qualify. These groups are: (1) Alumni associations; (2) Religious organizations, including churches or groups of related churches; (3) Electric cooperatives; (4) Homeowner associations; (5) Labor unions; (6) Scouting groups; and (7) Associations that have a mission based on preserving or furthering the culture of a particular national or ethnic origin. III.A.1.d—Additional Information A support group whose members are continually changing or whose duration is temporary may not meet the single associational common bond criteria. Each class of member will be evaluated based on the totality of the circumstances. Individuals or honorary members who only make donations to the association are not eligible to join the credit union. Educational groups—for example, parentteacher organizations and student organizations in any school—may constitute associational common bonds. Student groups (e.g., students enrolled at a public, private, or parochial school) may constitute either an associational or occupational common bond. For example, students enrolled at a church sponsored school could share a single associational common bond with the members of that church and may qualify for a federal credit union charter. Similarly, students enrolled at a university, as a group by itself, or in conjunction with the faculty and employees of the school, could share a single occupational common bond and may qualify for a federal credit union charter. Tenant groups, consumer groups, and other groups of persons having an ‘‘interest in’’ a particular cause and certain consumer cooperatives may also qualify as an association. Associations based primarily on a clientcustomer relationship do not meet associational common bond requirements. Health clubs are an example of a group not meeting associational common bond requirements, including YMCAs. However, having an incidental client-customer relationship does not preclude an associational charter as long as the associational common bond requirements are met. For example, a fraternal association that offers insurance, which is not a condition of E:\FR\FM\01MYP1.SGM 01MYP1 24628 Federal Register / Vol. 79, No. 84 / Thursday, May 1, 2014 / Proposed Rules membership, may qualify as a valid associational common bond. * * * * * [FR Doc. 2014–09812 Filed 4–30–14; 8:45 am] BILLING CODE 7535–01–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA–2014–0257; Directorate Identifier 2014–NM–012–AD] RIN 2120–AA64 Airworthiness Directives; The Boeing Company Airplanes Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). AGENCY: We propose to adopt a new airworthiness directive (AD) for certain The Boeing Company Model 737–100, –200, –200C, –300, –400, and –500 series airplanes. This proposed AD was prompted by reports of fatigue cracking in certain areas. This proposed AD would require repetitive inspections for cracking of the skin assembly and bear strap of the forward airstair stowage doorway; post-repair and postmodification inspections for certain airplanes; and related investigative and corrective actions, if necessary. This proposed AD would also provide optional terminating actions for certain repetitive inspections. We are proposing this AD to detect and correct fatigue cracking, which could result in rapid loss of cabin pressure. DATES: We must receive comments on this proposed AD by June 16, 2014. ADDRESSES: You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods: • Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments. • Fax: 202–493–2251. • Mail: U.S. Department of Transportation, Docket Operations, M– 30, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue SE., Washington, DC 20590. • Hand Delivery: Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. For service information identified in this proposed AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P. O. Box 3707, MC 2H–65, Seattle, WA 98124–2207; mstockstill on DSK4VPTVN1PROD with PROPOSALS SUMMARY: VerDate Mar<15>2010 17:07 Apr 30, 2014 Jkt 232001 telephone 206–544–5000, extension 1; fax 206–766–5680; Internet https:// www.myboeingfleet.com. You may review this referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425–227–1221. Examining the AD Docket You may examine the AD docket on the Internet at http:// www.regulations.gov by searching for and locating Docket No. FAA–2014– 0257; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this proposed AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Office (phone: 800–647–5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. FOR FURTHER INFORMATION CONTACT: Alan Pohl, Aerospace Engineer, Airframe Branch, ANM–120S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue SW., Renton, WA 98057–3356; phone: (425) 917–6450; fax: (425) 917–6590; email: alan.pohl@ faa.gov. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the ADDRESSES section. Include ‘‘Docket No. FAA– 2014–0257; Directorate Identifier 2014– NM–012–AD’’ at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments. We will post all comments we receive, without change, to http:// www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD. Discussion We received reports of fatigue cracking in the skin assembly and bear strap at the aft lower corner of the forward airstair stowage doorway. The cracking was caused by fatigue from cyclic pressurization loading. At the time of crack detection, the airplanes PO 00000 Frm 00034 Fmt 4702 Sfmt 4702 had accumulated between 16,177 and 74,036 total flight cycles. This condition, if not corrected, could result in rapid loss of cabin pressure. Related Rulemaking AD 90–06–02, Amendment 39–6489 (Docket No. 89–NM–67–AD; 55 FR 8372, March 7, 1990), mandates certain structural modifications for Model 737– 100, –200, –200C series airplanes. AD 98–11–04 R1, Amendment 39–10984 (64 FR 987, January 7, 1999); AD 2008–08– 23, Amendment 39–15477 (73 FR 21237, April 21, 2008); and AD 2008– 09–13, Amendment 39–15494 (73 FR 24164, May 2, 2008); are supplemental structural inspection (SSI) program ADs that contain inspection requirements that are near or overlap the inspection areas that this proposed AD would require. The modification mandated by AD 90–06–02 and the inspections mandated by the exploratory SSI program ADs are not sufficient to address the unsafe condition identified in this proposed AD. Relevant Service Information We reviewed Boeing Service Bulletin 737–53–1058, Revision 4, dated January 9, 2014. For information on the procedures and compliance times, see this service information at http:// www.regulations.gov by searching for Docket No. FAA–2014–0257. FAA’s Determination We are proposing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design. Proposed AD Requirements This proposed AD would require accomplishing the actions specified in the service information described previously, except as discussed under ‘‘Differences Between this Proposed AD and the Service Information.’’ This proposed AD would also provide optional terminating actions for certain repetitive inspections. The phrase ‘‘related investigative actions’’ is used in this proposed AD. ‘‘Related investigative actions’’ are follow-on actions that (1) are related to the primary actions, and (2) further investigate the nature of any condition found. Related investigative actions in an AD could include, for example, inspections. The phrase ‘‘corrective actions’’ is used in this proposed AD. ‘‘Corrective actions’’ are actions that correct or address any condition found. Corrective E:\FR\FM\01MYP1.SGM 01MYP1

