Chartering and Field of Membership Manual, 24623-24628 [2014-09812]
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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.
*
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*
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:
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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.
*
*
*
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*
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:
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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.
*
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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:
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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: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• NCUA Web site: https://
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 https://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
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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.
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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.
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(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.
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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
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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
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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.
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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.
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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
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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
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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
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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,
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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.
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[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
https://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 https://
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 https://
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 https://
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]
=======================================================================
-----------------------------------------------------------------------
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: https://www.regulations.gov.
Follow the instructions for submitting comments.
NCUA Web site: https://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 https://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.
---------------------------------------------------------------------------
\1\ 12 U.S.C. 1759.
\2\ 12 CFR part 701, Appendix B.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------
\7\ 12 CFR part 701, Appendix B (Chapter 2, Section III.A.1).
\8\ Id.
\9\ Id.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
\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.
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\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.
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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).
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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.
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\21\ 44 U.S.C. 3507(d); 5 CFR part 1320.
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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).
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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
[[Page 24628]]
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
