Chartering and Field of Membership Manual, 76747-76853 [2015-30069]
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Vol. 80
Thursday,
No. 237
December 10, 2015
Part II
National Credit Union Administration
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12 CFR Part 701
Chartering and Field of Membership Manual; Proposed Rule
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
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.
NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Part 701
RIN 3133–AE31
Chartering and Field of Membership
Manual
FOR FURTHER INFORMATION CONTACT:
National Credit Union
Administration (NCUA).
ACTION: Proposed rule with request for
comments.
AGENCY:
The NCUA Board proposes to
comprehensively amend its chartering
and field of membership rules to put
them in a more efficient framework and
to maximize access to federal credit
union services to the extent permitted
by law. The amendments will
implement changes in policy affecting:
The definition of a local community, a
rural district, and an underserved area;
the expansion of multiple common
bond credit unions and members’
proximity to them; the expansion of
single common bond credit unions
based on a trade, industry or profession;
and the process for applying to charter
or expand a federal credit union.
DATES: Comments must be received on
or before February 8, 2016.
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
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SUMMARY:
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Matthew Biliouris, Deputy Director, or
Robert Leonard, Director, Division of
Consumer Access, or Rita Woods,
Director, Division of Consumer Access
South, Office of Consumer Protection, at
the above address or telephone (703)
518–1140; or Senior Staff Attorney
Steven Widerman or Staff Attorney
Marvin Shaw, Office of General
Counsel, at the above address or
telephone (703) 518–6540.
SUPPLEMENTARY INFORMATION:
I. Background
A. Overview
NCUA’s Chartering and Field of
Membership Manual, incorporated as
appendix B to part 701 of its regulations
(‘‘Chartering and FOM Manual’’),1
implements the field of membership
(‘‘FOM’’) requirements established by
the Federal Credit Union Act (‘‘the FCU
Act’’) for federal credit unions
(‘‘FCUs’’).2 An FOM consists of those
persons and entities eligible for
membership according to an FCU’s type
of charter.
In adopting the Credit Union
Membership Access Act of 1998
(‘‘CUMAA’’), Congress reiterated its
longstanding support for credit unions,
noting their ‘‘specif[ic] mission of
meeting the credit and savings needs of
consumers, especially persons of
modest means.’’ 3 As amended by
CUMAA, the FCU Act provides a choice
among three charter types: A single
group sharing a single occupational or
associational common bond; 4 a
multiple common bond, with each
group having a distinct occupational or
associational common bond among
group members; 5 and a community
common bond among persons or
organizations within a well-defined
local community, neighborhood or rural
district.6
Based on NCUA’s experience in
processing applications for initial
approval and subsequent expansion of
all three types of charters, the Board
periodically updates and revises the
1 Appendix
B to 12 CFR part 701(‘‘appendix B’’).
U.S.C. 1759.
3 Pub. L. 105–219, Section 2, 112 Stat. 913 (Aug
7, 1998).
4 12 U.S.C. 1759(b)(1).
5 Id. Section 1759(b)(2)(A).
6 Id. Section 1759(b)(3).
2 12
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Chartering and FOM Manual to ensure
adherence to the statutory criteria,
limitations and special rules that apply
to each charter type, to reflect
contemporary practice, and to enhance
the user-friendliness of the Chartering
and FOM Manual for the benefit of
those seeking to charter an FCU, as well
as for existing credit unions.
B. Why is NCUA Proposing this Rule?
The proposed rule will modify the
Board’s policies affecting the definition
of a local community, a rural district,
and an underserved area; group
members’ proximity to multiple
common bond FCUs when they expand;
and expansion of single common bond
FCUs that serve a trade, industry or
profession; and the process for applying
to charter or expand an FCU. Consistent
with its responsibility under CUMAA to
facilitate access to credit unions and
their delivery of services, the Board is
proposing these policy modifications in
order to accomplish several objectives.
The first is to ease any undue burdens
and restrictions on an FCU’s ability to
provide services to consumers who are
eligible for FCU membership,
particularly those of modest means and
those who may not currently be
members of a credit union. The second
is to enhance the menu of strategic
options for FOM expansions. The third
is to maximize competitive parity
between federal and state charters, to
the extent allowed by law, while
respecting the national system of dual
chartering. The Board invites public
comments addressing all aspects of the
proposed rule.
II. Summary of the Proposed Rule
A. Community Common Bond
As amended in 1998, the FCU Act
limits membership in a community
credit union to ‘‘[p]ersons or
organizations within a well-defined
local community, neighborhood or rural
district.’’ 7 It directs the Board to define
what constitutes a well-defined local
community, neighborhood or rural
district for purposes of ‘‘making any
determination’’ regarding a community
credit union,8 and to establish
applicable criteria for any such
determination.9 To qualify as a welldefined local community or rural
district, the Board requires the proposed
area to have ‘‘specific geographic
boundaries,’’ such as those of ‘‘a city,
township, county (single or multiple
portions of a county) or their political
equivalent, school districts or a clearly
7 Id.
Section 1759(b).
Section 1759(g)(1)(A).
9 Id. Section 1759(g)(1)(B).
8 Id.
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identifiable neighborhood.’’ 10 The
boundaries themselves may consist of
political borders, streets, rivers, railroad
tracks, or other static geographical
feature.11 The Board continues to
emphasize interaction and common
interests among residents within those
boundaries as essential to the viability
of a local community.
Since 2010, the Board has provided
credit unions the option of two uniform,
nationally-recognized, objective
geographic units that, by definition,
meet the statutory criteria of a welldefined local community, neighborhood
or rural district. The first is a ‘‘Single
Political Jurisdiction . . . or any
contiguous portion thereof,’’ regardless
of population.12 The second is a single
U.S. Census Bureau-designated Core
Based Statistical Area or one or more
Metropolitan Divisions within, or a
well-defined portion of either one,
subject in any case to a 2.5 million
population limit that applies to the Core
Based Statistical Area as a whole.13
Under either well-defined local
community option, a credit union must
be able to serve the proposed
community or rural district, as
demonstrated by its business and
marketing plans that must accompany
an application for charter approval,
expansion or conversion.14
1. Core Based Statistical Area
Population Limit. As explained above, a
Core Based Statistical Area qualifies as
a well-defined local community only if
its population does not exceed 2.5
million. By design, this population limit
conforms to the population parameter
by which OMB recognizes metropolitan
divisions with a Core Based Statistical
Area.15 Upon further consideration in
connection with this rule, the Board has
decided to retain the 2.5 million
population limit, but nonetheless
invites public comment on whether to
adjust the limit, by what amount, and
for what specific reasons.
2. ‘‘Core Area’’ Service Requirement.
Since 2010, NCUA has required that
when a credit union applies to serve a
community consisting of a portion of a
Core Based Statistical Area, that portion
must include the Core Based Statistical
Area’s ‘‘core area,’’ which NCUA
defines as the most populated county or
named municipality in the Core Based
Statistical Area’s title.16 The primary
purpose of this requirement was to
10 Appendix
B, Ch. 2, Section V.A.2.
B, Ch. 2, Section V.A.5.
12 Appendix B, Ch. 2, Section V.A.2.
13 Appendix B, Ch. 2, Section V.A.2.
14 Appendix B, Ch. 2, Section V.A.4.
15 https://www.whitehouse.gov/sites/default/files/
omb/bulletins/2015/15-01.pdf (at page 62).
16 75 FR 36257, 36260 (June 25, 2010).
11 Appendix
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acknowledge the core area of a Core
Based Statistical Area as the typical
focal point for common interests and
interaction among residents. An
additional purpose was to extend FCU
services to low-income persons and
underserved areas, both typically
located primarily in the core area of a
Core Based Statistical Area. NCUA’s
review of progress under approved
FCUs’ business and marketing plans
over the last five years indicates that
those credit unions are adequately
serving low-income persons and
underserved areas without regard to
their location within the community.
Accordingly, NCUA proposes to repeal
the core area requirement as an
indicator of service to low-income
persons and underserved areas, in favor
of its practice of annually reviewing the
progress of business and marketing
plans for three years following charter
approval or expansion, and relying on
those plans to assess those service
objectives within an original or an
expanded community.
3. Population Limit as Applied to a
Well-Defined Portion of a Core Based
Statistical Area. The Board presently
permits a well-defined portion of a Core
Based Statistical Area to qualify as a
well-defined local community provided
the population of the Core Based
Statistical Area as a whole does not
exceed the 2.5 million population
limitation,17 disregarding whether the
portion a credit union seeks to serve
alone meets that limitation. A review of
requests to serve a portion of a Core
Based Statistical Area that were denied
because the population of the whole
Core Based Statistical Area exceeded 2.5
million has convinced the Board that
this is an unnecessarily broad
application of the population cap that
produces unintended consequences.
To target the 2.5 million population
limit strictly to the community a credit
union seeks to serve, the Board proposes
to modify its ‘‘statistical area’’ definition
to specify that ‘‘a Core Based Statistical
Area, Metropolitan Division, or welldefined portion of either one, must itself
have a population of 2.5 million or
fewer people.’’ This will ensure that a
portion of a Core Based Statistical Area,
or a Metropolitan Division within,
qualifies as a well-defined local
community when it meets the
population limit solely as applied to
that portion, even if the Core Based
Statistical Area as a whole exceeds the
limit.
4. ‘‘Combined Statistical Area’’ as a
Single Well-Defined Local Community.
17 Appendix B, Ch. 2, Section V.A.2. (‘‘statistical
area’’ definition).
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As explained above, a Core Based
Statistical Area or a Metropolitan
Division within a Core Based Statistical
Area, or a well-defined portion of either
one, qualifies as a well-defined local
community subject to a population
limit.18 Acknowledging the
interdependence among adjacent Core
Based Statistical Areas, the Office of
Management and Budget (‘‘OMB’’) has
recognized 169 Combined Statistical
Areas consisting of contiguous Core
Based Statistical Areas, and
Metropolitan and Micropolitan
Statistical Areas within, that
complement one another according to
objective measurements of social and
economic integration among an area’s
residents.19
OMB’s approach in designating
Combined Statistical Areas is consistent
with that of the Board in relying on
residents’ interactions and common
interests to define a local community.
Accordingly, the Board proposes to
expand the existing single Core Based
Statistical Area definition of a welldefined local community to include
Combined Statistical Areas as
designated by OMB, subject to the 2.5
million population limit. Additionally,
in evaluating expansion requests, NCUA
will continue its practice of reviewing
each FCU’s business and marketing
plans to determine its capability and
success in serving its original and
previously expanded community.
5. Addition of an Adjacent Area to a
Well-Defined Local Community. Despite
the convenience, certainty and staff
efficiency of using a Single Political
Jurisdiction, a Core Based Statistical
Area or a Combined Statistical Area to
form a well-defined local community or
rural district, areas adjacent to the
perimeter of these objective geographic
units may lack a credit union presence
and/or lack sufficient access to financial
services, even though residents on both
sides of the perimeter may routinely
interact or share common interests with
18 75
FR 36257 (June 25, 2010).
Bulletin No. 15–01 to Heads of Executive
Departments and Establishments (July 15, 2015)
defines a Combined Statistical Area as ‘‘two or more
Metropolitan Statistical Areas, a Metropolitan
Statistical Area and a Micropolitan Statistical Area,
two or more Micropolitan Statistical Areas, or
multiple Metropolitan and Micropolitan Statistical
Areas that have social and economic ties as
measured by commuting, but at lower levels than
are found among counties within Metropolitan and
Micropolitan Statistical Areas.’’ OMB characterizes
Core Based Statistical Areas as ‘‘representing larger
regions that reflect broader social and economic
interactions, such as wholesaling, commodity
distribution, and weekend recreation activities, and
are likely to be of considerable interest to regional
authorities and the private sector.’’ https://
www.whitehouse.gov/sites/default/files/omb/
bulletins/2015/15-01.pdf
19 OMB
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each other. To enable residents of those
adjacent areas to access credit union
services, the Board proposes to permit
the addition of such an area to a
community consisting of a Single
Political Jurisdiction, Core Based
Statistical Area, Combined Statistical
Area, or rural district, upon a showing
by subjective evidence that residents on
both sides of the perimeter interact or
share common interests.
The expanded community would be
subject to the proposed population
limits for community charters (2.5
million) and rural district charters (1
million).20 The more expansive the
adjacent area, theoretically even
surrounding the original community’s
entire perimeter, the more challenging
and burdensome it may be for a credit
union to, first, subjectively demonstrate
a sufficient totality of indicia of
interaction or common interests among
residents of the expanded community,21
and then to establish through the credit
union’s business and marketing plans
its ability and commitment to serve the
entire expanded community.
The Board recognizes that credit
unions seeking to add bordering areas to
their existing community or rural
district charters historically have
already established a proven track
record of serving an existing community
or rural district and should not be
subject to the same requirements as
those for a credit union seeking to
convert to a community or rural district
charter. Therefore, the Board proposes
to require a federal credit union seeking
to add a bordering area to follow a
streamlined set of business plan
requirements contained in this rule. The
Board seeks comment on the
appropriateness of the proposed set of
streamlined requirements, and if any
specific items should be added or
removed from the proposed criteria. The
Board also seeks comment on the
existing comprehensive business and
marketing plan requirements. Finally,
the Board is considering whether to
limit the availability of this streamlined
approach to a federal credit union
seeking a certain maximum percentage
increase in its field of membership, and
is interested in receiving public
comment on this aspect of the proposal.
6. Individual Congressional District as
a Well-Defined Local Community. Since
20 See Rural District Definition discussion later in
this same section.
21 The proposed rule incorporates guidance
identifying compelling indicia of common interests
and interaction that would be relevant when a
credit union chooses to submit a narrative to NCUA
to demonstrate that the residents of the expanded
community meet the requirements of a well-defined
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1999, the Board has maintained that
neither a Congressional district nor a
whole state qualifies as a well-defined
local community, despite recognizing
that both are well-defined.22 These
restrictions were never imposed by
statute; rather, the Board disallowed
whole states and Congressional districts
solely as a matter of policy.23 When
imposing these restrictions, the Board
recognized that—
in general, a large population in a small
geographic area or a small population in a
large geographic area, may meet community
chartering requirements. Conversely, . . . a
large population in a large geographic area
will not normally meet community
chartering requirements. In so doing,
however, the Board has not summarily
dismissed or prejudged any potential
application. While an area with a large
population may require additional
documentation, it still may meet the
definition of a local community.24
A significant change in circumstances
has prompted the Board to reconsider
this policy as it applies to Congressional
districts—namely that, NCUA has, since
1999, approved 21 Single Political
Jurisdictions that each have a
population in excess of 1 million, while
the average population of the United
States’ 435 Congressional districts is
710,767.25
The most populous of the 435
districts is the ‘‘at large’’ district serving
the state of Montana, with a population
of 1,023,579; Rhode Island has the
smallest average district size at
523,028.26 As measured by population,
it is appropriate to recognize each
individual Congressional district, as
well as the District of Columbia and
each U.S. territory represented by a nonvoting delegate,27 as local when
compared to Single Political
Jurisdictions as large in population as
Los Angeles County, California (9.6
million), approved by the Board in
2003, and Harris County, Texas (3.45
million), approved by the Board in
2007.
Among residents of Single Political
Jurisdictions comprised of towns, cities
and counties, the focal point of common
interests and interaction tends be local
22 63 FR 72013, 72037 (December 30, 1998);
Appendix B, Ch. 2, Section V.A.2.
23 63 FR at 72037. See also 75 FR at 36258
(affirming that entire state is not acceptable as
WDLC)
24 63 FR at 72012.
25 https://www.census.gov/fastfacts.
26 Id. Seven states presently are comprised of a
single Congressional district, effectively giving each
a state-wide FOM: Alaska, Delaware, Montana,
North Dakota, South Dakota, Vermont and
Wyoming.
27 American Samoa, Guam, Northern Mariana
Islands, Puerto Rico, and the U.S. Virgin Islands.
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services, resources and facilities (e.g.,
taxes, schools, police and fire
protection). The proposal acknowledges
that Congressional districts, structured
for purposes of federal representation,
reflect interaction and common interests
among each district’s constituents based
on issues and matters decided at the
federal level that affect them locally
(e.g., economic, agricultural, and
environmental).
Based on this rationale, the Board
proposes to recognize each individual
Congressional district as a Single
Political Jurisdiction, thus qualifying it
as a well-defined local community
without regard to population.28
As in the case of any community
charter application, a credit union that
applies to serve a Congressional district
must submit a business and marketing
plan demonstrating its ability and
commitment to serve the entire
community. The larger the
Congressional district, the more
challenging and burdensome it may be
for an applicant to satisfy this
requirement.
If, as a result of redistricting, the
boundaries of an individual
Congressional district were to be
redrawn, the FOM consisting of the
original Congressional district would no
longer be available to be served by any
other FCU. Only an FCU that was
approved to serve an FOM comprised of
an individual Congressional district
would be grandfathered to continue
serving that area.
B. Rural District Definition
The Board has, since 2013, imposed
two requirements for a proposed area to
qualify as a well-defined ‘‘Rural
District.’’ The first is that the area’s total
population cannot exceed the greater of
either 250,000 people or 3 percent of the
population of the state in which the
majority of the proposed Rural District’s
residents would be located.29 The
second is that either at least 50 percent
of the proposed Rural District’s
population must reside in census blocks
or other geographic units the U.S.
Census Bureau (‘‘U.S. Census’’)
designates as ‘‘rural,’’ or the proposed
Rural District’s population density
cannot exceed 100 persons per square
mile.30 Independently of these welldefined local community requirements,
a credit union must be able to serve the
proposed Rural District, as
demonstrated by its business and
marketing plans that must accompany
28 Appendix
29 Appendix
B, Ch. 2, Section V.A.1.
B, Ch. 2, Section V.A.2.
30 Id.
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an application for charter approval,
expansion or conversion.31
1. Population Limits. The 250,000
persons/3 percent population limits
were based on the view that a Rural
District should have a relatively small,
widely disbursed population. However,
a compelling countervailing factor
continues to weigh against this view: To
make the area attractive as a strategic
option, a Rural District must have a
population sufficient to enable credit
unions to achieve a sufficient level of
operating efficiencies and scale to
deliver products and services. Balancing
these opposing population
considerations, NCUA proposes to
modify the Rural District definition to
increase the population limit to 1
million persons. Because the increased
population limit would exceed 3
percent of a state’s population in all
states but one (California), making that
alternative redundant, the proposed rule
omits it. The Board invites public
comment on whether to adjust the
proposed 1 million population limit, by
what amount, and for what specific
reasons.