Agencies

[Federal Register Volume 79, Number 84 (Thursday, May 1, 2014)]
[Proposed Rules]
[Pages 24623-24628]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-09812]


=======================================================================
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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701

RIN 3133-AE31


Chartering and Field of Membership Manual

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: The NCUA Board (Board) proposes to amend the associational 
common bond provisions of NCUA's chartering and field of membership 
rules. Specifically, the amendments establish a threshold requirement 
that an association not be formed primarily for the purpose of 
expanding credit union membership. The amendments also expand the 
criteria in the totality of the circumstances test, which is used to 
determine if an association, which satisfies the threshold requirement, 
also satisfies the associational common bond requirements and qualifies 
for inclusion in a federal credit union's (FCU) field of membership 
(FOM). The amendments will help to ensure FCU compliance with 
membership requirements. Additionally, NCUA proposes to grant automatic 
qualification under the associational common bond rules to certain 
categories of groups that NCUA has approved in the past after applying 
the totality of the circumstances test.

[[Page 24624]]


DATES: Comments must be received on or before June 30, 2014.

ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web site: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs. html. Follow the 
instructions for submitting comments.
     Email: Address to regcomments@ncua.gov. Include ``[Your 
name] Comments on Notice of Proposed Rulemaking Regarding Associational 
Common Bond'' in the email subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for email.
     Mail: Address to Gerard S. Poliquin, Secretary of the 
Board, National Credit Union Administration, 1775 Duke Street, 
Alexandria, Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public Inspection: You may view all public comments on NCUA's Web 
site at http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx as 
submitted, except for those we cannot post for technical reasons. NCUA 
will not edit or remove any identifying or contact information from the 
public comments submitted. You may inspect paper copies of comments in 
NCUA's law library at 1775 Duke Street, Alexandria, Virginia 22314, by 
appointment weekdays between 9 a.m. and 3 p.m. To make an appointment, 
call (703) 518-6546 or send an email to OGCMail@ncua.gov.