2. Multi-State Expansion Limit. In
1998, the Board conceded that ‘‘While
an area with a large population may
require additional documentation, it
still may meet the definition of a local
community. Similarly, multiple
counties, particularly in rural areas, may
qualify for a community charter.’’ 32 To
achieve consistency with U.S. Census
recognition of expansive rural areas, the
proposed rule modifies the option for an
area to qualify as a Rural District either
because it is among the ‘‘rural counties’’
identified by the Consumer Financial
Protection Bureau (‘‘CFPB’’),33 or
because the area has a sparse population
density of no more than 100 people per
square mile. These criteria truly reflect
an area’s rural character regardless of its
physical size, as shown by the eight
states in which the U.S. Census
identifies more than 40 percent of the
state population as ‘‘rural.’’ 34
As revised, the Rural District
definition—a 1 million population limit,
and either a sparse population density
or ‘‘rural’’ designation—would continue
to permit a Rural District to extend
beyond a single state’s boundaries. To
prevent the overexpansion of Rural
Districts, however, the Board proposes
31 Appendix
B, Ch. 2, Section V.A.4.
FR at 72012.
33 See CFPB’s ‘‘Rural or underserved counties
list’’ available at: https://www.consumerfinance.gov/
guidance/#ruralunderserved.
34 https://www.census.gov/geo/reference/ua/
urban-rural-2010.html (List of Population, Land
Area and Percent Urban and Rural in 2010 and
Changes from 2000 to 2010).
32 63
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to prohibit a single well-defined Rural
District from exceeding the boundaries
of the states that are immediately
contiguous to the state in which the
FCU serving the Rural District is
headquartered (i.e., not to exceed the
outer perimeter of the layer of states
immediately bordering the headquarters
state).
C. Underserved Areas
The FCU Act authorizes the NCUA
Board to allow multiple common bond
credit unions to serve members residing
in an ‘‘underserved area,’’ provided the
FCU establishes and maintains a facility
in the area.35 For an area to be
‘‘underserved,’’ it must qualify: (1) As a
well-defined local community,
neighborhood or rural district; 36 (2) as
an ‘‘investment area’’ under the
Community Development Banking and
Financial Institutions Act (‘‘CDFI
Act’’); 37 and (3) as ‘‘underserved’’ by
other depository institutions (as defined
[by the CDFI Act]) ‘‘based on data of the
Board and the Federal banking
agencies.’’ 38 Other than to limit the
sources of data and to define
‘‘depository institutions,’’ the FCU Act
prescribes no specific test or criteria to
assess ‘‘underservice.’’ Within this
broad authority, the Board seeks to
refine the data used in its concentration
of facilities ratio, first introduced in
2008,39 to determine whether a
proposed area is underserved by other
depository institutions, as well as to
propose for comment alternative
methodologies and metrics as options
for making that determination.
1. Exclusion of Non-Depository
Institutions and Non-Community Credit
Unions from Concentration of Facilities
Ratio. It has been NCUA’s practice to
calculate an area’s concentration of
facilities ratio on behalf of a credit
union seeking approval to serve it as an
underserved area. To assess the
presence of banks and savings
35 12
U.S.C. 1759(c)(2).
36 Id.
37 Id.
Section 4702(16).
Section 1759(c)(2)(A) citing id. Section
461(b)(1)(A). By definition, a ‘‘depository
institution’’ is insured and includes credit unions.
Id. Section 461(b)(1)(A)(iv).
39 73 FR 73392 (Dec. 2, 2008). Using census tracts
as the unit of measure, the concentration of
facilities ratio compares the concentration of
depository institution facilities among the
population within the non-‘‘distressed’’ portions of
the proposed area against the concentration of such
facilities among the population of the area as a
whole. 73 FR at 73396. Ch.3, Section III.B.3.of
appendix B. An area qualifies as underserved by
other depository institutions when the
concentration of facilities ratio within its non‘‘distressed’’ census tracts exceeds the
concentration of facilities ratio within the census
tracts of the area as a whole.
38 Id.
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associations within geographic units
that do not already qualify as
‘‘distressed’’ under the CDFI Act, NCUA
has relied upon data compiled by the
Federal Deposit Insurance Corporation
(‘‘FDIC’’) in its Summary of Deposits
Survey,40 and on NCUA data to assess
the presence of credit unions. The Board
proposes to exclude two data
components from the ratio, on a
contingent basis, to prevent the
concentration of facilities ratio from
being diluted or distorted by overinclusive data, as well as to ensure
compliance with the letter and the spirit
of the ‘‘depository institutions’’
definition the FCU Act references.41
The first component is NCUA data
reflecting the presence of noncommunity credit unions, such as
multiple common bond credit unions—
other than those already serving the
proposed area as an underserved area—
because they would be unable to serve
the general public of a underserved area
(i.e., unable to serve anyone not within
its select groups). The second
component is FDIC data reflecting the
presence of non-depository institutions,
such as trust companies, which do not
accept deposits from the general public.
Excluding data reflecting the presence
of institutions that would not be capable
of serving a proposed area, either by
definition or in fact, will preclude the
unwarranted denial of an application to
serve an underserved area.
It would be impracticable and an
inefficient use of resources for NCUA to
segregate bank and credit union data on
a nationwide scale to exclude nondepository bank and non-community
credit union data. However, in the event
an initial concentration of facilities ratio
calculation fails to identify a proposed
area as underserved by other depository
institutions, the proposed rule would
require NCUA to then exclude the nondepository bank and non-community
credit union data and recalculate the
ratio. This will ensure the integrity of
the result, as well as maximize the
identification of areas that would
benefit from the introduction of credit
union service to compensate for the lack
of service by other depository
institutions. This approach also will
conserve NCUA resources that
otherwise would be consumed in
routinely excluding this data without
regard to whether an initial
concentration of facilities ratio
calculation without those exclusions
would yield a positive result.
40 FDIC’s ‘‘Summary of Deposits Survey,’’ e.g.,
https://www.fdic.gov/news/news/financial/2015/
fil15024.pdf.
41 12 U.S.C. 461(b)(1)(A).
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2. Alternatives to Identify Areas
‘‘Underserved by Other Depository
Institutions.’’ While the concentration of
facilities ratio has generally proven to be
an effective measure of underservice by
other depository institutions, it has
some inherent limitations: It accounts
for the physical presence of depository
institutions in a given area, but it does
not necessarily evaluate the benefit or
quality of services these institutions
deliver.42 Accordingly, the Board
proposes two alternatives to the
concentration of facilities ratio that may
reflect underservice by other depository
institutions more comprehensively. The
first would be the designation of
‘‘underserved counties’’ by the CFPB,43
which has rulemaking authority over
Federal banking agencies’ collection of
Home Mortgage Disclosure Act
(‘‘HMDA’’) data used to make those
designations.44 The second would be a
metric of a credit union’s own choosing
that it would submit as evidence of
underservice in a proposed area,
provided the metric is based on ‘‘data of
the Board and the Federal banking
agencies.’’45
The Board invites commenters to
identify other methodologies and
Federal banking agency data that would
be useful in identifying areas
‘‘underserved by other depository
institutions’’ in an objective manner.
Examples include data from Community
Reinvestment Act examination reports
prepared by the FDIC, Office of the
Comptroller of the Currency (‘‘OCC’’) or
the Board of Governors of the Federal
Reserve System (‘‘the Fed’’),46 and
HMDA data collected by these agencies.
The Board encourages commenters to
suggest why and how any specific
methodology and supporting data
recommended for consideration would
establish an objective basis for analysis
of underservice by other depository
institutions.
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D. Multiple Common Bond
As amended in 1998, the FCU Act
restored the Board’s multiple common
42 The benefit and quality of services depository
institutions deliver is addressed by the ‘‘distress’’
criterion requiring the area to have ‘‘significant
unmet need for loans and financial services.’’ 12
U.S.C. 4702(16)(A)(ii).
43 Although CFPB’s annual ‘‘Rural or underserved
counties list’’ does not segregate ‘‘rural’’ and
‘‘underserved’’ counties, NCUA will use the data
collected by CFPB to produce and make available
a list that identifies ‘‘underserved areas’’
exclusively.
44 12 U.S.C. 1813(z). Financial institutions,
including national banks, Federal savings
associations, state member banks, and FCUs report
mortgage related data to their respective Federal
regulator –OCC, the Fed, FDIC and NCUA.
45 E.g., FDIC ‘‘Summary of Deposits Survey.’’
46 E.g., https://www.ffiec.gov/cra/default.htm.
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bond policy, permitting a multiple
common bond credit union to serve a
combination of distinct, definable
occupational and/or associational
groups, each having its own common
bond among group members.47
1. Credit Union’s ‘‘Reasonable
Proximity’’ through Members’ Online
Access to Services. The FCU Act
authorizes multiple common bond
credit unions to expand through the
addition of select groups having
dissimilar common bonds, provided
such a group does not exceed 3,000
members.48 To add a group that exceeds
that limit, the group must meet other
criteria the FCU Act prescribes to
establish that it ‘‘could not feasibly or
reasonably establish a new single
common bond credit union.’’ 49
Regardless of group size, the FCU Act
further requires the Board, in deciding
whether to approve a multiple common
bond expansion, ‘‘to encourage the
formation of separately chartered credit
unions . . . whenever practicable and
consistent with reasonable standards for
the safe and sound operation of the
credit union,’’ based on approval
criteria the FCU Act prescribes.50
When formation of a stand-alone
single common bond credit union either
is not practicable, or would be
inconsistent with reasonable standards
of safety and soundness, the FCU Act
requires ‘‘inclusion of the group in the
[FOM] of a credit union that is within
reasonable proximity to the location of
the group whenever practicable and
consistent with reasonable standards for
the safe and sound operation of the
credit union.’’ 51 The Chartering and
FOM Manual implements both the
stand-alone feasibility criteria and the
multiple common bond expansion
approval criteria.
In 1998, the Board acknowledged that
‘‘reasonable proximity’’ is an essential
factor in determining whether a select
group can be added to a multiple
common bond credit union.52 However,
the Board did not require an added
group’s location to be within reasonable
proximity of the credit union’s main
office, but rather, within the service area
of a ‘‘service facility’’ of the credit
union. As currently defined, a ‘‘service
facility’’ includes a credit union branch,
a shared branch, a mobile branch that
visits the same location on a weekly
basis, and a credit union-owned
47 63 FR 71998, December 30, 1998; 12 U.S.C.
1759(b)(2)(A). See NCUA v. First National Bank &
Trust Co., 522 U.S. 479 (1988).
48 Id. Section 1759(d)(1).
49 Id. Section 1759(d)(2)(A).
50 Id. Section 1759(f)(1)(A).
51 Id. Section 1759(f)(1)(B) (emphasis added).
52 63 FR 71998, 72002 (December 30, 1998).
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electronic facility.53 To qualify as a
service facility, a group’s members must
be able to deposit funds, apply for a
loan or obtain funds on approved
loans.54
To recognize the role of advancing
technologies in enabling reasonable
proximity between a credit union and
the groups it serves, the Board proposes
to revise the definition of a ‘‘service
facility’’ to extend it to members of
occupational select groups, and
members of pre-approved associational
groups,55 who have access to their credit
union’s products and services through
an online internet channel such as a
transactional Web site. This proposed
change would apply solely to meet the
‘‘reasonable proximity’’ requirement
that applies to a multiple common bond
credit union and its select occupational
and associational groups; it would not
apply to meet the requirement that a
credit union serving an underserved
area ‘‘must establish and maintain an
office or facility in [the underserved
area].’’ 56 To provide the same
functionality currently required for a
service facility, the online internet
channel must be capable of accepting
shares for those members’ accounts and
loan applications from them, or
disbursing loan proceeds to them. The
Board emphasizes that this proposed
change would allow access to online
financial services only by already
existing members of multiple common
bond credit unions; it would not permit
an individual to qualify remotely for
membership in a community credit
union based on electronic access to it
from outside its well-defined local
community.
To support its proposal to incorporate
online financial services in the
definition of ‘‘service facility’’ through
online internet channels via access to
laptop computers, personal computers
and mobile devices, the Board has
reviewed data from FCUs regarding
consumer needs and preferences. By all
measures, the use of online financial
services has increased dramatically in
the past 15 years. Federally insured
credit unions’ Call Report data indicates
that the proportion of members using
transactional Web sites has steadily
increased from 27 percent of members
in the fourth quarter of 2006 (23.2
million) to 45 percent in the second
quarter of 2015 (40.5 million)—an
increase of 17.3 million users.
53 Appendix B, Ch.2, Section IV.A.1 and
appendix 1 (glossary).
54 Appendix B, Ch.2, Section IV.A.1.
55 Appendix B, Ch. 2, Section III.A.1.B.
56 12 U.S.C. 1759(c)(1)(B).
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Among FCUs, only 22 percent offered
home banking via an internet Web site
in 2000. This share increased to 68
percent in the fourth quarter of 2011
(4,846 out of 7,094), and 75 percent by
the second quarter of 2015 (4,612 out of
6,159). There has been similarly
significant growth in the use of smart
phones and tablets to conduct mobile
banking transactions. With such
technology non-existent as late as 2008,
only 6 percent of FCUs offered mobile
banking in 2009. This share increased to
16 percent in 2011, and 47 percent by
the second quarter of 2015.
Similarly, data collected by the
Boston Consulting Group (‘‘BCG’’)
indicates actual consumer use of online
delivery channels has increased
significantly.57 Specifically, online
consumer contacts with banks nearly
doubled from 2004 to 2012. Mobile and
internet banking increased from 5
percent of customer contacts in 2004 to
about 48 percent by 2012. In contrast,
the share of contacts conducted in
branches fell from 75 percent to 30
percent during this period. The BCG
study noted that mobile and internet
banking transaction volume advanced
not only due to the increase in the
number of overall contacts, but because
banking transactions accounted for a
larger share of total activity. The BCG
study emphasized that to compete
effectively in the financial sector,
financial institutions need to establish
business plans that make ‘‘interactions
across multiple channels simple—not
disjointed or constrained by internal
organizational boundaries in a way that
leads customers to dead ends. Channels
should support each other, not
compete.’’ 58 In addition, the BCG study
predicted that internet contacts as a
percentage of all contacts would
increase to about 66 percent by 2020.
The dramatic increase in FCUs
offering mobile banking service is
consistent with the use of internet and
mobile banking services by consumers
generally. An annual study sponsored
by the American Bankers Association,
and conducted by Ipsos Public Affairs
for 2015, surveyed 1,000 adults about
their banking preferences among the
following choices: Internet banking
(laptop or personal computer), mobile
devices (cell phone, Blackberry, PDA,
tablet), brick and mortar branches,
ATMs, telephone, and mail. A primary
question was, ‘‘Which method do you
use most often to manage your bank
accounts?’’ The table below indicates
that 41 percent of customers preferred
internet or mobile banking. In contrast,
only 21 percent preferred branch
banking. These preferences were similar
in 2013 and in 2014. The study sponsor
further stated that ‘‘This is the sixth year
in a row [2008–2014] that customers
named the Internet as their favorite way
of conducting their banking
business.’’ 59
Type of banking
2014
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Online channels (laptop or PC) ...............................................................................................................................
Branches ..................................................................................................................................................................
ATMs ........................................................................................................................................................................
Mobile (cell phone, Blackberry, PDA, IPad) ............................................................................................................
Telephone ................................................................................................................................................................
Mail ..........................................................................................................................................................................
Don’t Know/Not sure ................................................................................................................................................
Similarly, government-sponsored
studies indicate dramatic increases in
online banking in the past few years.
Since 2011, the Fed has conducted an
annual survey that focuses on one
channel of online banking: Smart phone
technology for mobile banking.60 That
survey illustrates the increased reliance
of smart phone technology for mobile
banking. The March 2015 Report of a
December 2014 survey stated, ‘‘Thirty
nine percent of all mobile phone owners
with a bank account have used mobile
banking in the 12 months prior to the
survey, up from 33 percent in 2013 and
29 percent in 2012.’’ Further, ‘‘Fifty two
percent of smartphone owners with a
bank account used mobile banking in
the past 12 months, up from 51 percent
in 2013.’’ The Federal Reserve survey
further found that another 11 percent of
mobile phone users think that they will
use smart phones for online banking
within 12 months.61
The Federal Reserve Bank of Atlanta
studied the use of mobile banking by
banks and credit unions to determine
the level of and type of mobile financial
services offered by financial
institutions.62 Of 189 respondents in
Georgia, Alabama, Florida, and parts of
Mississippi, Louisiana, and Tennessee,
which included banks and credit unions
of all asset sizes, only six (3 percent) did
not currently offer or, plan to offer
mobile banking services. Further, the
study noted, ‘‘There was very little
difference between the bank and CU
responses.’’ The study also confirmed a
significant trend toward offering mobile
banking, given that 23 percent of the
respondents began offering mobile
banking within the past year and 15
percent were planning to offer such
services within the next two years.
The strong consumer preference for
online financial services, as well as for
integration of online banking into
financial institutions’ overall business
and marketing plans indicates the need
to amend the Chartering and FOM
Manual to facilitate current credit union
57 Maguire, Andy, et. al., Distribution 2020: The
Next Big Journey for Retail Banking (March 2013):
https://www.bcgperspectives.com/content/articles/
financial_institutions_sales_channels_distribution_
2020/?chapter=2.
58 American Bankers Association Press Release:
More Consumers Turning to Mobile Banking
(August 11, 2015).
59 Id. at 2.
60 Federal Reserve Consumers and Mobile
Financial Services (March 2015).
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2013
31%
21%
14%
10%
7%
6%
11%
39%
18%
11%
8%
7%
7%
10%
members’ access to such online services.
Accordingly, to put multiple common
bond credit unions and members of the
groups they serve within reasonable
proximity of each other, as required by
law, as well as to put them in parity
with their depository institution
competitors, the Board is proposing to
amend the definition of ‘‘service
facility’’ to include online financial
services, including computer-based and
mobile phone channels meeting certain
criteria for access.
In addition to the proposal to include
a transactional Web site in the
definition of ‘‘service facility,’’ the
Board is considering modifying the
definition of ‘‘service area’’ to include
one or more discreet political
jurisdictions such as a county or city.
While the Board historically has
discouraged using mileage and distance
factors exclusively to define reasonable
proximity,63 it acknowledges that there
may be an appropriate level of certainty
in also defining reasonable proximity to
61 Id.
Executive Summary at 4.
Banking and Payments Survey of
Financial Institutions of the Sixth District, Lott,
David (March 2015).
63 63 FR 71998, 72003 (December 30, 1998).
62 Mobile
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encompass a city or county jurisdiction.
The Board invites comments on options
to modify the definition of ‘‘service
area.’’
2. Inclusion of Select Employee Group
Contractors in a Multiple Common
Bond. The Board presently includes
within the definition of a single
occupational common bond the persons
who work regularly for an entity that is
under contract to the sponsor of the
select employee group (‘‘SEG’’) listed in
its charter, provided the contractor has
a ‘‘strong dependency relationship’’
with that sponsor.64 This definition
relies on the presence of a ‘‘strong
dependency relationship’’ between the
SEG sponsor and its contractor to
establish the ‘‘common bond of
occupation’’ the FCU Act requires for a
group to be included in either a single
or a multiple common bond credit
union.65 There being no distinction
between a single and a multiple
common bond credit union for purposes
of recognizing the occupational affinity
between a SEG sponsor’s own
employees and those of each sponsor’s
contractors, the Board proposes to
extend to multiple occupational
common bond credit unions the ability
to add persons who work regularly for
an entity that is under contract to any
of the multiple SEG sponsors listed in
its charter, provided the contractor has
a ‘‘strong dependency relationship’’
with the sponsor in each case.
3. Inclusion of Office/Industrial Park
Tenants in a Multiple Common Bond. In
the past, NCUA has recognized
industrial parks as a special type of
community charter.66 As an alternative
to extend credit union service to
persons who work in an office or
industrial park, the Board now proposes
to also permit a multiple common bond
credit union to include as a SEG the
employees of a park’s tenants (e.g., retail
tenants of a shopping mall, business
tenants of an office building or
complex). The group listed in the
charter would be the office/industrial
park itself; it would not be necessary to
individually list each tenant as a group
sponsor. Inclusion of such office/
industrial park groups within a multiple
common bond credit union would be
subject to two conditions: Each tenant
within the group must have fewer than
3,000 employees working at a facility
within the park, and only those
employees who work regularly at the
park during their employer’s tenancy
would be eligible for FCU membership.
B, Ch. 2, Section II.A.1.
U.S.C. 1759(b)(1) & (2).
66 Appendix B, Ch. 2, Section V.A.6 (special
community charters).
New tenants to the industrial park
would be eligible for membership
subject to the above conditions.
The option of including a tenants’
SEG within a multiple common bond
would allow those FCUs to more
efficiently offer services to employees of
small businesses, avoiding an extensive
outlay of resources to obtain letters from
each group requesting credit union
service. Instead, a multiple common
bond credit union could serve
employees of an office/industrial park’s
tenants by obtaining a letter from an
authorized representative of the park
itself, such as its leasing agent.
4. Streamlined Determination of
Stand-Alone Feasibility of Groups
Greater than 3,000. Based on NCUA’s
experience in assessing the stand-alone
feasibility of groups in excess of 3,000
members, and data regarding the failure
rate of credit unions during a 12-year
period,67 a trend has emerged: 80
percent of credit union failures occurred
in credit unions with fewer than 5,000
members. In view of this trend, the
Board has decided to modify NCUA’s
process for assessing the stand-alone
feasibility of groups that seek to be
added to the FOM of an existing
multiple common bond credit union,
rather than forming the group’s own
single common bond credit union.
Accordingly, the Board proposes to
reorganize and streamline the
application process for multiple
common bond expansions according a
group’s size.
Groups of fewer than 3,000 members
will be subject to the existing
application process, consisting of the
following: A written request using the
Application for Field of Membership
(NCUA 4015 EZ), a letter from the group
requesting credit union service and
indicating the desire to be added to the
FCU’s field of membership; the number
of persons included in the group to be
added; and the group’s proximity to the
credit union’s nearest service facility.
Applicants do not need to support these
groups’ lack of ability to form their own
credit union.
Since the statute presumes a group of
3,000 or more members can form a
credit union, there is a higher burden of
proof to establish that such a group
cannot form its own credit union. When
a group has between 3,000 and 5,000
members and displays evidence of a
lack of available subsidies, disinterest
among the group’s members, and an
overall lack of sufficient resources, the
Board has historically determined that
64 Appendix
65 12
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67 Credit union failures according to asset size
and membership as reflected in final Call Reports
for 2003Q1–2015Q2.
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the group could not feasibly or
reasonably establish a new single
common bond credit union. In such
cases the Board will accept a written
statement indicating these conditions
exist as sufficient documentation the
group cannot form its own credit union.
Consistent with current policy on
incidental overlaps, the Board will no
longer require an overlap analysis of a
group between 3,000 and 5,000
members, given that groups in this size
range rarely have been able to form a
stand-alone credit union. Groups with
more than 5,000 members will be
subject to the existing standard
application process, requiring a group to
fully describe its inability to establish a
new single common bond credit union.
However, the Board is particularly
interested in comments on whether to
consider a larger number than 5,000 for
this threshold. While 80 percent of
failures occurred in credit unions with
fewer than 5,000 actual members, the
number of potential members of those
credit unions was significantly larger.
Therefore, if 5,000 actual credit union
members were deemed to be the
minimum number needed to charter a
viable new credit union, the number of
potential members needed to reach
5,000 actual members would be larger.
For example, if the average
penetration rate of actual members to
potential members at the smallest
multiple-group credit unions is 50
percent, a group of 10,000 potential
members may be needed to reach 5,000
actual members. The Board welcomes
comments on how many actual
members are needed to charter a viable
new credit union, and how many
potential members would be needed in
order to reach that minimum number of
actual members.
There are three benefits to the
proposed three-tiered process for
assessing a group’s stand-alone
feasibility. First, it conforms to the
stand-alone feasibility criteria the FCU
Act prescribes for groups in excess of
3,000, and the approval criteria it
prescribes for the addition of a group,
regardless of its size, to an existing
multiple common bond credit union.68
Second, it will minimize the resource
burden on individual groups and credit
unions in compiling information and
documentation to support an
application to add a group, as well as on
the NCUA staff in assessing the
application. Finally, it will allow NCUA
to more effectively allocate its resources
by focusing its scrutiny on individual
groups based on the record of survival
of newly chartered credit unions having
68 Id.
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more than 5,000 members when formed.
This would enhance the agency’s ability
to conduct an appropriate level of due
diligence in its reviews.
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E. Other Persons Eligible for Credit
Union Membership
NCUA has historically recognized a
variety of persons who, by virtue of
their relationship to a common bond
group, have been entitled to credit
union membership eligibility. Principal
among these persons are members of the
immediate family or household of a
primary member of a credit union
members (i.e., spouse, child, sibling,
parent, grandparent, grandchild,
including by step or adoptive
relationship).69 Other such affinity
groups include spouses of deceased
credit union members, current credit
union employees, pensioners and
annuitants who have retired from credit
union employment, and persons who
perform volunteer work for a credit
union.70
Active duty and discharged military
personnel and their families share a
similar affinity, typically maintaining a
close relationship with their active duty
branch of service, largely through
Armed Forces associations, publications
and continued access to military bases,
such as Veterans Administration
facilities, base commissaries, post
exchanges, and morale, welfare and
recreation sponsored programs. To
honor the contributions of those serving
in the United States Armed Forces, and
to give them the benefit of access to
credit union service throughout their
lives following active duty, the Board
proposes to include within a credit
union’s common bond the honorably
discharged veterans of any branch of the
United States Armed Forces listed in its
charter, continuing their eligibility for
credit union membership beyond active
duty.
F. Trade, Industry or Profession (‘‘TIP’’)
as a Single Common Bond
A TIP is a single occupational
common bond based on employment at
any number of corporations or other
legal entities that, while not under
common ownership, still have a
common bond by reason of producing
similar products, providing similar
services, sharing the same profession or
trade, or participating in the same
industry.71 To establish ‘‘one group that
has a common bond of occupation,’’ as
the FCU Act prescribes, a TIP-based
69 Appendix
B, Ch.2, Sections II.H., IV.H., and
appendix 1 (glossary definition of ‘‘affinity’’).
70 Appendix B, Ch.2, Sections II.H., IV.H.
71 68 FR 18334, 18336 (April 15, 2003); Appendix
B, Ch. 2, Section IIA.2.
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FOM must reflect a narrow
commonality of interests among those
working within a specific trade,
industry, or profession, and there must
be a close nexus among the entities
within the group.72 The commonality of
interest and close nexus requirements
preclude a TIP from including thirdparty vendors and other suppliers and
contractors. As an example, an
automobile TIP may include all workers
manufacturing automobiles but may not
include the steel suppliers or other
component suppliers.
Inclusion of ‘‘Strong Dependency’’
Vendors and Suppliers in TIP
Definition. The Board already
recognizes a single occupational
common bond between a SEG sponsor’s
own employees and those of its
contractors, provided there is a ‘‘strong
dependency relationship’’ between the
sponsor and the contractor. Similarly,
NCUA proposes to clarify its definition
of a TIP to include employees of types
of entities that have a strong
dependency relationship on, and whose
employees work directly with
employees of, other entities within the
same industry. An example would be an
FCU that serves employees of
companies within the airline industry
that have a strong dependency
relationship with airlines or airports,
and whose employees work directly
with providers of air freight
transportation, courier services, air
passenger services, in-flight food
services, airport security, baggage
handling, and commercial janitorial,
maintenance and repair services. The
premise of a strong relationship between
these providers and their airport and
airline customers is the likelihood of a
significant economic impact, if not
equally between them, if one were
unable to continue in its operations
without doing business with the other.
As expanded, the TIP definition would
give credit unions the opportunity to
demonstrate that an entity is ‘‘strongly
dependent’’ on the others within a TIP,
and shares a narrow commonality of
interest with them, as necessary to be
part of a TIP-based single occupational
common bond.
G. Technical Updates
Apart from introducing substantive
revisions to NCUA’s FOM rules and
policies, the proposed rule will update
the Chartering and FOM Manual to
enhance its accuracy and userfriendliness for the benefit of those
seeking to charter a credit union, as well
as for existing credit unions. To that
end, the proposed rule substitutes
72 Id.
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certain references to regional office and
regional director chartering
responsibilities with references to the
Office of Consumer Protection as the
primary office for chartering matters
within NCUA and, to address previous
comments, substitutes the Board
Secretary for the Office of Consumer
Protection in reference to appeals of
chartering decisions.73 Finally, the
proposed rule corrects statutory and
regulatory citations and crossreferences, as well as typos; updates the
appendices to the Chartering and FOM
Manual to reflect current agency
practices; and updates references to
NCUA offices and industry trade
associations.
III. Regulatory Procedures
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.74
For purposes of this analysis, NCUA
considers small credit unions to be
those having under $50 million in
assets.75 Although this rule is
anticipated to economically benefit
FCUs that choose to expand their FOMs,
NCUA certifies that it will not have a
significant economic impact on small
credit unions.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(PRA) applies to collections of
information through which an agency
creates a paperwork burden on
regulated entities or the public, or
modifies an existing burden.76 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. The Office of
Management and Budget (OMB)
previously approved the current
information collection requirements for
the Chartering and Field of Membership
Manual and assigned them control
number 3133–0015.
The proposed rule creates new
strategic options for FCUs, while
requiring essentially the same
information that the existing rule
required to apply for and be granted a
charter expansion or conversion, with
two exceptions. It introduces a new
form within an appendix to the
73 87
FR 25924, 25929 (May 6, 2015).
U.S.C. 603(a).
75 Effective November 23, 2015, the asset ceiling
for small credit unions will increase to $100
million. 80 FR 57512 (Sept. 24, 2015).
76 44 U.S.C. 3507(d); 5 CFR part 1320.
74 5
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Chartering and Field of Membership
Manual to condense the application
process for adding certain groups to a
multiple common bond FOM. This new
form does not add any additional
burden to FCUs.
Regarding a community common
bond, the proposed rule permits an FCU
to add an area adjacent to the perimeter
of its existing community consisting of
a Single Political Jurisdiction, Core
Based Statistical Area, Combined
Statistical Area or rural district, upon a
showing by subjective evidence that
residents on both sides of the perimeter
interact or share common interests. For
that purpose, the rule provides guidance
in identifying compelling indicia of
interaction or common interests that
would be relevant in drafting a narrative
summarizing the indicia that
demonstrate that the residents of the
expanded community meet the
requirements of a well-defined local
community.
NCUA has determined that the
procedure for an FCU to assemble such
subjective evidence of interaction or
common interests, and to draft and
submit a narrative summarizing the
evidence to support its application to
expand, would create a new information
collection requirement. As required,
NCUA is applying to OMB for approval
to amend the current information
collection to account for the new
procedure.
Approximately 1,090 FCUs have a
community charter. While there is no
reasonable way to measure how many
FCUs will use this particular option, it
would be available to any community
FCU, regardless of asset size. NCUA
estimates that, on average, it would take
an FCU’s staff approximately 24 hours
to collect the evidence of interaction
and common interests and to draft a
narrative to support its application to
expand. Accordingly, NCUA estimates
the aggregate information collection
burden on FCUs that seek to add an area
adjacent to the perimeter of an existing
community consisting of a Single
Political Jurisdiction, Core Based
Statistical Area, Combined Statistical
Area or rural district would be 24 hours
times 1,090 FCUs for a total of 26,160
hours. NCUA is proposing to amend the
current information collection control
number 3133–0015 to account for these
additional burden hours.
Organizations and individuals
wishing to submit comments on this
information collection requirement
should direct them to the Office of
Information and Regulatory Affairs,
OMB, Attn: Shagufta Ahmed, Room
10226, New Executive Office Building,
Washington, DC 20503, with a copy to
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the Secretary of the Board, National
Credit Union Administration, 1775
Duke Street, Alexandria, Virginia
22314–3428.
NCUA will consider comments by the
public on this proposed collection of
information in:
• Evaluating whether the proposed
collection of information is necessary
for the proper performance of the
functions of the NCUA, including
whether the information will have a
practical use;
• Evaluating the accuracy of NCUA’s
estimate of the burden of the proposed
collection of information, including the
validity of the methodology and
assumptions used;
• Enhancing the quality, usefulness,
and clarity of the information to be
collected; and
• Minimizing the burden of collection
of information on those who are to
respond, including through the use of
appropriate automated, electronic,
mechanical, or other technological
collection techniques or other forms of
information technology (e.g., permitting
electronic submission of responses).
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. Primarily because this rule
applies to FCUs exclusively, it 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.
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,
1999.77
List of Subjects in 12 CFR Part 701
Credit, Credit unions, Reporting and
recordkeeping requirements.
77 Pub.
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By the National Credit Union
Administration Board on November 19, 2015.
Gerard S. Poliquin,
Secretary of the Board.
For the reasons stated above, NCUA
proposes to amend 12 CFR part 701,
appendix B, as follows:
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. Appendix B to part 701 is revised
to read as follows:
■
Appendix B to Part 701—Chartering
and Field of Membership Manual
Chapter 1—Federal Credit Union Chartering
I—Goals of NCUA Chartering Policy
The National Credit Union
Administration’s (NCUA) chartering and
field of membership policies are directed
toward achieving the following goals:
• To encourage the formation of credit
unions;
• To uphold the provisions of the Federal
Credit Union Act;
• To promote thrift and credit extension;
• To promote credit union safety and
soundness; and
• To make quality credit union service
available to all eligible persons.
NCUA may grant a charter to single
occupational/associational groups, multiple
groups, or communities if:
• The occupational, associational, or
multiple groups possess an appropriate
common bond or the community represents
a well-defined local community,
neighborhood, or rural district;
• The subscribers are of good character
and are fit to represent the proposed credit
union; and
• The establishment of the credit union is
economically advisable.
Generally, these are the primary criteria
that NCUA will consider. In unusual
circumstances, however, NCUA may examine
other factors, such as other federal law or
public policy, in deciding if a charter should
be approved. Unless otherwise noted, the
policies outlined in this manual apply only
to federal credit unions.
II—Types of Charters
The Federal Credit Union Act recognizes
three types of federal credit union charters—
single common bond (occupational and
associational), multiple common bond (more
than one group each having a common bond
of occupation or association), and
community.
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The requirements that must be met to
charter a federal credit union are described
in Chapter 2 of this manual. Special rules for
credit unions serving low-income groups are
described in Chapter 3 of this manual.
If a federal credit union charter is granted,
Section 5 of the charter will describe the
credit union’s field of membership, which
defines those persons and entities eligible for
membership. Generally, federal credit unions
are only able to grant loans and provide
services to persons within the field of
membership who have become members of
the credit union.
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III—Subscribers
Federal credit unions are generally
organized by persons who volunteer their
time and resources and are responsible for
determining the interest, commitment, and
economic advisability of forming a federal
credit union. The organization of a successful
federal credit union takes considerable
planning and dedication.
Persons interested in organizing a federal
credit union should contact one of the credit
union trade associations or the NCUA
regional office serving the state in which the
credit union will be organized. Lists of
NCUA offices and credit union trade
associations are shown in the appendices.
NCUA will provide information to groups
interested in pursuing a federal charter and
will assist them in contacting an organizer.
While anyone may organize a credit union,
a person with training and experience in
chartering new federal credit unions is
generally the most effective organizer.
However, extensive involvement by the
group desiring credit union service is
essential.
The functions of the organizer are to
provide direction, guidance, and advice on
the chartering process. The organizer also
provides the group with information about a
credit union’s functions and purpose as well
as technical assistance in preparing and
submitting the charter application. Close
communication and cooperation between the
organizer and the proposed members are
critical to the chartering process.
The Federal Credit Union Act requires that
seven or more natural persons—the
‘‘subscribers’’—present to NCUA for approval
a sworn organization certificate stating at a
minimum:
• The name of the proposed federal credit
union;
• The location of the proposed federal
credit union and the territory in which it will
operate;
• The names and addresses of the
subscribers to the certificate and the number
of shares subscribed by each;
• The initial par value of the shares;
• The detailed proposed field of
membership; and
• The fact that the certificate is made to
enable such persons to avail themselves of
the advantages of the Federal Credit Union
Act.