FOR FURTHER INFORMATION CONTACT: Sarah Chung, Staff Attorney, Office of 
General Counsel, at the above address or telephone (703) 518-1178.

SUPPLEMENTARY INFORMATION:

I. Background
II. Summary of the Proposed Rule
III. Regulatory Procedures

I. Background and Requirements of the Associational Common Bond

    NCUA has implemented the Federal Credit Union Act's (FCU Act) FOM 
requirements \1\ in its Chartering and Field of Membership Manual 
(Chartering Manual), incorporated as Appendix B to part 701 of NCUA's 
regulations.\2\ NCUA also publishes this manual as an Interpretative 
Ruling and Policy Statement (IRPS). The current version of the manual 
is published as IRPS 08-2, as amended by IRPS 10-1.
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    \1\ 12 U.S.C. 1759.
    \2\ 12 CFR part 701, Appendix B.
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    Section 109 of the FCU Act provides for three types of FCU 
charters: (1) Single common bond (occupational or associational); (2) 
multiple common bond (multiple groups); and (3) community.\3\ Section 
109 also describes the membership criteria for each of these three 
types of charters.\4\ Special rules apply to each type of charter.
---------------------------------------------------------------------------

    \3\ 12 U.S.C. 1759(b).
    \4\ Id.
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    An FOM consists of those persons and entities eligible for 
membership for each type of charter. The Chartering Manual sets forth 
that a single common bond FCU consists of one group having a common 
bond of occupation or association.\5\ A multiple common bond FCU 
consists of more than one group, each of which has a common bond of 
occupation or association.\6\ This rule will not affect the current 
requirements for occupational common bonds.
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    \5\ 12 CFR part 701, Appendix B (Chapter 2, Section II.A.1). A 
community FCU consists of persons or organizations within a well-
defined local community, neighborhood, or rural district.
    \6\ Id.
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Associational Common Bond

    A single associational common bond consists of individuals (natural 
persons) and/or groups (non-natural persons) whose members participate 
in activities developing common loyalties, mutual benefits, and mutual 
interests.\7\ Separately chartered associational groups can establish a 
single common bond relationship if such groups are integrally related 
and share common goals and purposes.\8\ The Chartering Manual more 
specifically lists the individuals and groups eligible for membership 
in a single associational credit union. Eligible individuals and groups 
are natural and non-natural person members of the association, 
employees of the association, and the association itself.\9\
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    \7\ 12 CFR part 701, Appendix B (Chapter 2, Section III.A.1).
    \8\ Id.
    \9\ Id.
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    NCUA determines whether a group satisfies the associational common 
bond requirements for an FCU charter based on the totality of the 
circumstances.\10\ This test in the current rule consists of seven 
factors: \11\
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    \10\ 12 CFR part 701, Appendix B (Chapter 2, Section III.A.1).
    \11\ Id.
---------------------------------------------------------------------------

    (1) Whether members pay dues;
    (2) Whether members participate in the furtherance of the goals of 
the association;
    (3) Whether the members have voting rights; \12\
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    \12\ To meet this requirement, members do not have to vote 
directly for an officer, but may vote for a delegate who in turn 
represents the members' interests.
---------------------------------------------------------------------------

    (4) Whether the association maintains a membership list;
    (5) Whether the association sponsors other activities;
    (6) The association's membership eligibility requirements; and
    (7) The frequency of meetings.
    The Chartering Manual specifies certain examples that may or may 
not qualify as associational common bonds. Educational groups, church 
groups, student groups, homeowner associations, and consumer groups may 
qualify as associational common bonds.\13\ However, associations based 
primarily on a client-customer relationship do not meet associational 
common bond requirements.\14\
---------------------------------------------------------------------------