False statements on any of the required
documentation filed in obtaining a federal
credit union charter may be grounds for
federal criminal prosecution.
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IV—Economic Advisability
IV.A—General
Before chartering a federal credit union,
NCUA must be satisfied that the institution
will be viable and that it will provide needed
services to its members. Economic
advisability, which is a determination that a
potential charter will have a reasonable
opportunity to succeed, is essential in order
to qualify for a credit union charter.
NCUA will conduct an independent on-site
investigation of each charter application to
ensure that the proposed credit union can be
successful. In general, the success of any
credit union depends on: (a) The character
and fitness of management; (b) the depth of
the members’ support; and (c) present and
projected market conditions.
IV.B—Proposed Management’s Character
and Fitness
The Federal Credit Union Act requires
NCUA to ensure that the subscribers are of
good ‘‘general character and fitness.’’
Prospective officials and employees will be
the subject of credit and background
investigations. The investigation report must
demonstrate each applicant’s ability to
effectively handle financial matters.
Employees and officials should also be
competent, experienced, honest and of good
character. Factors that may lead to
disapproval of a prospective official or
employee include criminal convictions,
indictments, and acts of fraud and
dishonesty. Further, factors such as serious
or unresolved past due credit obligations and
bankruptcies disclosed during credit checks
may disqualify an individual.
NCUA also needs reasonable assurance
that the management team will have the
requisite skills—particularly in leadership
and accounting—and the commitment to
dedicate the time and effort needed to make
the proposed federal credit union a success.
Section 701.14 of NCUA’s Rules and
Regulations sets forth the procedures for
NCUA approval of officials of newly
chartered credit unions. If the application of
a prospective official or employee to serve is
not acceptable to the Office of Consumer
Protection Director, the group can propose an
alternate to act in that individual’s place. If
the charter applicant feels it is essential that
the disqualified individual be retained, the
individual may appeal the Office of
Consumer Protection Director’s decision to
the NCUA Board. If an appeal is pursued,
action on the application may be delayed. If
the appeal is denied by the NCUA Board, an
acceptable new applicant must be provided
before the charter can be approved.
IV.C—Member Support
Economic advisability is a major factor in
determining whether the credit union will be
chartered. An important consideration is the
degree of support from the field of
membership. The charter applicant must be
able to demonstrate that membership support
is sufficient to ensure viability.
NCUA has not set a minimum field of
membership size for chartering a federal
credit union. Consequently, groups of any
size may apply for a credit union charter and
be approved if they demonstrate economic
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76757
advisability. However, it is important to note
that often the size of the group is indicative
of the potential for success. For that reason,
a charter application with fewer than 3,000
primary potential members (e.g., employees
of a corporation or members of an
association) may not be economically
advisable. Therefore, a charter applicant with
a proposed field of membership of fewer than
3,000 primary potential members may have
to provide more support than an applicant
with a larger field of membership. For
example, a small occupational or
associational group may be required to
demonstrate a commitment for long-term
support from the sponsor.
IV.D—Present and Future Market
Conditions—Business Plan
The ability to provide effective service to
members, compete in the marketplace, and to
adapt to changing market conditions are key
to the survival of any enterprise. Before
NCUA will charter a credit union, a business
plan based on realistic and supportable
projections and assumptions must be
submitted.
The business plan should contain, at a
minimum, the following elements:
• Mission statement;
• Analysis of market conditions, including
if applicable, geographic, demographic,
employment, income, housing, and other
economic data;
• Evidence of member support;
• Goals for shares, loans, and for number
of members;
• Financial services needed/desired;
• Financial services to be provided to
members of all segments within the field of
membership;
• How/when services are to be
implemented;
• Organizational/management plan
addressing qualification and planned training
of officials/employees;
• Continuity plan for directors, committee
members and management staff;
• Operating facilities, to include office
space/equipment and supplies, safeguarding
of assets, insurance coverage, etc.;
• Type of record-keeping and data
processing system;
• Detailed semiannual pro forma financial
statements (balance sheet, income and
expense projections) for 1st and 2nd year,
including assumptions—e.g., loan and
dividend rates;
• Plans for operating independently;
• Written policies (shares, lending,
investments, funds management, capital
accumulation, dividends, collections, etc.);
• Source of funds to pay expenses during
initial months of operation, including any
subsidies, assistance, etc., and terms or
conditions of such resources; and
• Evidence of sponsor commitment (or
other source of support) if subsidies are
critical to success of the federal credit union.
Evidence may be in the form of letters,
contracts, financial statements from the
sponsor, and any other such document on
which the proposed federal credit union can
substantiate its projections.
While the business plan may be prepared
with outside assistance, the subscribers and
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V.B.3—Organization Certificate, NCUA 4008
proposed officials must understand and
support the submitted business plan.
V—Steps in Organizing a Federal Credit
Union
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V.A—Getting Started
Following the guidance contained
throughout this policy, the organizers should
submit wording for the proposed field of
membership (the persons, organizations and
other legal entities the credit union will
serve) to NCUA early in the application
process for written preliminary approval. The
proposed field of membership must meet all
common bond or community requirements.
Once the field of membership has been
given preliminary approval, and the
organizer is satisfied the application has
merit, the organizer should conduct an
organizational meeting to elect seven to ten
persons to serve as subscribers. The
subscribers should locate willing individuals
capable of serving on the board of directors,
credit committee, supervisory committee,
and as chief operating officer/manager of the
proposed credit union.
Subsequent organizational meetings may
be held to discuss the progress of the charter
investigation, to announce the proposed slate
of officials, and to respond to any questions
posed at these meetings.
If NCUA approves the charter application,
the subscribers, as their final duty, will elect
the board of directors of the proposed federal
credit union. The new board of directors will
then appoint the supervisory committee.
V.B—Charter Application Documentation
V.B.1—General
As discussed previously in this chapter,
the organizer of a federal credit union charter
must, at a minimum, provide evidence that:
• The group(s) possess an appropriate
common bond or the geographical area to be
served is a well-defined local community,
neighborhood, or rural district;
• The subscribers, prospective officials,
and employees are of good character and
fitness; and
• The establishment of the credit union is
economically advisable.
As part of the application process, the
organizer must submit the following forms,
which are available in appendix 4 of this
manual:
• Federal Credit Union Investigation
Report, NCUA 4001;
• Organization Certificate, NCUA 4008;
• Report of Official and Agreement To
Serve, NCUA 4012;
• Application and Agreements for
Insurance of Accounts, NCUA 9500; and
• Certification of Resolutions, NCUA 9501.
Each of these forms is described in more
detail in the following sections.
V.B.2—Federal Credit Union Investigation
Report, NCUA 4001
The application for a new federal credit
union will be submitted on NCUA 4001.
State-chartered credit unions applying for
conversion to a federal charter will use
NCUA 4000. (See Chapter 4 for a full
discussion.) The organizer is required to
certify the information and recommend
approval or disapproval, based on the
investigation of the request.
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VII—NCUA Review
This document, which must be completed
by the subscribers, includes the seven criteria
established by the Federal Credit Union Act.
NCUA staff assigned to the case will assist in
the proper completion of this document.
VII.A—General
Once NCUA receives a complete charter
application package, an acknowledgment of
receipt will be sent to the organizer. At some
point during the review process, a staff
member will be assigned to perform an onsite contact with the proposed officials and
others having an interest in the proposed
federal credit union.
NCUA staff will review the application
package and verify its accuracy and
reasonableness. A staff member will inquire
into the financial management experience
and the suitability and commitment of the
proposed officials and employees, and will
make an assessment of economic
advisability. The staff member will also
provide guidance to the subscribers in the
proper completion of the Organization
Certificate, NCUA 4008.
Credit and background investigations may
be conducted concurrently by NCUA with
other work being performed by the organizer
and subscribers to reduce the likelihood of
delays in the chartering process.
The staff member will analyze the
prospective credit union’s business plan for
realistic projections, attainable goals,
adequate service to all segments of the field
of membership, sufficient start-up capital,
and time commitment by the proposed
officials and employees. Any concerns will
be reviewed with the organizer and discussed
with the prospective credit union’s officials.
Additional on-site contacts by NCUA staff
may be necessary. The organizer and
subscribers will be expected to take the steps
necessary to resolve any issues or concerns.
Such resolution efforts may delay processing
the application.
NCUA staff will then make a
recommendation to the Office of Consumer
Protection Director regarding the charter
application. The recommendation may
include specific provisions to be included in
a Letter of Understanding and Agreement. In
most cases, NCUA will require the
prospective officials to adhere to certain
operational guidelines. Generally, the
agreement is for a limited term of two to four
years. A sample Letter of Understanding and
Agreement is found in appendix 2 of this
manual.
V.B.4—Report of Official and Agreement To
Serve, NCUA 4012
This form documents general background
information of each official and employee of
the proposed federal credit union. Each
official and employee must complete and
sign this form. The organizer must review
each of the NCUA 4012s for elements that
would prevent the prospective official or
employee from serving. Further, such factors
as serious, unresolved past due credit
obligations and bankruptcies disclosed
during credit checks may disqualify an
individual.
V.B.5—Application and Agreements for
Insurance of Accounts, NCUA 9500
This document contains the agreements
with which federal credit unions must
comply in order to obtain National Credit
Union Share Insurance Fund (NCUSIF)
coverage of member accounts. The document
must be completed and signed by both the
chief executive officer and chief financial
officer. A federal credit union must qualify
for federal share insurance.
V.B.6—Certification of Resolutions, NCUA
9501
This document certifies that the board of
directors of the proposed federal credit union
has resolved to apply for NCUSIF insurance
of member accounts and has authorized the
chief executive officer and recording officer
to execute the Application and Agreements
for Insurance of Accounts. Both the chief
executive officer and recording officer of the
proposed federal credit union must sign this
form.
VI—Name Selection
It is the responsibility of the federal credit
union organizers or officials of an existing
credit union to ensure that the proposed
federal credit union name or federal credit
union name change does not constitute an
infringement on the name of any corporation
in its trade area. This responsibility also
includes researching any service marks or
trademarks used by any other corporation
(including credit unions) in its trade area.
NCUA will ensure, to the extent possible,
that the credit union’s name:
• Is not already being officially used by
another federal credit union;
• Will not be confused with NCUA or
another federal or state agency, or with
another credit union; and
• Does not include misleading or
inappropriate language.
The last three words in the name of every
credit union chartered by NCUA must be
‘‘Federal Credit Union.’’
The word ‘‘community,’’ while not
required, can only be included in the name
of federal credit unions that have been
granted a community charter.
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VII.B—Office of Consumer Protection
Director Approval
Once approved, the board of directors of
the newly formed federal credit union will
receive a signed charter and standard bylaws
from the Office of Consumer Protection
Director. Additionally, the officials will be
advised of the name of the examiner assigned
responsibility for supervising and examining
the credit union.
VII.C—Office of Consumer Protection
Director Disapproval
When the Office of Consumer Protection
Director disapproves any charter application,
in whole or in part, the organizer will be
informed in writing of the specific reasons
for the disapproval. Where applicable, the
Office of Consumer Protection Director will
provide information concerning options or
suggestions that the applicant could consider
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for gaining approval or otherwise acquiring
credit union service. The letter of denial will
include the procedures for appealing the
decision.
VII.D—Appeal of Office of Consumer
Protection Director Decision
If the Office of Consumer Protection
Director denies a charter application, in
whole or in part, that decision may be
appealed to the NCUA Board. An appeal
must be sent to the NCUA Board Secretary
within 60 days of the date of denial and must
address the specific reasons for denial. The
appeal must be clearly identified as such and
address the specific reason(s) the prospective
group disagrees with the denial. A copy of
the appeal must be sent to the Office of
Consumer Protection Director. NCUA central
office staff will make an independent review
of the facts and present the appeal with a
recommendation to the NCUA Board.
Before appealing, the prospective group
may, within 30 days of the denial, provide
supplemental information to the Office of
Consumer Protection Director for
reconsideration. A reconsideration will
contain new and material evidence
addressing the reasons for the initial denial.
The Office of Consumer Protection Director
will have 30 days from the date of the receipt
of the request for reconsideration to make a
final decision. If the request is again denied,
the applicant may proceed with the appeal
process within 60 days of the date of the last
denial. A second request for reconsideration
will be treated as an appeal to the NCUA
Board.
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VII.E—Commencement of Operations
Assistance in commencing operations is
generally available through the various credit
union trade organizations listed in appendix
5 of this manual.
All new federal credit unions are also
encouraged to establish a mentor relationship
with a knowledgeable, experienced credit
union individual or an existing, welloperated credit union. The mentor should
provide guidance and assistance to the new
credit union through attendance at meetings
and general oversight. Upon request, NCUA
will provide assistance in finding a qualified
mentor.
VIII—Future Supervision
Each federal credit union will be examined
regularly by NCUA to determine that it
remains in compliance with applicable laws
and regulations and to determine that it does
not pose undue risk to the NCUSIF. The
examiner will contact the credit union
officials shortly after approval of the charter
in order to arrange for the initial examination
(usually within the first six months of
operation).
The examiner will be responsible for
monitoring the progress of the credit union
and providing the necessary advice and
guidance to ensure it is in compliance with
applicable laws and regulations. The
examiner will also monitor compliance with
the terms of any required Letter of
Understanding and Agreement. Typically,
the examiner will require the credit union to
submit copies of monthly board minutes and
financial statements.
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The Federal Credit Union Act requires all
newly chartered credit unions, up to two
years after the charter anniversary date, to
obtain NCUA approval prior to appointment
of any new board member, credit or
supervisory committee member, or senior
executive officer. Section 701.14 of the
NCUA Rules and Regulations sets forth the
notice and application requirements. If
NCUA issues a Notice of Disapproval, the
newly chartered credit union is prohibited
from making the change.
NCUA may disapprove an individual
serving as a director, committee member or
senior executive officer if it finds that the
competence, experience, character, or
integrity of the individual indicates it would
not be in the best interests of the members
of the credit union or of the public to permit
the individual to be employed by or
associated with the credit union. If a Notice
of Disapproval is issued, the credit union
may appeal the decision to the NCUA Board.
IX—Corporate Federal Credit Unions
A corporate federal credit union is one that
is operated primarily for the purpose of
serving other credit unions. Corporate federal
credit unions operate under and are
administered by the NCUA Office of National
Examinations and Supervision.
X—Groups Seeking Credit Union Service
NCUA will attempt to assist any group in
chartering a credit union or joining an
existing credit union. If the group is not
eligible for federal credit union service,
NCUA will refer the group to the appropriate
state supervisory authority where different
requirements may apply.
XI—Field of Membership Designations
NCUA will designate a credit union based
on the following criteria:
Single Occupational: If a credit union
serves a single occupational sponsor, such as
ABC Corporation, it will be designated as an
occupational credit union. A single
occupational common bond credit union may
also serve a trade, industry, or profession
(TIP), such as all teachers.
Single Associational: If a credit union
serves a single associational sponsor, such as
the Knights of Columbus, it will be
designated as an associational credit union.
Multiple Common Bond: If a credit union
serves more than one group, each of which
has a common bond of occupation and/or
association, it will be designated as a
multiple common bond credit union.
Community: All community credit unions
will be designated as such, followed by a
description of their geographic boundaries,
including but not limited to city or county
boundaries, roadways, rivers, transportation
lines.
Credit unions desiring to confirm or submit
an application to change their designations
should contact the Office of Consumer
Protection.
XII—Foreign Branching
Federal credit unions are permitted to
serve foreign nationals within their fields of
membership wherever they reside provided
they have the ability, resources, and
management expertise to serve such persons.
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Before a credit union opens a branch outside
the United States, it must submit an
application to do so and have prior written
approval of the regional director. A federal
credit union may establish a service facility
on a United States military installation or
United States embassy without prior NCUA
approval.
Chapter 2—Field of Membership
Requirements for Federal Credit Unions
I—Introduction
I.A.1—General
As set forth in Chapter 1, the Federal
Credit Union Act provides for three types of
federal credit union charters—single
common bond (occupational or
associational), multiple common bond
(multiple groups), and community. Section
109 (12 U.S.C. 1759) of the Federal Credit
Union Act sets forth the membership criteria
for each of these three types of credit unions.
The field of membership, which is
specified in Section 5 of the charter, defines
those persons and entities eligible for
membership. A single common bond federal
credit union consists of one group having a
common bond of occupation or association.
A multiple common bond federal credit
union consists of more than one group, each
of which has a common bond of occupation
or association. A community federal credit
union consists of persons or organizations
within a well-defined local community,
neighborhood, or rural district.
Once chartered, a federal credit union can
amend its field of membership; however, the
same common bond or community
requirements for chartering the credit union
must be satisfied. Since there are differences
in the three types of charters, special rules,
which are fully discussed in the following
sections of this chapter, may apply to each.
I.A.2—Special Low-Income Rules
Generally, federal credit unions can only
grant loans and provide services to persons
who have joined the credit union. The
Federal Credit Union Act states that one of
the purposes of federal credit unions is ‘‘to
serve the productive and provident credit
needs of individuals of modest means.’’
Although field of membership requirements
are applicable, special rules set forth in
Chapter 3 of this manual may apply to lowincome designated credit unions and those
credit unions assisting low-income groups or
to a federal credit union that adds an
underserved community to its field of
membership.
II—Occupational Common Bond
II.A.1—General
A single occupational common bond
federal credit union may include in its field
of membership all persons and entities who
share that common bond. NCUA permits a
person’s membership eligibility in a single
occupational common bond group to be
established in five ways:
• Employment (or a long-term contractual
relationship equivalent to employment) in a
single corporation or other legal entity makes
that person part of a single occupational
common bond;
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• Employment in a corporation or other
legal entity with a controlling ownership
interest (which shall not be less than 10
percent) in or by another legal entity makes
that person part of a single occupational
common bond;
• Employment in a corporation or other
legal entity which is related to another legal
entity (such as a company under contract and
possessing a strong dependency relationship
with another company) makes that person
part of a single occupational common bond;
• Employment or attendance at a school
makes that person part of a single
occupational common bond (see Chapter 2,
Section III.A.1 of this manual); or
• Employment in the same Trade,
Industry, or Profession (TIP) (see Chapter 2,
Section II.A.2 of this manual).
A geographic limitation is not a
requirement for a single occupational
common bond. However, for purposes of
describing the field of membership, the
geographic areas being served may be
included in the charter. For example:
• Employees, officials, and persons who
work regularly under contract in Miami,
Florida for ABC Corporation and
subsidiaries;
• Employees of ABC Corporation who are
paid from * * *;
• Employees of ABC Corporation who are
supervised from * * *;
• Employees of ABC Corporation who are
headquartered in * * *; and/or
• Employees of ABC Corporation who
work in the United States.
The corporation or other legal entity (i.e.,
the employer) may also be included in the
common bond—e.g., ‘‘ABC Corporation.’’
The corporation or legal entity will be
defined in the last clause in Section 5 of the
credit union’s charter.
A charter applicant must provide
documentation to establish that the single
occupational common bond requirement has
been met.
Some examples of valid single
occupational common bonds are:
• Employees of the Hunt Manufacturing
Company who work in West Chester,
Pennsylvania. (common bond—same
employer with geographic definition);
• Employees of the Buffalo Manufacturing
Company who work in the United States.
(common bond—same employer with
geographic definition);
• Employees, elected and appointed
officials of municipal government in Parma,
Ohio. (common bond—same employer with
geographic definition);
• Employees of Johnson Soap Company
and its majority owned subsidiary, Johnson
Toothpaste Company, who work in, are paid
from, are supervised from, or are
headquartered in Augusta and Portland,
Maine. (common bond—parent and
subsidiary company with geographic
definition);
• Employees of MMLLJS contractor who
work regularly at the U.S. Naval Shipyard in
Bremerton, Washington. (common bond—
employees of contractors with geographic
definition);
• Employees, doctors, medical staff,
technicians, medical and nursing students
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who work in or are paid from the Newport
Beach Medical Center, Newport Beach,
California. (single corporation with
geographic definition);
• Employees of JLS, Incorporated and
MJM, Incorporated working for the LKM Joint
Venture Company in Catalina Island,
California. (common bond—same employer—
ongoing dependent relationship);
• Employees of and students attending
Georgetown University. (common bond—
same occupation);
• Employees of all the schools supervised
by the Timbrook Board of Education in
Timbrook, Georgia. (common bond—same
employer); or
• All licensed nurses in Fairfax County,
Virginia. (occupational common bond TIP).
In contrast, some examples of
insufficiently defined single occupational
common bonds are:
• Employees of manufacturing firms in
Seattle, Washington. (no defined
occupational sponsor; overly broad TIP);
• Persons employed or working in
Chicago, Illinois. (no occupational common
bond).
II.A.2—Trade, Industry, or Profession
A common bond based on employment in
a trade, industry, or profession can include
employment at any number of corporations
or other legal entities that—while not under
common ownership—have a common bond
by virtue of producing similar products,
providing similar services, or participating in
the same type of business.
While proposed or existing single common
bond credit unions have some latitude in
defining a trade, industry, or profession
occupational common bond, it cannot be
defined so broadly as to include groups in
fields which are not closely related. For
example, the manufacturing industry, energy
industry, communications industry, retail
industry, or entertainment industry would
not qualify as a TIP because each industry
lacks the necessary commonality. However,
textile workers, realtors, nurses, teachers,
police officers, or U.S. military personnel are
closely related and each would qualify as a
TIP.
The common bond relationship must be
one that demonstrates a narrow commonality
of interests within a specific trade, industry,
or profession. If a credit union wants to serve
a physician TIP, it can serve all physicians,
but that does not mean it can also serve all
clerical staff in the physicians’ offices.
However, if the TIP is based on the health
care industry, then clerical staff would be
able to be served by the credit union because
they work in the same industry and have the
same commonality of interests.
If a credit union wants to include the
airline services industry, it can serve airline
and airport personnel but not passengers.
Clients or customers of the TIP are not
eligible for credit union membership (e.g.,
patients in hospitals). Any company that is
involved in more than one industry cannot
be included in an industry TIP (e.g., a
company that makes tobacco products, food
products, and electronics). However,
employees of these companies may be
eligible for membership in a variety of trade/
profession occupational common bond TIPs.
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Although a TIP must be narrowly defined,
and cannot include third-party vendors and
other suppliers, it may include, on a case by
case basis with NCUA approval, employees
of types of entities that have a strong
dependency relationship and work directly
with other types of entities within the
industry. As one example, an FCU may serve
employees of companies within the Airline
Transportation Industry that have a strong
dependency relationship with airlines or
airports, without the limitation that these
employees work at an airport. This is
provided they work directly with the
following: Air transportation of freight, air
courier services; air passenger services;
airport baggage handling; airport security;
commercial airport janitorial services;
maintenance, servicing, and repair services;
and on board airline food services. The
employees of those entities have a narrow
commonality of interests, share the single
occupational common bond, and can be
included within the Air Transportation
Industry field of membership.
In general, except for credit unions serving
a national field of membership or operating
in multiple states, a geographic limitation is
required for a TIP credit union. The
geographic limitation will be part of the
credit union’s charter and generally
correspond to its current or planned
operational area. More than one federal credit
union may serve the same trade, industry, or
profession, even if both credit unions are in
the same geographic location.
This type of occupational common bond is
only available to single common bond credit
unions. A TIP cannot be added to a multiple
common bond or community field of
membership.
To obtain a TIP designation, the proposed
or existing credit union must submit a
request to the Office of Consumer Protection
Director. New charter applicants must follow
the documentation requirements in Chapter 1
of this manual. New charter applicants and
existing credit unions must submit a business
plan on how the credit union will serve the
group with the request to serve the TIP. The
business plan also must address how the
credit union will verify the TIP. Examples of
such verification include state licenses,
professional licenses, organizational
memberships, pay statements, union
membership, or employer certification. The
Office of Consumer Protection Director must
approve this type of field of membership
before a credit union can serve a TIP. Credit
unions converting to a TIP can retain
members of record but cannot add new
members from its previous group or groups,
unless it is part of the TIP.
Section II.B of this manual, on
Occupational Common Bond Amendments,
does not apply to a TIP common bond.
Removing or changing a geographical
limitation will be processed as a
housekeeping amendment. If safety and
soundness concerns are present, the Office of
Consumer Protection Director may require
additional information before the request can
be processed.
Section II.H, on Other Persons Eligible for
Credit Union Membership, applies to TIP
based credit unions except for the corporate
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account provision which only applies to
industry based TIPs. Credit unions with
industry based TIPs may include
corporations as members because they have
the same commonality of interests as all
employees in the industry. For example, an
airline service TIP (industry) can serve an
airline carrier (corporate account); however,
a nurses TIP (profession) could not serve a
hospital (corporate account) because not
everyone working in the hospital shares the
same profession.
If a TIP designated credit union wishes to
convert to a different TIP or employer-based
occupational common bond, or different
charter type, it only retains members of
record after the conversion. The Office of
Consumer Protection Director, for safety and
soundness reasons, may approve a TIP
designated credit union to convert to its
original field of membership.
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II.B—Occupational Common Bond
Amendments
II.B.1—General
Section 5 of every single occupational
federal credit union’s charter defines the
field of membership the credit union can
legally serve. Only those persons or legal
entities specified in the field of membership
can be served. There are a number of
instances in which Section 5 must be
amended by NCUA.
First, a group sharing the credit union’s
common bond is added to the field of
membership. This may occur through various
ways including agreement between the group
and the credit union directly, or through a
merger, corporate acquisition, purchase and
assumption (P&A), or spin-off.
Second, if the entire field of membership
is acquired by another corporation, the credit
union can serve the employees of the new
corporation and any subsidiaries after
receiving NCUA approval.
Third, a federal credit union qualifies to
change its common bond from:
• A single occupational common bond to
a single associational common bond;
• A single occupational common bond to
a community charter; or
• A single occupational common bond to
a multiple common bond.
Fourth, a federal credit union removes a
portion of the group from its field of
membership through agreement with the
group, a spin-off, or because a portion of the
group is no longer in existence.
An existing single occupational common
bond federal credit union that submits a
request to amend its charter must provide
documentation to establish that the
occupational common bond requirement has
been met. The Office of Consumer Protection
Director must approve all amendments to an
occupational common bond credit union’s
field of membership.
II.B.2—Corporate Restructuring
If the single common bond group that
comprises a federal credit union’s field of
membership undergoes a substantial
restructuring, the result is often that portions
of the group are sold or spun off. This
requires a change to the credit union’s field
of membership. NCUA will not permit a
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single common bond credit union to
maintain in its field of membership a sold or
spun-off group to which it has been
providing service unless the group otherwise
qualifies for membership in the credit union
or the credit union converts to a multiple
common bond credit union.
If the group comprising the single common
bond of the credit union merges with, or is
acquired by, another group, the credit union
can serve the new group resulting from the
merger or acquisition after receiving a
housekeeping amendment.
II.B.3—Economic Advisability
Prior to granting a common bond
expansion, NCUA will examine the
amendment’s likely effect on the credit
union’s operations and financial condition.
In most cases, the information needed for
analyzing the effect of adding a particular
group will be available to NCUA through the
examination and financial and statistical
reports; however, in particular cases, the
Office of Consumer Protection Director may
require additional information prior to
making a decision.
II.B.4—Documentation Requirements
A federal credit union requesting a
common bond expansion must submit an
Application for Field of Membership
Amendment (NCUA 4015–EZ) to the Office
of Consumer Protection Director. An
authorized credit union representative must
sign the request.
II.C—NCUA’s Procedures for Amending the
Field of Membership
II.C.1—General
All requests for approval to amend a
federal credit union’s charter must be
submitted to the Office of Consumer
Protection Director.
II.C.2—Office of Consumer Protection
Director Decision
NCUA staff will review all amendment
requests in order to ensure compliance with
NCUA policy.
Before acting on a proposed amendment,
the Office of Consumer Protection Director
may require an on-site review. In addition,
the Office of Consumer Protection Director
may, after taking into account the
significance of the proposed field of
membership amendment, require the
applicant to submit a business plan
addressing specific issues.
The financial and operational condition of
the requesting credit union will be
considered in every instance. NCUA will
carefully consider the economic advisability
of expanding the field of membership of a
credit union with financial or operational
problems.
In most cases, field of membership
amendments will only be approved for credit
unions that are operating satisfactorily.
Generally, if a federal credit union is having
difficulty providing service to its current
membership, or is experiencing financial or
other operational problems, it may have more
difficulty serving an expanded field of
membership.
Occasionally, however, an expanded field
of membership may provide the basis for
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reversing current financial problems. In such
cases, an amendment to expand the field of
membership may be granted notwithstanding
the credit union’s financial or operational
problems. The applicant credit union must
clearly establish that the expanded field of
membership is in the best interest of the
members and will not increase the risk to the
NCUSIF.
II.C.3—Office of Consumer Protection
Director Approval
If the Office of Consumer Protection
Director approves the requested amendment,
the credit union will be issued an
amendment to Section 5 of its charter.
II.C.4—Office of Consumer Protection
Director Disapproval
When the Office of Consumer Protection
Director disapproves any application, in
whole or in part, to amend the field of
membership under this chapter, the
applicant will be informed in writing of the:
• Specific reasons for the action;
• Options to consider, if appropriate, for
gaining approval; and
• Appeal procedure.
II.C.5—Appeal of Office of Consumer
Protection Director Decision
If a field of membership expansion request,
merger, or spin-off is denied by staff, the
federal credit union may appeal the decision
to the NCUA Board. An appeal must be sent
to the NCUA Board Secretary within 60 days
of the date of denial. The appeal must be
clearly identified as such and must address
the specific reason(s) the federal credit union
disagrees with the denial. A copy of the
appeal must be sent to the Office of
Consumer Protection, or as applicable, the
appropriate regional office. NCUA central
office staff will make an independent review
of the facts and present the appeal to the
Board with a recommendation.
Before appealing, the credit union may,
within 30 days of the denial, provide
supplemental information to the office
rendering the initial decision for
reconsideration. A reconsideration will
contain new and material evidence
addressing the reasons for the initial denial.
The office rendering the initial decision will
have 30 days from the date of the receipt of
the request for reconsideration to make a
final decision. If the request is again denied,
the applicant may proceed with the appeal
process within 60 days of the date of the last
denial. A second request for reconsideration
will be treated as an appeal to the NCUA
Board.
II.D—Mergers, Purchase and Assumptions,
and Spin-Offs
In general, other than the addition of
common bond groups, there are three
additional ways a federal credit union with
a single occupational common bond can
expand its field of membership:
• By taking in the field of membership of
another credit union through a common bond
or emergency merger;
• By taking in the field of membership of
another credit union through a common bond
or emergency purchase and assumption
(P&A); or
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• By taking a portion of another credit
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common bond spin-off.
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II.D.1—Mergers
Generally, the requirements applicable to
field of membership expansions found in this
chapter apply to mergers where the
continuing credit union has a federal charter.
That is, the two credit unions must share a
common bond.
Where the merging credit union is statechartered, the common bond rules applicable
to a federal credit union apply.
Mergers must be approved by the NCUA
regional director where the continuing credit
union is headquartered, with the concurrence
of the regional director of the merging credit
union, and, as applicable, the state
regulators.
If a single occupational credit union wants
to merge into a multiple common bond or
community credit union, Section IV.D or
Section V.D of this chapter, respectively,
should be reviewed.
II.D.2—Emergency Mergers
An emergency merger may be approved by
NCUA without regard to common bond or
other legal constraints. An emergency merger
involves NCUA’s direct intervention and
approval. The credit union to be merged
must either be insolvent or in danger of
insolvency, as defined in the Glossary, and
NCUA must determine that:
• An emergency requiring expeditious
action exists;
• Other alternatives are not reasonably
available; and
• The public interest would best be served
by approving the merger.
If not corrected, conditions that could lead
to insolvency include, but are not limited to:
• Abandonment by management;
• Loss of sponsor;
• Serious and persistent recordkeeping
problems; or
• Serious and persistent operational
concerns.
In an emergency merger situation, NCUA
will take an active role in finding a suitable
merger partner (continuing credit union).
NCUA is primarily concerned that the
continuing credit union has the financial
strength and management expertise to absorb
the troubled credit union without adversely
affecting its own financial condition and
stability.
As a stipulated condition to an emergency
merger, the field of membership of the
merging credit union may be transferred
intact to the continuing federal credit union
without regard to any common bond
restrictions. Under this authority, therefore, a
single occupational common bond federal
credit union may take into its field of
membership any dissimilar charter type.
The common bond characteristic of the
continuing credit union in an emergency
merger does not change. That is, even though
the merging credit union is a multiple
common bond or community, the continuing
credit union will remain a single common
bond credit union. Similarly, if the merging
credit union is also an unlike single common
bond, the continuing credit union will
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remain a single common bond credit union.
Future common bond expansions will be
based on the continuing credit union’s
original single common bond.
Emergency mergers involving federally
insured credit unions in different NCUA
regions must be approved by the regional
director where the continuing credit union is
headquartered, with the concurrence of the
regional director of the merging credit union
and, as applicable, the state regulators.
II.D.3—Purchase and Assumption (P&A)
Another alternative for acquiring the field
of membership of a failing credit union is
through a consolidation known as a P&A. A
P&A has limited application because, in most
cases, the failing credit union must be placed
into involuntary liquidation. In the few
instances where a P&A may be appropriate,
the assuming federal credit union, as with
emergency mergers, may acquire the entire
field of membership if the emergency merger
criteria are satisfied. However, if the P&A
does not meet the emergency merger criteria,
it must be processed under the common bond
requirements.
In a P&A processed under the emergency
criteria, specified loans, shares, and certain
other designated assets and liabilities,
without regard to common bond restrictions,
may also be acquired without changing the
character of the continuing federal credit
union for purposes of future field of
membership amendments.
If the purchased and/or assumed credit
union’s field of membership does not share
a common bond with the purchasing and/or
assuming credit union, then the continuing
credit union’s original common bond will be
controlling for future common bond
expansions.
P&As involving federally insured credit
unions in different NCUA regions must be
approved by the regional director where the
continuing credit union is headquartered,
with the concurrence of the regional director
of the purchased and/or assumed credit
union and, as applicable, the state regulators.
II.D.4—Spin-Offs
A spin-off occurs when, by agreement of
the parties, a portion of the field of
membership, assets, liabilities, shares, and
capital of a credit union are transferred to a
new or existing credit union. A spin-off is
unique in that usually one credit union has
a field of membership expansion and the
other loses a portion of its field of
membership.
All common bond requirements apply
regardless of whether the spun-off group
becomes a new credit union or goes to an
existing federal charter.
The request for approval of a spin-off must
be supported with a plan that addresses, at
a minimum:
• Why the spin-off is being requested;
• What part of the field of membership is
to be spun off;
• Whether the affected credit unions have
a common bond (applies only to single
occupational credit unions);
• Which assets, liabilities, shares, and
capital are to be transferred;
• The financial impact the spin-off will
have on the affected credit unions;
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• The ability of the acquiring credit union
to effectively serve the new members;
• The proposed spin-off date; and
• Disclosure to the members of the
requirements set forth above.
The spin-off request must also include
current financial statements from the affected
credit unions and the proposed voting ballot.
For federal credit unions spinning off a
group, membership notice and voting
requirements and procedures are the same as
for mergers (see part 708 of the NCUA Rules
and Regulations), except that only the
members directly affected by the spin-off—
those whose shares are to be transferred—are
permitted to vote. Members whose shares are
not being transferred will not be afforded the
opportunity to vote. All members of the
group to be spun off (whether they voted in
favor, against, or not at all) will be transferred
if the spin-off is approved by the voting
membership. Voting requirements for
federally insured state credit unions are
governed by state law.
Spin-offs involving federally insured credit
unions in different NCUA regions must be
approved by all regional directors where the
credit unions are headquartered and the state
regulators, as applicable. Spin-offs in the
same region also require approval by the state
regulator, as applicable. Spin-offs involving
the creation of a new federally insured credit
union require the approval of the Office of
Consumer Protection Director. The Office of
Consumer Protection also provides advice
regarding field of membership compatibility
when appropriate.
II.E—Overlaps
II.E.1—General
An overlap exists when a group of persons
is eligible for membership in two or more
credit unions. NCUA will permit single
occupational federal credit unions to overlap
any other charter without performing an
overlap analysis.