    \13\ 12 CFR part 701, Appendix B (Chapter 2, Section III.A.1).
    \14\ Id.
---------------------------------------------------------------------------

Multiple Occupational or Associational Common Bonds

    An FCU may be chartered to serve a combination of distinct, 
definable single occupational and/or associational common bonds.\15\ 
This type of credit union is called a multiple common bond credit 
union. Each group in the FOM must have its own occupational or 
associational common bond. These groups must be within reasonable 
geographic proximity of the credit union.\16\ The groups must be within 
the service area of one of the credit union's service facilities and 
are referred to as select groups. A select group as a whole will be 
considered to be within a credit union's service area when a majority 
of the persons in the select group live, work, or gather regularly 
within the service area; the group's headquarters is located within the 
service area; or the group's ``paid from'' or ``supervised from'' 
location is within the service area.
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    \15\ 12 CFR part 701, Appendix B (Chapter 4, Section IV.A.1.).
    \16\ A multiple common bond credit union cannot include a trade, 
industry, or profession single occupational common bond or expand 
using single common bond criteria.
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II. Summary of the Proposed Rule

Why is NCUA proposing this rule?

    Executive Order 13579 provides that independent agencies, including 
NCUA, should consider if they can modify, streamline, expand, or repeal 
existing rules to make their programs more effective and less 
burdensome. The amendments to the associational

[[Page 24625]]

common bond requirements establish a threshold requirement that an 
association not be formed primarily for the purpose of expanding credit 
union membership. The amendments also improve and clarify the totality 
of the circumstances test so that FCUs will better understand it, and 
will provide regulatory relief for FCUs who want to add to their FOMs 
certain groups that qualify for automatic approval.
    Also, NCUA is concerned that the current totality of the 
circumstances test may not be sufficiently filtering out those groups 
that do not meet the associational common bond requirements. In this 
regard, the amendments also emphasize that the group added to an FCU's 
FOM must meet the underlying common bond criteria. As noted above, FCUs 
must follow the associational requirements under the FCU Act and NCUA's 
regulations. In an attempt to expand their potential FOMs beyond 
appropriate limits, however, a few FCUs have begun forming their own 
associations and adding independent associations to their FOMs that may 
not fully satisfy the intent of the associational common bond rules. 
This is discussed more fully below.

Automatic Approval

    NCUA has historically approved certain associations almost without 
exception due to their structure, practices, and functions, and because 
they easily satisfy the Chartering Manual's requirements. For example, 
churches are consistently recognized as valid associations based on the 
associational common bond requirements. Likewise, labor unions, 
scouting groups, electric cooperatives, and homeowner associations are 
regularly approved for inclusion due to their natural cooperative 
structures. By the nature of these groups, members consistently 
participate in activities developing common loyalties, mutual benefits, 
and mutual interests to further the goals and purposes of the 
association. Therefore, religious organizations including churches, 
homeowner associations, scouting groups, electric cooperatives, and 
labor unions will be automatically included in an FCU's FOM if it 
chooses to add the groups, as long as such groups meet service area and 
other related requirements. Additionally, NCUA proposes to 
automatically approve associations that have a mission based on 
preserving or furthering the culture of a particular national or ethnic 
origin for the same reasons stated above. However, it should be noted 
that only regular members of these groups will be approved. NCUA will 
not automatically approve honorary or other classes of non-regular 
members.
    Based on NCUA's experience, alumni associations are also regularly 
approved for inclusion in FOMs. Consequently, the proposed rule allows 
alumni associations to be automatically approved. Members of the alumni 
association need not have attended the college or university if the 
association's bylaws permit them to join.
    The automatic approval of the above associations provides 
regulatory relief for FCUs as they will no longer be required to obtain 
and review the association's bylaws, and, for the same reason, will 
result in more efficient use of NCUA's resources. Further, NCUA is 
requesting public comment on if NCUA should automatically approve any 
other categories of associations that are not included above.
    NCUA has not deleted the descriptions and examples of associational 
common bonds in the Chartering Manual, and has now categorized such 
descriptions and examples as additional information. NCUA has also 
clarified that health clubs do not qualify under the associational 
common bond, including YMCAs, because these health clubs function 
primarily on a client-customer relationship. An FCU should consider 
this additional information regarding whether a group qualifies as 
having an associational common bond.