II.E.2—Organizational Restructuring
A federal credit union’s field of
membership will always be governed by the
common bond descriptions contained in
Section 5 of its charter. Where a sponsor
organization expands its operations
internally, by acquisition or otherwise, the
credit union may serve these new entrants to
its field of membership if they are part of the
common bond described in Section 5. NCUA
will permit a complete overlap of the credit
unions’ fields of membership.
If a sponsor organization sells off a group,
new members can no longer be served unless
they otherwise qualify for membership in the
credit union or it converts to a multiple
common bond charter.
Credit unions must submit documentation
explaining the restructuring and providing
information regarding the new organizational
structure.
II.E.3—Exclusionary Clauses
An exclusionary clause is a limitation
precluding the credit union from serving the
primary members of a portion of a group
otherwise included in its field of
membership. NCUA no longer grants
exclusionary clauses. Those granted prior to
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the adoption of this new Chartering and Field
of Membership Manual will remain in effect
unless the credit unions agree to remove
them or one of the affected credit unions
submits a housekeeping amendment to have
it removed.
II.F—Charter Conversion
A single occupational common bond
federal credit union may apply to convert to
a community charter provided the field of
membership requirements of the community
charter are met. Groups within the existing
charter which cannot qualify in the new
charter cannot be served except for members
of record, or groups or communities obtained
in an emergency merger or P&A. A credit
union must notify all groups that will be
removed from the field of membership as a
result of conversion. Members of record can
continue to be served. Also, in order to
support a case for a conversion, the applicant
federal credit union may be required to
develop a detailed business plan as specified
in Chapter 2, Section V.A.3 of this manual.
A single occupational common bond
federal credit union may apply to convert to
a multiple common bond charter by adding
a non-common bond group that is within a
reasonable proximity of a service facility.
Groups within the existing charter may be
retained and continue to be served. However,
future amendments, including any
expansions of the original single common
bond group, must be done in accordance
with multiple common bond policy.
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II.G—Removal of Groups From the Field of
Membership
A credit union may request removal of a
portion of the common bond group from its
field of membership for various reasons. The
most common reasons for this type of
amendment are:
• The group is within the field of
membership of two credit unions and one
wishes to discontinue service;
• The federal credit union cannot continue
to provide adequate service to the group;
• The group has ceased to exist;
• The group does not respond to repeated
requests to contact the credit union or refuses
to provide needed support; or
• The group initiates action to be removed
from the field of membership.
When a federal credit union requests an
amendment to remove a group from its field
of membership, the Office of Consumer
Protection Director will determine why the
credit union desires to remove the group. If
the Office of Consumer Protection Director
concurs with the request, membership will
continue for those who are already members
under the ‘‘once a member, always a
member’’ provision of the Federal Credit
Union Act.
II.H—Other Persons Eligible for Credit
Union Membership
A number of persons, by virtue of their
close relationship to a common bond group,
may be included, at the charter applicant’s
option, in the field of membership. These
include the following:
• Spouses of persons who died while
within the field of membership of this credit
union;
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• Employees of this credit union;
• Persons retired as pensioners or
annuitants from the above employment;
• Volunteers;
• Members of the immediate family or
household;
• Honorably discharged veterans who
served in any of the Armed Services of the
United States listed in this charter;
Organizations of such persons; and
• Corporate or other legal entities in this
charter.
Immediate family is defined as spouse,
child, sibling, parent, grandparent, or
grandchild. This includes stepparents,
stepchildren, stepsiblings, and adoptive
relationships.
Household is defined as persons living in
the same residence maintaining a single
economic unit.
Membership eligibility is extended only to
individuals who are members of an
‘‘immediate family or household’’ of a credit
union member. It is not necessary for the
primary member to join the credit union in
order for the immediate family or household
member of the primary member to join,
provided the immediate family or household
clause is included in the field of
membership. However, it is necessary for the
immediate family member or household
member to first join in order for that person’s
immediate family member or household
member to join the credit union. A credit
union can adopt a more restrictive definition
of immediate family or household.
Volunteers, by virtue of their close
relationship with a sponsor group, may be
included. Examples include volunteers
working at a hospital or school.
Under the Federal Credit Union Act, once
a person becomes a member of the credit
union, such person may remain a member of
the credit union until the person chooses to
withdraw or is expelled from the
membership of the credit union. This is
commonly referred to as ‘‘once a member,
always a member.’’ The ‘‘once a member,
always a member’’ provision does not
prevent a credit union from restricting
services to members who are no longer
within the field of membership.
III—Associational Common Bond
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:
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• 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
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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. Specifically, this
means the federal credit union’s and the
group’s respective business transactions,
accounts, and corporate records are not
intermingled.
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 of this section.
III.A.1.b—Pre-Approved Groups
NCUA automatically approves the below
groups as satisfying the associational
common bond provisions. 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;
(7) Parent teacher associations (PTAs)
organized at the local level to serve a single
school district;
(8) Chamber of commerce groups (members
only and not employees of members);
(9) Athletic booster clubs whose members
have voting rights;
(10) Fraternal organizations or civic groups
with a mission of community service whose
members have voting rights;
(11) Organizations having a mission based
on preserving or furthering the culture of a
particular national or ethnic origin; and
(12) Organizations promoting social
interaction or educational initiatives among
persons sharing a common occupational
profession.
III.A.1.c—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.
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
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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
membership, may qualify as a valid
associational common bond.
III.A.2—Subsequent Changes to Association’s
Bylaws
If the association’s membership or
geographical definitions in its charter and
bylaws are changed subsequent to the
effective date stated in the field of
membership, the credit union must submit
the revised charter or bylaws for NCUA’s
consideration and approval prior to serving
members of the association added as a result
of the change.
III.A.3—Sample Single Associational
Common Bonds
Some examples of associational common
bonds are:
• Regular members of Locals 10 and 13,
IBEW, in Florida, who qualify for
membership in accordance with their charter
and bylaws in effect on May 20, 2001;
• Members of the Hoosier Farm Bureau in
Grant, Logan, or Lee Counties of Indiana,
who qualify for membership in accordance
with its charter and bylaws in effect on
March 7, 1997;
• Members of the Shalom Congregation in
Chevy Chase, Maryland;
• Regular members of the Corporate
Executives Association, located in
Westchester, New York, who qualify for
membership in accordance with its charter
and bylaws in effect on December 1, 1997;
• Members of the University of Wisconsin
Alumni Association, located in Green Bay,
Wisconsin;
• Members of the Marine Corps Reserve
Officers Association; or
• Members of St. John’s Methodist Church
and St. Luke’s Methodist Church, located in
Toledo, Ohio.
Some examples of insufficiently defined
single associational common bonds are:
• All Lutherans in the United States (too
broadly defined); or
• Veterans of U.S. military service (group
is too broadly defined; no formal association
of all members of the group).
Some examples of unacceptable single
associational common bonds are:
• Alumni of Amos University (no formal
association);
• Customers of Fleetwood Insurance
Company (policyholders or primarily
customer/client relationships do not meet
associational standards);
• Employees of members of the Reston,
Virginia, Chamber of Commerce (not a
sufficiently close tie to the associational
common bond); or
• Members of St. John’s Lutheran Church
and St. Mary’s Catholic Church located in
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Anniston, Alabama (churches are not of the
same denomination).
III.B—Associational Common Bond
Amendments
III.B.1—General
Section 5 of every associational federal
credit union’s charter defines the field of
membership the credit union can legally
serve. Only those persons who, or legal
entities that, join the credit union and are
specified in the field of membership can be
served. There are three instances in which
Section 5 must be amended by NCUA.
First, a group that shares the credit union’s
common bond is added to the field of
membership. This may occur through various
ways including agreement between the group
and the credit union directly, or through a
merger, purchase and assumption (P&A), or
spin-off.
Second, a federal credit union qualifies to
change its common bond from:
• A single associational common bond to
a single occupational common bond;
• A single associational common bond to
a community charter; or
• A single associational common bond to
a multiple common bond.
Third, a federal credit union removes a
portion of the group from its field of
membership through agreement with the
group, a spin-off, or a portion of the group
that is no longer in existence.
An existing single associational federal
credit union that submits a request to amend
its charter must provide documentation to
establish that the associational common bond
requirement has been met. The Office of
Consumer Protection Director must approve
all amendments to an associational common
bond credit union’s field of membership.
III.B.2—Organizational Restructuring
If the single common bond group that
comprises a federal credit union’s field of
membership undergoes a substantial
restructuring, the result is often that portions
of the group are sold or spun off. This is an
event requiring a change to the credit union’s
field of membership. NCUA may not permit
a single associational credit union to
maintain in its field of membership a sold or
spun-off group to which it has been
providing service unless the group otherwise
qualifies for membership in the credit union
or the credit union converts to a multiple
common bond credit union.
If the group comprising the single common
bond of the credit union merges with, or is
acquired by, another group, the credit union
can serve the new group resulting from the
merger or acquisition after receiving a
housekeeping amendment.
III.B.3—Economic Advisability
Prior to granting a common bond
expansion, NCUA will examine the
amendment’s likely impact on the credit
union’s operations and financial condition.
In most cases, the information needed for
analyzing the effect of adding a particular
group will be available to NCUA through the
examination and financial and statistical
reports; however, in particular cases, the
Office of Consumer Protection Director may
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require additional information prior to
making a decision.
III.B.4—Documentation Requirements
A federal credit union requesting a
common bond expansion must submit an
Application for Field of Membership
Amendment (NCUA 4015–EZ) to the Office
of Consumer Protection Director. An
authorized credit union representative must
sign the request.
III.C—NCUA Procedures for Amending the
Field of Membership
III.C.1—General
All requests for approval to amend a
federal credit union’s charter must be
submitted to the Office of Consumer
Protection Director.
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III.C.2—Office of Consumer Protection
Director Decision
NCUA staff will review all amendment
requests in order to ensure conformance to
NCUA policy.
Before acting on a proposed amendment,
the Office of Consumer Protection Director
may require an on-site review. In addition,
the Office of Consumer Protection Director
may, after taking into account the
significance of the proposed field of
membership amendment, require the
applicant to submit a business plan
addressing specific issues.
The financial and operational condition of
the requesting credit union will be
considered in every instance. The economic
advisability of expanding the field of
membership of a credit union with financial
or operational problems must be carefully
considered.
In most cases, field of membership
amendments will only be approved for credit
unions that are operating satisfactorily.
Generally, if a federal credit union is having
difficulty providing service to its current
membership, or is experiencing financial or
other operational problems, it may have more
difficulty serving an expanded field of
membership.
Occasionally, however, an expanded field
of membership may provide the basis for
reversing current financial problems. In such
cases, an amendment to expand the field of
membership may be granted notwithstanding
the credit union’s financial or operational
problems. The applicant credit union must
clearly establish that the expanded field of
membership is in the best interest of the
members and will not increase the risk to the
NCUSIF.
III.C.3—Office of Consumer Protection
Director Approval
If the Office of Consumer Protection
Director approves the requested amendment,
the credit union will be issued an
amendment to Section 5 of its charter.
III.C.4—Office of Consumer Protection
Director Disapproval
When the Office of Consumer Protection
Director disapproves any application, in
whole or in part, to amend the field of
membership under this chapter, the
applicant will be informed in writing of the:
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• Specific reasons for the action;
• Options to consider, if appropriate, for
gaining approval; and
• Appeal procedures.
III.C.5—Appeal of Office of Consumer
Protection Director Decision
If a field of membership expansion request,
merger, or spin-off is denied by staff, the
federal credit union may appeal the decision
to the NCUA Board. An appeal must be sent
to the NCUA Board Secretary within 60 days
of the date of denial and must be clearly
identified as such and address the reason(s)
the federal credit union disagrees with the
denial. A copy of the appeal must be sent to
the Office of Consumer Protection, or as
applicable, the appropriate regional office.
NCUA central office staff will make an
independent review of the facts and present
the appeal to the NCUA Board with a
recommendation.
Before appealing, the credit union may,
within 30 days of the denial, provide
supplemental information to the office
rendering the initial decision for
reconsideration. A reconsideration will
contain new and material evidence
addressing the reasons for the initial denial.
The office rendering the initial decision will
have 30 days from the date of the receipt of
the request for reconsideration to make a
final decision. If the request is again denied,
the applicant may proceed with the appeal
process within 60 days of the date of the last
denial. A second request for reconsideration
will be treated as an appeal to the NCUA
Board.
III.D—Mergers, Purchase and Assumptions,
and Spin-Offs
In general, other than the addition of
common bond groups, there are three
additional ways a federal credit union with
a single associational common bond can
expand its field of membership:
• By taking in the field of membership of
another credit union through a common bond
or emergency merger;
• By taking in the field of membership of
another credit union through a common bond
or emergency purchase and assumption
(P&A); or
• By taking a portion of another credit
union’s field of membership through a
common bond spin-off.
III.D.1—Mergers
Generally, the requirements applicable to
field of membership expansions found in this
section apply to mergers where the
continuing credit union is a federal charter.
That is, the two credit unions must share a
common bond.
Where the merging credit union is statechartered, the common bond rules applicable
to a federal credit union apply.
Mergers must be approved by the NCUA
regional director where the continuing credit
union is headquartered, with the concurrence
of the regional director of the merging credit
union, and, as applicable, the state
regulators.
If a single associational credit union wants
to merge into a multiple common bond or
community credit union, Section IV.D or
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Section V.D of this chapter, respectively,
should be reviewed.
III.D.2—Emergency Mergers
An emergency merger may be approved by
NCUA without regard to common bond or
other legal constraints. An emergency merger
involves NCUA’s direct intervention and
approval. The credit union to be merged
must either be insolvent or in danger of
insolvency, as defined in the Glossary, and
NCUA must determine that:
• An emergency requiring expeditious
action exists;
• Other alternatives are not reasonably
available; and
• The public interest would best be served
by approving the merger.
If not corrected, conditions that could lead
to insolvency include, but are not limited to:
• Abandonment by management;
• Loss of sponsor;
• Serious and persistent record-keeping
problems; or
• Serious and persistent operational
concerns.
In an emergency merger situation, NCUA
will take an active role in finding a suitable
merger partner (continuing credit union).
NCUA is primarily concerned that the
continuing credit union has the financial
strength and management expertise to absorb
the troubled credit union without adversely
affecting its own financial condition and
stability.
As a stipulated condition to an emergency
merger, the field of membership of the
merging credit union may be transferred
intact to the continuing federal credit union
without regard to any common bond
restrictions. Under this authority, therefore, a
single associational common bond federal
credit union may take into its field of
membership any dissimilar charter type.
The common bond characteristic of the
continuing credit union in an emergency
merger does not change. That is, even though
the merging credit union is a multiple
common bond or community, the continuing
credit union will remain a single common
bond credit union. Similarly, if the merging
credit union is an unlike single common
bond, the continuing credit union will
remain a single common bond credit union.
Future common bond expansions will be
based on the continuing credit union’s single
common bond.
Emergency mergers involving federally
insured credit unions in different NCUA
regions must be approved by the regional
director where the continuing credit union is
headquartered, with the concurrence of the
regional director of the merging credit union
and, as applicable, the state regulators.
III.D.3—Purchase and Assumption (P&A)
Another alternative for acquiring the field
of membership of a failing credit union is
through a consolidation known as a P&A. A
P&A has limited application because, in most
cases, the failing credit union must be placed
into involuntary liquidation. In the few
instances where a P&A may be appropriate,
the assuming federal credit union, as with
emergency mergers, may acquire the entire
field of membership if the emergency merger
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criteria are satisfied. However, if the P&A
does not meet the emergency merger criteria,
it must be processed under the common bond
requirements.
In a P&A processed under the emergency
criteria, specified loans, shares, and certain
other designated assets and liabilities,
without regard to common bond restrictions,
may also be acquired without changing the
character of the continuing federal credit
union for purposes of future field of
membership amendments.
If the purchased and/or assumed credit
union’s field of membership does not share
a common bond with the purchasing and/or
assuming credit union, then the continuing
credit union’s original common bond will be
controlling for future common bond
expansions.
P&As involving federally insured credit
unions in different NCUA regions must be
approved by the regional director where the
continuing credit union is headquartered,
with the concurrence of the regional director
of the purchased and/or assumed credit
union and, as applicable, the state regulators.
III.D.4—Spin-Offs
A spin-off occurs when, by agreement of
the parties, a portion of the field of
membership, assets, liabilities, shares, and
capital of a credit union are transferred to a
new or existing credit union. A spin-off is
unique in that usually one credit union has
a field of membership expansion and the
other loses a portion of its field of
membership.
All common bond requirements apply
regardless of whether the spun-off group
becomes a new credit union or goes to an
existing federal charter.
The request for approval of a spin-off must
be supported with a plan that addresses, at
a minimum:
• Why the spin-off is being requested;
• What part of the field of membership is
to be spun off;
• Whether the affected credit unions have
the same common bond (applies only to
single associational credit unions);
• Which assets, liabilities, shares, and
capital are to be transferred;
• The financial impact the spin-off will
have on the affected credit unions;
• The ability of the acquiring credit union
to effectively serve the new members;
• The proposed spin-off date; and
• Disclosure to the members of the
requirements set forth above.
The spin-off request must also include
current financial statements from the affected
credit unions and the proposed voting ballot.
For federal credit unions spinning off a
group, membership notice and voting
requirements and procedures are the same as
for mergers (see part 708 of the NCUA Rules
and Regulations), except that only the
members directly affected by the spin-off—
those whose shares are to be transferred—are
permitted to vote. Members whose shares are
not being transferred will not be afforded the
opportunity to vote. All members of the
group to be spun off (whether they voted in
favor, against, or not at all) will be transferred
if the spin-off is approved by the voting
membership. Voting requirements for
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federally insured state credit unions are
governed by state law.
Spin-offs involving federally insured credit
unions in different NCUA regions must be
approved by all regional directors where the
credit unions are headquartered and the state
regulators, as applicable. Spin-offs in the
same region also require approval by the state
regulator, as applicable. Spin-offs involving
the creation of a new federally insured credit
union require the approval of the Office of
Consumer Protection Director. The Office of
Consumer Protection also provides advice
regarding field of membership compatibility
when appropriate.
III.E—Overlaps
III.E.1—General
An overlap exists when a group of persons
is eligible for membership in two or more
credit unions. NCUA will permit single
associational federal credit unions to overlap
any other charters without performing an
overlap analysis.
III.E.2—Organizational Restructuring
A federal credit union’s field of
membership will always be governed by the
common bond descriptions contained in
Section 5 of its charter. Where a sponsor
organization expands its operations
internally, by acquisition or otherwise, the
credit union may serve these new entrants to
its field of membership if they are part of the
common bond described in Section 5. NCUA
will permit a complete overlap of the credit
unions’ fields of membership. If a sponsor
organization sells off a group, new members
can no longer be served unless they
otherwise qualify for membership in the
credit union or it converts to a multiple
common bond.
Credit unions must submit documentation
explaining the restructuring and providing
information regarding the new organizational
structure.
III.E.3—Exclusionary Clauses
An exclusionary clause is a limitation
precluding the credit union from serving the
primary members of a portion of a group
otherwise included in its field of
membership. NCUA no longer grants
exclusionary clauses. Those granted prior to
the adoption of this new Chartering and Field
of Membership Manual will remain in effect
unless the credit unions agree to remove
them or one of the affected credit unions
submits a housekeeping amendment to have
it removed.
III.F—Charter Conversions
A single associational common bond
federal credit union may apply to convert to
a community charter provided the field of
membership requirements of the community
charter are met. Groups within the existing
charter which cannot qualify in the new
charter cannot be served except for members
of record, or groups or communities obtained
in an emergency merger or P&A. A credit
union must notify all groups that will be
removed from the field of membership as a
result of conversion. Members of record can
continue to be served. Also, in order to
support a case for a conversion, the applicant
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federal credit union may be required to
develop a detailed business plan as specified
in Chapter 2, Section V.A.3 of this manual.
A single associational common bond
federal credit union may apply to convert to
a multiple common bond charter by adding
a non-common bond group that is within a
reasonable proximity of a service facility.
Groups within the existing charter may be
retained and continue to be served. However,
future amendments, including any
expansions of the original single common
bond group, must be done in accordance
with multiple common bond policy.
III.G—Removal of Groups From the Field of
Membership
A credit union may request removal of a
portion of the common bond group from its
field of membership for various reasons. The
most common reasons for this type of
amendment are:
• The group is within the field of
membership of two credit unions and one
wishes to discontinue service;
• The federal credit union cannot continue
to provide adequate service to the group;
• The group has ceased to exist;
• The group does not respond to repeated
requests to contact the credit union or refuses
to provide needed support; or
• The group initiates action to be removed
from the field of membership.
When a federal credit union requests an
amendment to remove a group from its field
of membership, the Office of Consumer
Protection Director will determine why the
credit union desires to remove the group. If
the Office of Consumer Protection Director
concurs with the request, membership will
continue for those who are already members
under the ‘‘once a member, always a
member’’ provision of the Federal Credit
Union Act.
III.H—Other Persons Eligible for Credit
Union Membership
A number of persons by virtue of their
close relationship to a common bond group
may be included, at the charter applicant’s
option, in the field of membership. These
include the following:
• Spouses of persons who died while
within the field of membership of this credit
union;
• Employees of this credit union;
• Volunteers;
• Members of the immediate family or
household;
• Honorably discharged veterans who
served in any of the Armed Services of the
United States in this charter;
Organizations of such persons; and
• Corporate or other legal entities in this
charter.
Immediate family is defined as spouse,
child, sibling, parent, grandparent, or
grandchild. This includes stepparents,
stepchildren, stepsiblings, and adoptive
relationships.
Household is defined as persons living in
the same residence maintaining a single
economic unit.
Membership eligibility is extended only to
individuals who are members of an
‘‘immediate family or household’’ of a credit
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union member. It is not necessary for the
primary member to join the credit union in
order for the immediate family or household
member of the primary member to join,
provided the immediate family or household
clause is included in the field of
membership. However, it is necessary for the
immediate family member or household
member to first join in order for that person’s
immediate family member or household
member to join the credit union. A credit
union can adopt a more restrictive definition
of immediate family or household.
Volunteers, by virtue of their close
relationship with a sponsor group, may be
included. One example is volunteers working
at a church.
Under the Federal Credit Union Act, once
a person becomes a member of the credit
union, such person may remain a member of
the credit union until the person chooses to
withdraw or is expelled from the
membership of the credit union. This is
commonly referred to as ‘‘once a member,
always a member.’’ The ‘‘once a member,
always a member’’ provision does not
prevent a credit union from restricting
services to members who are no longer
within the field of membership.
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IV—Multiple Occupational/Associational
Common Bonds
IV.A.1—General
A federal credit union may be chartered to
serve a combination of distinct, definable
single occupational and/or associational
common bonds. This type of credit union is
called a multiple common bond credit union.
Each group in the field of membership must
have its own occupational or associational
common bond. For example, a multiple
common bond credit union may include two
unrelated employers, or two unrelated
associations, or a combination of two or more
employers or associations. Additionally,
these groups must be within reasonable
geographic proximity of the credit union.
That is, the groups must be within the service
area of one of the credit union’s service
facilities. These groups are referred to as
select groups. A multiple common bond
credit union cannot include a TIP or expand
using single common bond criteria.
Employment in a corporation or other legal
entity which is related to another legal entity
(such as a company under contract and
possessing a strong dependency relationship
with another company) makes that person
part of the occupational common bond of a
select employee group within a multiple
common bond.
A multiple common bond credit union is
also able to serve the employees of tenants
who work in an industrial park, such as a
shopping mall or office park, without listing
each occupational group, provided that each
tenant employee group has fewer than 3,000
employees at the location. In addition, only
employees who work at the facility during
the tenancy are eligible for membership. New
tenants would be eligible for membership
subject to the above requirements.
A federal credit union’s service area is the
area that can reasonably be served by the
service facilities accessible to the groups
within the field of membership. The service
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area will most often coincide with that
geographic area primarily served by the
service facility. Additionally, the groups
served by the credit union must have access
to the service facility. The non-availability of
other credit union service is a factor to be
considered in determining whether the group
is within reasonable proximity of a credit
union wishing to add the group to its field
of membership.
A service facility includes the means for a
multiple common bond credit union to
accept shares for members’ accounts, accept
loan applications from them or disburse
loans to them. This definition includes a
credit union owned branch, a mobile branch,
an office operated on a regularly scheduled
weekly basis, a credit union owned ATM, a
credit union owned electronic facility, or a
credit union’s transactional Web site that
meets the above listed transactional
requirements (a ‘‘transactional Web site’’). A
credit union’s transactional Web site that
meets these requirements may be accessed by
a computer, smart phone, tablet, or similar
technological device. This definition of
service facility does not meet the requirement
that a credit union establish and maintain an
office or facility in an underserved area.
The select group as a whole will be
considered to be within a credit union’s
service area when:
• A majority of the persons in a 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.
IV.A.2—Sample Multiple Common Bond
Field of Membership
An example of a multiple common bond
field of membership is:
‘‘The field of membership of this federal
credit union shall be limited to the following:
1. Employees of Teltex Corporation who
work in Wilmington, Delaware;
2. Partners and employees of Smith &
Jones, Attorneys at Law, who work in
Wilmington, Delaware;
3. Members of the M&L Association in
Wilmington, Delaware, who qualify for
membership in accordance with its charter
and bylaws in effect on December 31, 1997;
4. Employees of tenants with fewer than
3,000 employees of MJB Office Park who
work in MJB Office Park’s Wilmington,
Delaware location.’’
IV.B—Multiple Common Bond Amendments
IV.B.1—General
Section 5 of every multiple common bond
federal credit union’s charter defines the
field of membership and select groups the
credit union can legally serve. Only those
persons or legal entities specified in the field
of membership can be served. There are a
number of instances in which Section 5 must
be amended by NCUA.
First, a new select group is added to the
field of membership. This may occur through
agreement between the group and the credit
union directly, or through a merger,
corporate acquisition, purchase and
assumption (P&A), or spin-off.
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Second, a federal credit union qualifies to
change its charter from:
• A single occupational or associational
charter to a multiple common bond charter;
• A multiple common bond to a single
occupational or associational charter;
• A multiple common bond to a
community charter; or
• A community to a multiple common
bond charter.
Third, a federal credit union removes a
group from its field of membership through
agreement with the group, a spin-off, or
because the group no longer exists.
IV.B.2—Numerical Limitation of Select
Groups
An existing multiple common bond federal
credit union that submits a request to amend
its charter must provide documentation to
establish that the multiple common bond
requirements have been met. The Office of
Consumer Protection Director must approve
all amendments to a multiple common bond
credit union’s field of membership.
NCUA will approve groups to a credit
union’s field of membership if the agency
determines in writing that the following
criteria are met:
• The credit union has not engaged in any
unsafe or unsound practice, as determined by
the Office of Consumer Protection Director,
with input from the appropriate regional
director, which is material during the one
year period preceding the filing to add the
group;
• The credit union is ‘‘adequately
capitalized’’ pursuant to part 702 of NCUA’s
Rules and Regulations. For low-income credit
unions or credit unions chartered less than
ten years, the Office of Consumer Protection
Director, with input from the appropriate
regional director, may determine that a less
than ‘‘adequately capitalized’’ credit union
can qualify for an expansion if it is making
reasonable progress toward becoming
‘‘adequately capitalized.’’ For any other
credit union, the Office of Consumer
Protection Director, with input from the
appropriate regional director, may determine
that a less than ‘‘adequately capitalized’’
credit union can qualify for an expansion if
it is making reasonable progress toward
becoming ‘‘adequately capitalized,’’ and the
addition of the group would not adversely
affect the credit union’s capitalization level;
• The credit union has the administrative
capability to serve the proposed group and
the financial resources to meet the need for
additional staff and assets to serve the new
group;
• Any potential harm the expansion may
have on any other credit union and its
members is clearly outweighed by the
probable beneficial effect of the expansion.
With respect to a proposed expansion’s effect
on other credit unions, the requirements on
overlapping fields of membership set forth in
Section IV.E of this chapter are also
applicable; and
• If the formation of a separate credit
union by such group is not practical and
consistent with reasonable standards for the
safe and sound operation of a credit union.
Additional information is required for
groups of 3,000 or more primary potential
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members requesting to be added to a multiple
common bond credit union. For groups
between 3,000 and 4,999 potential members,
NCUA requires documentation indicating the
group has a lack of available subsidies,
interest among the group’s members, and
sufficient resources. For such cases the
NCUA will accept a written statement
indicating these conditions exist as sufficient
documentation the group cannot form its
own credit union. Groups with 5,000 or more
members will be subject to the standard
application process as discussed later in this
chapter, requiring a group to fully describe
its inability to establish a new single
common bond credit union.
IV.B.3—Documentation Requirements
A multiple common bond credit union
requesting a select group expansion must
submit a formal written request, using the
Application for Field of Membership
Amendment (NCUA 4015 or NCUA 4015–EZ)
to the Office of Consumer Protection
Director. An authorized credit union
representative must sign the request.
The NCUA 4015–EZ (for groups less than
3,000 potential members) must be
accompanied by the following:
• A letter, or equivalent documentation,
from the group requesting credit union
service. This letter must indicate:
• That the group wants to be added to the
applicant federal credit union’s field of
membership;
• The number of persons currently
included within the group to be added and
their locations; and
• The group’s proximity to credit union’s
nearest service facility.
• The most recent copy of the group’s
charter and bylaws or equivalent
documentation (for associational groups).
The NCUA 4015 (for groups between 3,000
and 4,999 primary potential members) must
be accompanied by the following:
• A letter, or equivalent documentation,
from the group requesting credit union
service. This letter must indicate:
• That the group wants to be added to the
federal credit union’s field of membership;
• Whether the group presently has other
credit union service available;
• The number of persons currently
included within the group to be added and
their locations;
• The group’s proximity to credit union’s
nearest service facility, and
• Why the formation of a separate credit
union for the group is not practical or
consistent with safety and soundness
standards because of a lack of available
subsidies, interest among the group’s
members, and sufficient resources.
The NCUA 4015 (for groups of 5,000 or
more primary potential members) must be
accompanied by the following:
• A letter, or equivalent documentation,
from the group requesting credit union
service. This letter must indicate:
• That the group wants to be added to the
federal credit union’s field of membership;
• Whether the group presently has other
credit union service available;
• The number of persons currently
included within the group to be added and
their locations;
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• The group’s proximity to credit union’s
nearest service facility, and
• Why the formation of a separate credit
union for the group is not practical or
consistent with safety and soundness
standards. A credit union need not address
every item on the list, simply those issues
that are relevant to its particular request:
Member location—whether the
membership is widely dispersed or
concentrated in a central location.
Demographics—the employee turnover
rate, economic status of the group’s members,
and whether the group is more apt to consist
of savers and/or borrowers.
Market competition—the availability of
other financial services.
Desired services and products—the type of
services the group desires in comparison to
the type of services a new credit union could
offer.
Sponsor subsidies—the availability of
operating subsidies.
The desire of the sponsor—the extent of
the sponsor’s interest in supporting a credit
union charter.
Employee interest—the extent of the
employees’ interest in obtaining a credit
union charter.
Evidence of past failure—whether the
group previously had its own credit union or
previously filed for a credit union charter.
Administrative capacity to provide
services—will the group have the
management expertise to provide the services
requested.
• If the group is eligible for membership in
any other credit union, documentation must
be provided to support inclusion of the group
under the overlap standards set forth in
Section IV.E of this chapter; and
• The most recent copy of the group’s
charter and bylaws or equivalent
documentation (for associational groups).
IV.B.4—Corporate Restructuring
If a select group within a federal credit
union’s field of membership undergoes a
substantial restructuring, a change to the
credit union’s field of membership may be
required if the credit union is to continue to
provide service to the select group. NCUA
permits a multiple common bond credit
union to maintain in its field of membership
a sold, spun-off, or merged select group to
which it has been providing service. This
type of amendment to the credit union’s
charter is not considered an expansion;
therefore, the criteria relating to adding new
groups are not applicable.
When two groups merge and each is in the
field of membership of a credit union, then
both (or all affected) credit unions can serve
the resulting merged group, subject to any
existing geographic limitation and without
regard to any overlap provisions. However,
the credit unions cannot serve the other
multiple groups that may be in the field of
membership of the other credit union.
IV.C—NCUA’s Procedures for Amending the
Field of Membership
IV.C.1—General
All requests for approval to amend a
federal credit union’s charter must be
submitted to the Office of Consumer
Protection Director.
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IV.C.2—Office of Consumer Protection
Director Decision
NCUA staff will review all amendment
requests in order to ensure conformance to
NCUA policy.
Before acting on a proposed amendment,
the Office of Consumer Protection Director
may require an on-site review. In addition,
the Office of Consumer Protection Director
may, after taking into account the
significance of the proposed field of
membership amendment, require the
applicant to submit a business plan
addressing specific issues.
The financial and operational condition of
the requesting credit union will be
considered in every instance. An expanded
field of membership may provide the basis
for reversing adverse trends. In such cases, an
amendment to expand the field of
membership may be granted notwithstanding
the credit union’s adverse trends. The
applicant credit union must clearly establish
that the approval of the expanded field of
membership meets the requirements of
Section IV.B.2 of this chapter and will not
increase the risk to the NCUSIF.
IV.C.3—Office of Consumer Protection
Director Approval
If the Office of Consumer Protection
Director approves the requested amendment,
the credit union will be issued an
amendment to Section 5 of its charter.
IV.C.4—Office of Consumer Protection
Director Disapproval
When the Office of Consumer Protection
Director disapproves any application, in
whole or in part, to amend the field of
membership under this chapter, the
applicant will be informed in writing of the:
• Specific reasons for the action;
• Options to consider, if appropriate, for
gaining approval; and
• Appeal procedure.
IV.C.5—Appeal of Office of Consumer
Protection Director Decision
If a field of membership expansion request,
merger, or spin-off is denied by staff, the
federal credit union may appeal the decision
to the NCUA Board. An appeal must be sent
to the NCUA Board Secretary within 60 days
of the date of denial and must be clearly
identified as such and address the reason(s)
the federal credit union disagrees with the
denial. A copy of the appeal must be sent to
the Office of Consumer Protection or, as
applicable, the appropriate regional office.
NCUA central office staff will make an
independent review of the facts and present
the appeal to the NCUA Board with a
recommendation.
Before appealing, the credit union may,
within 30 days of the denial, provide
supplemental information to the office
rendering the initial decision for
reconsideration. A reconsideration will
contain new and material evidence
addressing the reasons for the initial denial.
The office rendering the initial decision will
have 30 days from the date of the receipt of
the request for reconsideration to make a
final decision. If the request is again denied,
the applicant may proceed with the appeal
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process within 60 days of the date of the last
denial. A second request for reconsideration
will be treated as an appeal to the NCUA
Board.
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IV.D—Mergers, Purchase and Assumptions,
and Spin-Offs
In general, other than the addition of select
groups, there are three additional ways a
multiple common bond federal credit union
can expand its field of membership:
• By taking in the field of membership of
another credit union through a merger;
• By taking in the field of membership of
another credit union through a purchase and
assumption (P&A); or
• By taking a portion of another credit
union’s field of membership through a spinoff.
IV.D.1—Voluntary Mergers
a. All Select Groups in the Merging Credit
Union’s Field of Membership Have Less
Than 3,000 Primary Potential Members
A voluntary merger of two or more federal
credit unions is permissible as long as each
select group in the merging credit union’s
field of membership has less than 3,000
primary potential members. While the merger
requirements outlined in Section 205 of the
Federal Credit Union Act must still be met,
the requirements of Chapter 2, Section IV.B.2
of this manual are not applicable.
b. One or More Select Groups in the Merging
Credit Union’s Field of Membership Has
3,000 or More Primary Potential Members
If the merging credit unions serve the same
group, and the group consists of 3,000 or
more primary potential members, then the
ability to form a separate credit union
analysis is not required for that group. If the
merging credit union has any other groups
consisting of 3,000 or more primary potential
members, special requirements apply. NCUA
will analyze each group of 3,000 or more
primary potential members, except as noted
above, to determine whether the formation of
a separate credit union by such a group is
practical. If the formation of a separate credit
union by such a group is not practical
because the group lacks sufficient volunteer
and other resources to support the efficient
and effective operations of a credit union or
does not meet the economic advisable criteria
outlined in Chapter 1 of this manual, the
group may be merged into a multiple
common bond credit union. If the formation
of a separate credit union is practical, the
group must be spun-off before the merger can
be approved.
c. Merger of a Single Common Bond Credit
Union Into a Multiple Common Bond Credit
Union
A financially healthy single common bond
credit union with a primary potential
membership of 3,000 or more cannot merge
into a multiple common bond credit union,
absent supervisory reasons, unless the
continuing credit union already serves the
same group.
d. Merger Approval
If the merger is approved, the qualifying
groups within the merging credit union’s
field of membership will be transferred intact
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to the continuing credit union and can
continue to be served.