Associational Group Quality Assurance Review

    In order to prevent abuses of the membership system, NCUA is 
currently reviewing the way associational groups are formed and 
operated. Prior to the issuance of IRPS 99-1, NCUA chartering policy 
specifically stated that associations formed primarily to obtain an FCU 
charter do not have a sufficient associational common bond. Since IRPS 
99-1, NCUA chartering policy states that the common bond for an 
associational group cannot be established simply on the basis that the 
association exists. NCUA is now finding a few FCUs are forming 
associations for the primary purpose of facilitating credit union 
membership. NCUA has found that some of these associational groups do 
not comply with their own bylaws or their bylaws do not reflect current 
practices.
    Prior to IRPS 99-1, NCUA chartering policy specifically stated that 
all associational common bonds must include a definition of the group 
that may be served based on the effective date of the association's 
charter, bylaws, and a geographic limitation. Since IRPS 99-1, NCUA 
chartering policy has not included a geographic limitation. Without the 
geographic limitation, NCUA is finding that associational groups, in 
conjunction with or at an FCU's instigation, are adding members outside 
of the FCU's historical operating area to increase FCU membership. This 
practice does not comply with the limitations in the Chartering Manual. 
Other associations have changed significantly since they were added to 
an FCU's FOM, and no longer meet the criteria for the totality of the 
circumstances test they once met. NCUA is currently reviewing several 
associations. If any of these associations no longer meet the totality 
of the circumstances test or an association is not operating according 
to their official bylaws in a way that impermissibly affects credit 
union membership, NCUA will remove the association from the FCU's FOM.

Threshold Requirement Regarding the Purpose for Which an Association Is 
Formed

    As a threshold matter, when reviewing an application to include an 
association in an FCU's FOM, NCUA will determine if the association has 
been formed primarily for the purpose of expanding credit union 
membership. If NCUA makes such a determination, then the analysis ends 
and the association is denied inclusion in the FCU's FOM. If NCUA 
determines that the association was formed to serve another separate 
function as an organization,\17\ then NCUA will apply the totality of 
the circumstances test to determine if the association satisfies the 
associational common bond requirements.
---------------------------------------------------------------------------

    \17\ In furtherance of this requirement, the association must 
have been operating as an organization independent from the 
requesting FCU for at least one year prior to the request to add the 
group to the FCU's FOM.
---------------------------------------------------------------------------

Totality of the Circumstances

    NCUA proposes to amend the criteria in the totality of the 
circumstances test for evaluating compliance with the associational 
common bond requirements. Clarifying and expanding the totality of the 
circumstances test will better ensure that all associations or groups 
(the terms ``association'' and ``group'' are used interchangeably) have 
the requisite associational bond. As part of the totality of the 
circumstances test, NCUA considers all criteria together, and the 
presence or absence of any one factor is not determinative of the 
membership eligibility of an association.
    NCUA is expanding the totality of the circumstances test by adding 
an

[[Page 24626]]

additional criterion regarding corporate separateness. Specifically, as 
part of the revised analysis, NCUA will review if there is corporate 
separateness between the association and the FCU. The association and 
the FCU must operate in a way that demonstrates the separate corporate 
existence of each entity. NCUA will consider several factors in 
determining if corporate separateness exists between an association and 
an FCU. The presence or absence of any one factor is not determinative. 
The factors NCUA will consider are as follows:
     Their respective business transactions, accounts, and 
records are not intermingled;
     Each observes the formalities of its separate corporate 
procedures;
     Each is adequately financed as a separate entity in light 
of normal obligations reasonably foreseeable in a business of its size 
and character;
     Each is held out to the public as a separate enterprise; 
and
     The group maintains a separate physical location, which 
does not include a P.O. Box or other mail drop or on premises owned or 
leased by the FCU.
    Qualified associations already within an FCU's FOM are 
grandfathered and will not be subject to the corporate separateness 
criterion.
    While NCUA has added this additional criterion to the totality of 
the circumstances test, NCUA has not removed any of the current 
criteria in the current totality of the circumstances test. However, 
the Board clarifies that after examining an association's purpose as a 
threshold matter, NCUA's primary focus under the totality of the 
circumstances test will be on the following criteria: (1) Whether the 
association provides opportunities for members to participate in the 
furtherance of the goals of the association; \18\ (2) whether the 
association maintains a membership list; (3) whether the association 
sponsors other activities; and (4) whether the association's membership 
eligibility requirements are authoritative.
---------------------------------------------------------------------------

    \18\ With respect to this criterion, the current totality of the 
circumstances test reads ``whether members participate in the 
furtherance of the goals of the association.'' The revised criterion 
reads somewhat differently in that it clarifies that the criterion 
is satisfied if the association provides members with opportunities 
to participate in the furtherance of the goals of the association 
even if a member does not necessarily choose to participate. This 
change in language is simply a clarification.
---------------------------------------------------------------------------

    As part of applying the totality of the circumstances test, NCUA 
will also consider whether an FCU enrolls a member into an association 
without the member's knowledge or consent. If an FCU enrolls members 
who do not knowingly and voluntarily join the association then this 
will reflect negatively on the association's qualification for FCU 
membership, as it appears that the members do not truly support the 
goals and mission of the association. An FCU may pay a member's 
associational dues if the member has given consent.

Grandfathering in Associations

    NCUA will grandfather in existing members from all qualified 
associations currently part of an FCU's membership. NCUA will consider 
if there are any associations in an FCU's FOM that need to be removed 
because they no longer meet the totality of circumstances test on a 
case-by-case basis. If an association that is in an FCU's FOM undergoes 
significant changes that result in the group no longer meeting the 
totality of the circumstances test, the FCU should notify NCUA's Office 
of Consumer Protection, Division of Consumer Access, to determine 
whether the group should be removed from the FOM or if such non-
compliance can be cured.

Does the proposed rule create any new burdens for FCUs?

    NCUA does not believe that the proposed requirements pertaining to 
the associational common bond provisions will add a significant 
administrative burden for FCUs. NCUA expects that the proposed changes 
will simplify the process of evaluating the existence of a qualifying 
associational common bond. FCUs will no longer have to include 
supplemental documentation, such as bylaws, with requests to serve pre-
approved associational groups.

III. Regulatory Procedures

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a regulation may have on a 
substantial number of small entities.\19\ For purposes of this 
analysis, NCUA considers small credit unions to be those having under 
$50 million in assets.\20\ This rule would affect relatively few FCUs 
and the associated cost is minimal. Accordingly, NCUA certifies the 
rule will not have a significant economic impact on small credit 
unions.
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    \19\ 5 U.S.C. 603(a).
    \20\ Interpretive Ruling and Policy Statement 03-2, 68 FR 31949 
(May 29, 2003), as amended by Interpretative Ruling and Policy 
Statement 13-1, 78 FR 4032 (Jan. 18, 2013).
---------------------------------------------------------------------------

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency by rule creates a new paperwork burden on regulated 
entities or modifies an existing burden.\21\ For purposes of the PRA, a 
paperwork burden may take the form of either a reporting or a 
recordkeeping requirement, both referred to as information collections. 
This proposed rule primarily requires the same information previously 
required and changes none of the forms listed in the Chartering Manual. 
Therefore, this proposed rule will not create new paperwork burdens or 
modify any existing paperwork burdens.
---------------------------------------------------------------------------

    \21\ 44 U.S.C. 3507(d); 5 CFR part 1320.
---------------------------------------------------------------------------

C. Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. In 
adherence to fundamental federalism principles, NCUA, an independent 
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies 
with the executive order. This rule will not have a substantial direct 
effect on the states, on the connection between the national government 
and the states, or on the distribution of power and responsibilities 
among the various levels of government. NCUA has determined this rule 
does not constitute a policy that has federalism implications for 
purposes of the executive order.

D. Assessment of Federal Regulations and Policies on Families

    NCUA has determined that this proposed rule will not affect family 
well-being within the meaning of Section 654 of the Treasury and 
General Government Appropriations Act, 1999.\22\
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    \22\ Public Law 105-277, 112 Stat. 2681 (1998).
---------------------------------------------------------------------------

List of Subjects in 12 CFR Part 701

    Credit, Credit unions, Reporting and recordkeeping requirements.

    By the National Credit Union Administration Board on April 24, 
2014.
Gerard S. Poliquin,
Secretary of the Board.

    For the reasons stated above, NCUA proposes to amend 12 CFR part 
701, Appendix B as follows:

[[Page 24627]]

PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

0
1. The authority for part 701 continues to read as follows:

    Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759, 
1761a, 1761b, 1766, 1767, 1782, 1784, 1786, 1787, 1789. Section 
701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 is also 
authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 3601-3610. 
Section 701.35 is also authorized by 42 U.S.C. 4311-4312.

0
2. Section III.A.1. of Chapter 2 of appendix B to part 701 is revised 
to read as follows:

Appendix B to Part 701--Chartering and Field of Membership Manual

* * * * *

III.A.1--General

    A single associational federal credit union may include in its 
field of membership, regardless of location, all members and 
employees of a recognized association. A single associational common 
bond consists of individuals (natural persons) and/or groups (non-
natural persons) whose members participate in activities developing 
common loyalties, mutual benefits, and mutual interests. Separately 
chartered associational groups can establish a single common bond 
relationship if they are integrally related and share common goals 
and purposes. For example, two or more churches of the same 
denomination, Knights of Columbus Councils, or locals of the same 
union can qualify as a single associational common bond.
    Individuals and groups eligible for membership in a single 
associational credit union can include the following:
     Natural person members of the association (for example, 
members of a union or church members);
     Non-natural person members of the association;
     Employees of the association (for example, employees of 
the labor union or employees of the church); and
     The association.
    Generally, a single associational common bond does not include a 
geographic definition and can operate nationally. However, a 
proposed or existing federal credit union may limit its field of 
membership to a single association or geographic area. NCUA may 
impose a geographic limitation if it is determined that the 
applicant credit union does not have the ability to serve a larger 
group or there are other operational concerns. All single 
associational common bonds should include a definition of the group 
that may be served based on the association's charter, bylaws, and 
any other equivalent documentation.
    Applicants for a single associational common bond federal credit 
union charter or a field of membership amendment to include an 
association must provide, at the request of NCUA, a copy of the 
association's charter, bylaws, or other equivalent documentation, 
including any legal documents required by the state or other 
governing authority.
    The associational sponsor itself may also be included in the 
field of membership--e.g., ``Sprocket Association''--and will be 
shown in the last clause of the field of membership.

III.A.1.a--Threshold Requirement Regarding the Purpose for Which an 
Associational Group Is Formed and the Totality of the Circumstances 
Criteria

    As a threshold matter, when reviewing an application to include 
an association in a federal credit union's field of membership, NCUA 
will determine if the association has been formed primarily for the 
purpose of expanding credit union membership. If NCUA makes such a 
determination, then the analysis ends and the association is denied 
inclusion in the federal credit union's field of membership. If NCUA 
determines that the association was formed to serve some other 
separate function as an organization, then NCUA will apply the 
following totality of the circumstances test to determine if the 
association satisfies the associational common bond requirements. 
The totality of the circumstances test consists of the following 
factors:
    1. Whether the association provides opportunities for members to 
participate in the furtherance of the goals of the association;
    2. Whether the association maintains a membership list;
    3. Whether the association sponsors other activities;
    4. Whether the association's membership eligibility requirements 
are authoritative;
    5. Whether members pay dues;
    6. Whether the members have voting rights; To meet this 
requirement, members need not vote directly for an officer, but may 
vote for a delegate who in turn represents the members' interests;
    7. The frequency of meetings; and
    8. Separateness--NCUA reviews if there is corporate separateness 
between the group and the federal credit union. The group and the 
federal credit union must operate in a way that demonstrates the 
separate corporate existence of each entity. NCUA will consider 
several factors in determining if corporate separateness exists 
between a group and a federal credit union. The presence or absence 
of any one factor is not determinative. The factors NCUA will 
consider are as follows:
     Their respective business transactions, accounts, and 
records are not intermingled;
     Each observes the formalities of its separate corporate 
procedures;
     Each is adequately financed as a separate entity in the 
light of normal obligations reasonably foreseeable in a business of 
its size and character;
     Each is held out to the public as a separate 
enterprise; and
     The group maintains a separate physical location, which 
does not include a P.O. Box or other mail drop or on premises owned 
or leased by the federal credit union.
    NCUA considers all of the totality of the circumstances test 
factors together. No one factor alone is determinative of membership 
eligibility as an association. The totality of the circumstances 
controls over any individual factor in the test. However, NCUA's 
primary focus will be on factors 1-4.

III.A.1.b--Pre-Approved Groups

    NCUA automatically approves the below groups as satisfying the 
associational common bond provisions. However, if NCUA finds that, 
for any reason, any such group does not satisfy the associational 
common bond provisions, then such group may be removed from the 
relevant federal credit union fields of membership, if appropriate. 
NCUA only approves regular members of an approved group. Honorary, 
affiliate, or non-regular members do not qualify.
    These groups are:
    (1) Alumni associations;
    (2) Religious organizations, including churches or groups of 
related churches;
    (3) Electric cooperatives;
    (4) Homeowner associations;
    (5) Labor unions;
    (6) Scouting groups; and
    (7) Associations that have a mission based on preserving or 
furthering the culture of a particular national or ethnic origin.

III.A.1.d--Additional Information

    A support group whose members are continually changing or whose 
duration is temporary may not meet the single associational common 
bond criteria. Each class of member will be evaluated based on the 
totality of the circumstances. Individuals or honorary members who 
only make donations to the association are not eligible to join the 
credit union.
    Educational groups--for example, parent-teacher organizations 
and student organizations in any school--may constitute 
associational common bonds.
    Student groups (e.g., students enrolled at a public, private, or 
parochial school) may constitute either an associational or 
occupational common bond. For example, students enrolled at a church 
sponsored school could share a single associational common bond with 
the members of that church and may qualify for a federal credit 
union charter. Similarly, students enrolled at a university, as a 
group by itself, or in conjunction with the faculty and employees of 
the school, could share a single occupational common bond and may 
qualify for a federal credit union charter.
    Tenant groups, consumer groups, and other groups of persons 
having an ``interest in'' a particular cause and certain consumer 
cooperatives may also qualify as an association.
    Associations based primarily on a client-customer relationship 
do not meet associational common bond requirements. Health clubs are 
an example of a group not meeting associational common bond 
requirements, including YMCAs. However, having an incidental client-
customer relationship does not preclude an associational charter as 
long as the associational common bond requirements are met. For 
example, a fraternal association that offers insurance, which is not 
a condition of

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membership, may qualify as a valid associational common bond.
* * * * *
[FR Doc. 2014-09812 Filed 4-30-14; 8:45 am]
BILLING CODE 7535-01-P