Where the merging credit union is statechartered, the field of membership rules
applicable to a federal credit union apply.
Mergers must be approved by the NCUA
regional director where the continuing credit
union is headquartered, with the concurrence
of the regional director of the merging credit
union, and, as applicable, the state
regulators.
IV.D.2—Supervisory Mergers
The NCUA may approve the merger of any
federally insured credit union when safety
and soundness concerns are present without
regard to the 3,000 numerical limitation. The
credit union need not be insolvent or in
danger of insolvency for NCUA to use this
statutory authority. Examples constituting
appropriate reasons for using this authority
are: Abandonment of the management and/or
officials and an inability to find
replacements, loss of sponsor support,
serious and persistent record-keeping
problems, sustained material decline in
financial condition, or other serious or
persistent circumstances.
IV.D.3—Emergency Mergers
An emergency merger may be approved by
NCUA without regard to common bond or
other legal constraints. An emergency merger
involves NCUA’s direct intervention and
approval. The credit union to be merged
must either be insolvent or in danger of
insolvency, as defined in the Glossary, and
NCUA must determine that:
• An emergency requiring expeditious
action exists;
• Other alternatives are not reasonably
available; and
• The public interest would best be served
by approving the merger.
If not corrected, conditions that could lead
to insolvency include, but are not limited to:
• Abandonment by management;
• Loss of sponsor;
• Serious and persistent record-keeping
problems; or
• Serious and persistent operational
concerns.
In an emergency merger situation, NCUA
will take an active role in finding a suitable
merger partner (continuing credit union).
NCUA is primarily concerned that the
continuing credit union has the financial
strength and management expertise to absorb
the troubled credit union without adversely
affecting its own financial condition and
stability.
As a stipulated condition to an emergency
merger, the field of membership of the
merging credit union may be transferred
intact to the continuing federal credit union
without regard to any field of membership
restrictions including numerical limitation
requirements. Under this authority, any
single occupational or associational common
bond, multiple common bond, or community
charter may merger into a multiple common
bond credit union and that credit union can
continue to serve the merging credit union’s
field of membership. Subsequent field of
membership expansions of the continuing
multiple common bond credit union must be
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consistent with multiple common bond
policies.
Emergency mergers involving federally
insured credit unions in different NCUA
regions must be approved by the regional
director where the continuing credit union is
headquartered, with the concurrence of the
regional director of the merging credit union
and, as applicable, the state regulators.
IV.D.4—Purchase and Assumption (P&A)
Another alternative for acquiring the field
of membership of a failing credit union is
through a consolidation known as a P&A.
Generally, the requirements applicable to
field of membership expansions found in this
chapter apply to purchase and assumptions
where the purchasing credit union is a
federal charter.
A P&A has limited application because, in
most cases, the failing credit union must be
placed into involuntary liquidation.
However, in the few instances where a P&A
may occur, the assuming federal credit
union, as with emergency mergers, may
acquire the entire field of membership if the
emergency criteria are satisfied. Specified
loans, shares, and certain other designated
assets and liabilities, without regard to field
of membership restrictions, may also be
acquired without changing the character of
the continuing federal credit union for
purposes of future field of membership
amendments. Subsequent field of
membership expansions must be consistent
with multiple common bond policies.
P&As involving federally insured credit
unions in different NCUA regions must be
approved by the regional director where the
continuing credit union is headquartered,
with the concurrence of the regional director
of the purchased and/or assumed credit
union and, as applicable, the state regulators.
IV.D.5—Spin-Offs
A spin-off occurs when, by agreement of
the parties, a portion of the field of
membership, assets, liabilities, shares, and
capital of a credit union are transferred to a
new or existing credit union. A spin-off is
unique in that usually one credit union has
a field of membership expansion and the
other loses a portion of its field of
membership.
All common bond requirements apply
regardless of whether the spun-off group
becomes a new charter or goes to an existing
federal charter.
The request for approval of a spun-off
group must be supported with a plan that
addresses, at a minimum:
• Why the spin-off is being requested;
• What part of the field of membership is
to be spun off;
• Which assets, liabilities, shares, and
capital are to be transferred;
• The financial impact the spin-off will
have on the affected credit unions;
• The ability of the acquiring credit union
to effectively serve the new members;
• The proposed spin-off date; and
• Disclosure to the members of the
requirements set forth above.
The spin-off request must also include
current financial statements from the affected
credit unions and the proposed voting ballot.
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IV.E—Overlaps
• Financial effect on the overlapped credit
union;
• The desires of the group(s);
• The desire of the sponsor organization;
and
• The best interests of the affected group
and the credit union members involved.
Generally, if the overlapped credit union
does not object, and NCUA determines that
there is no safety and soundness problem, the
overlap will be permitted.
Potential overlaps of a federally insured
state credit union’s field of membership by
a federal credit union will generally be
analyzed in the same way as if two federal
credit unions were involved. Where a
federally insured state credit union’s field of
membership is broadly stated, NCUA will
exclude its field of membership from any
overlap protection.
NCUA will permit multiple common bond
federal credit unions to overlap community
charters without performing an overlap
analysis.
IV.E.1—General
An overlap exists when a group of persons
is eligible for membership in two or more
credit unions, including state charters. An
overlap is permitted when the expansion’s
beneficial effect in meeting the convenience
and needs of the members of the group
proposed to be included in the field of
membership outweighs any adverse effect on
the overlapped credit union.
Credit unions must investigate the
possibility of an overlap with federally
insured credit unions prior to submitting an
expansion request if the group has 5,000 or
more primary potential members. If cases
arise where the assurance given to the Office
of Consumer Protection Director concerning
the unavailability of credit union service is
inaccurate, the misinformation may be
grounds for removal of the group from the
federal credit union’s charter.
When an overlap situation requiring
analysis does arise, officials of the expanding
credit union must ascertain the views of the
overlapped credit union. If the overlapped
credit union does not object, the applicant
must submit a letter or other documentation
to that effect. If the overlapped credit union
does not respond, the expanding credit union
must notify NCUA in writing of its attempt
to obtain the overlapped credit union’s
comments.
NCUA will approve an overlap if the
expansion’s beneficial effect in meeting the
convenience and needs of the members of the
group outweighs any adverse effect on the
overlapped credit union.
In reviewing the overlap, the Office of
Consumer Protection Director will consider:
• The view of the overlapped credit
union(s);
• Whether the overlap is incidental in
nature—the group of persons in question is
so small as to have no material effect on the
original credit union;
• Whether there is limited participation by
members or employees of the group in the
original credit union after the expiration of
a reasonable period of time;
• Whether the original credit union fails to
provide requested service;
IV.E.2—Overlap Issues as a Result of
Organizational Restructuring
A federal credit union’s field of
membership will always be governed by the
field of membership descriptions contained
in Section 5 of its charter. Where a sponsor
organization expands its operations
internally, by acquisition or otherwise, the
credit union may serve these new entrants to
its field of membership if they are part of any
select group listed in Section 5. Where
acquisitions are made which add a new
subsidiary, the group cannot be served until
the subsidiary is included in the field of
membership through a housekeeping
amendment.
A federal credit union’s field of
membership will always be governed by the
field of membership descriptions contained
in Section 5 of its charter. Where a sponsor
organization expands its operations
internally, by acquisition or otherwise, the
credit union may serve these new entrants to
its field of membership if they are part of any
select group listed in Section 5. Where
acquisitions are made which add a new
subsidiary, the group cannot be served until
the subsidiary is included in the field of
membership through a housekeeping
amendment.
Overlaps may occur as a result of
restructuring or merger of the parent
organization. When such overlaps occur,
each credit union must request a field of
membership amendment to reflect the new
groups each wishes to serve. The credit
union can continue to serve any current
group in its field of membership that is
acquiring a new group or has been acquired
by a new group. The new group cannot be
served by the credit union until the field of
membership amendment is approved by
NCUA.
Credit unions affected by organizational
restructuring or merger should attempt to
resolve overlap issues among themselves.
Unless an agreement is reached limiting the
overlap resulting from the corporate
restructuring, NCUA will permit a complete
overlap of the credit unions’ fields of
membership. When two groups merge, or one
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For federal credit unions spinning off a
group, membership notice and voting
requirements and procedures are the same as
for mergers (see part 708 of the NCUA Rules
and Regulations), except that only the
members directly affected by the spin-off—
those whose shares are to be transferred—are
permitted to vote. Members whose shares are
not being transferred will not be afforded the
opportunity to vote. All members of the
group to be spun off (whether they voted in
favor, against, or not at all) will be transferred
if the spin-off is approved by the voting
membership. Voting requirements for
federally insured state credit unions are
governed by state law.
Spin-offs involving federally insured credit
unions in different NCUA regions must be
approved by all regional directors where the
credit unions are headquartered and the state
regulators, as applicable. Spin-offs in the
same region also require approval by the state
regulator, as applicable.
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group is acquired by the other, and each is
in the field of membership of a credit union,
both (or all affected) credit unions can serve
the resulting merged or acquired group,
subject to any existing geographic limitation
and without regard to any overlap provisions.
This is accomplished through a
housekeeping amendment.
Credit unions must submit to NCUA
documentation explaining the restructuring
and provide information regarding the new
organizational structure.
IV.E.3—Exclusionary Clauses
An exclusionary clause is a limitation
precluding the credit union from serving the
primary members of a portion of a group
otherwise included in its field of
membership. NCUA no longer grants
exclusionary clauses. Those granted prior to
the adoption of this new Chartering and Field
of Membership Manual will remain in effect
unless the credit unions agree to remove
them or one of the affected credit unions
submits a housekeeping amendment to have
it removed.
IV.F—Charter Conversion
A multiple common bond federal credit
union may apply to convert to a community
charter provided the field of membership
requirements of the community charter are
met. Groups within the existing charter
which cannot qualify in the new charter
cannot be served except for members of
record, or groups or communities obtained in
an emergency merger or P&A. A credit union
must notify all groups that will be removed
from the field of membership as a result of
conversion. Members of record can continue
to be served. Also, in order to support a case
for a conversion, the applicant federal credit
union may be required to develop a detailed
business plan as specified in Chapter 2,
Section V.A.3 of this manual.
A multiple common bond federal credit
union may apply to convert to a single
occupational or associational common bond
charter provided the field of membership
requirements of the new charter are met.
Groups within the existing charter, which do
not qualify in the new charter, cannot be
served except for members of record, or
groups or communities obtained in an
emergency merger or P&A. A credit union
must notify all groups that will be removed
from the field of membership as a result of
conversion.
IV.G—Credit Union Requested Removal of
Groups From the Field of Membership
A credit union may request removal of a
group from its field of membership for
various reasons. The most common reasons
for this type of amendment are:
• The group is within the field of
membership of two credit unions and one
wishes to discontinue service;
• The federal credit union cannot continue
to provide adequate service to the group;
• The group has ceased to exist;
• The group does not respond to repeated
requests to contact the credit union or refuses
to provide needed support;
• The group initiates action to be removed
from the field of membership; or
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• The federal credit union wishes to
convert to a single common bond.
When a federal credit union requests an
amendment to remove a group from its field
of membership, the Office of Consumer
Protection Director will determine why the
credit union desires to remove the group. If
the Office of Consumer Protection Director
concurs with the request, membership will
continue for those who are already members
under the ‘‘once a member, always a
member’’ provision of the Federal Credit
Union Act.
IV.H—NCUA Supervisory Action To Remove
Groups From the Field of Membership
NCUA has in place quality control
processes that protect the integrity of its field
of membership requirements. As part of this
obligation, NCUA’s Office of Consumer
Protection will randomly select groups added
through NCUA’s Field of Membership
Internet Application (FOMIA) system for
quality assurance reviews even if the
expansion application meets all the
conditions for approval. Each FCU is
responsible for obtaining certain
documentation when seeking to add groups
to its field of membership through FOMIA.
In addition, as indicated in the FOMIA User
Instruction Guide, available on NCUA’s Web
site, an FCU must permanently retain the
documentation from the select group
requesting service and the Confirmation
Certificate generated at the time the FOMIA
request is submitted to NCUA.
As part of the quality assurance process,
OCP reserves the right to request this
documentation at any time. If the FCU fails
to provide this documentation when OCP
requests it, OCP may consider removing the
group from the FCU’s field of membership
and restricting the FCU from using the
FOMIA system for future requests.
Specifically, as part of the FOMIA quality
assurance process, OCP staff will do the
following:
1. Within 10 days of receiving an
application selected for a quality assurance
review, notify the FCU of the documentation
OCP requires. The FCU will have 15 days to
provide the necessary documentation. OCP
staff will respond to the FCU with a
determination on the quality assurance
review of the association within 15 days of
receiving the requested information;
2. After receiving the additional
documentation, if any concerns remain
outstanding, OCP staff will again correspond
with the FCU and provide a 15-day time
frame for correcting the concern. OCP staff
will respond to the FCU with a determination
on the quality assurance review of the
association within 15 days of receiving the
requested information; and
3. If the FCU does not provide the
requested documentation, or cannot correct
the concern, the OCP Director will deny the
application and notify the credit union of its
appeal rights.
IV.I—NCUA Investigation of Potential Field
of Membership Violations
NCUA’s Office of Consumer Protection
(OCP) is responsible for investigating field of
membership complaints from the public, and
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matters referred to it from the field. It also
pursues corrective action as needed for FCUs
with confirmed field of membership
violations. Although circumstances can vary
with each case, OCP staff will generally
adhere to the following process for
investigating and addressing potential field
of membership violations:
1. Initially correspond with management to
outline concerns and request clarifying
information within 60 days. OCP staff will
also provide context as to the source of OCP’s
concerns, such as the discovery of new
information about a particular group or an
examination finding brought to OCP’s
attention;
2. If OCP does not receive the requested
information within 60 days, it will notify the
FCU and again request the required
information be provided within 30 days;
3. After receiving the additional
documentation, if any concerns remain
outstanding, OCP staff will again correspond
with the FCU to provide a 60-day time frame
for addressing the concern; and
4. If the FCU is unable to correct the
concern, and after consultation with the
Office of General Counsel and the
appropriate Regional Office, and in
accordance with agency guidelines for
administrative actions, OCP will remove the
group from the FCU’s field of membership
pursuant to authority delegated by the NCUA
Board. Removal of a group is treated the same
as an initial denial under the Chartering
Manual. In any adverse final determination
on removal under the above delegations, OCP
will notify the FCU of its appeal rights.
NCUA considers the removal of an
association from an FCU’s field of
membership as an action of last resort. If a
group is removed, the FCU can no longer add
new members from the group, but can
continue serving those who are already
members of the FCU under the ‘‘once a
member, always a member’’ provision of the
Federal Credit Union Act. Also, if the group
subsequently qualifies due to changes to the
group itself, management can submit a new
application at that time.
IV.J—Other Persons Eligible for Credit
Union Membership
A number of persons, by virtue of their
close relationship to a common bond group,
may be included, at the charter applicant’s
option, in the field of membership. These
include the following:
• Spouses of persons who died while
within the field of membership of this credit
union;
• Employees of this credit union;
• Persons retired as pensioners or
annuitants from the above employment;
• Volunteers;
• Members of the immediate family or
household;
• Honorably discharged veterans who
served in any of the Armed Services of the
United States in this charter;
• Organizations of such persons; and
• Corporate or other legal entities in this
charter.
Immediate family is defined as spouse,
child, sibling, parent, grandparent, or
grandchild. This includes stepparents,
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stepchildren, stepsiblings, and adoptive
relationships.
Household is defined as persons living in
the same residence maintaining a single
economic unit.
Membership eligibility is extended only to
individuals who are members of an
‘‘immediate family or household’’ of a credit
union member. It is not necessary for the
primary member to join the credit union in
order for the immediate family or household
member of the primary member to join,
provided the immediate family or household
clause is included in the field of
membership. However, it is necessary for the
immediate family member or household
member to first join in order for that person’s
immediate family member or household
member to join the credit union. A credit
union can adopt a more restrictive definition
of immediate family or household.
Volunteers, by virtue of their close
relationship with a sponsor group, may be
included. Examples include volunteers
working at a hospital or church.
Under the Federal Credit Union Act, once
a person becomes a member of the credit
union, such person may remain a member of
the credit union until the person chooses to
withdraw or is expelled from the
membership of the credit union. This is
commonly referred to as ‘‘once a member,
always a member.’’ The ‘‘once a member,
always a member’’ provision does not
prevent a credit union from restricting
services to members who are no longer
within the field of membership.
V—Community Charter Requirements
V.A.1—General
There are two types of community charters.
One is based on a single, geographically welldefined local community or neighborhood;
the other is a rural district. More than one
credit union may serve the same community.
NCUA recognizes four types of affinity on
which both a community charter and a rural
district can be based—persons who live in,
worship in, attend school in, or work in the
community or rural district. Businesses and
other legal entities within the community
boundaries or rural district may also qualify
for membership.
NCUA has established the following
requirements for community charters:
• The geographic area’s boundaries must
be clearly defined; and
• The area is a well-defined local
community or a rural district.
V.A.2—Definition of Well-Defined Local
Community and Rural District
In addition to the documentation
requirements in Chapter 1 of this manual to
charter a credit union, a community credit
union applicant must provide additional
documentation addressing the proposed area
to be served and community service policies.
An applicant has the burden of
demonstrating to NCUA that the proposed
community area meets the statutory
requirements of being: (1) Well-defined, and
(2) a local community or rural district.
‘‘Well-defined’’ means the proposed area
has specific geographic boundaries.
Geographic boundaries may include a city,
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township, county (single, multiple, or
portions of a county) or their political
equivalent, an individual Congressional
district, school districts, or a clearly
identifiable neighborhood. Although state
boundaries are well-defined areas, states
themselves do not meet the requirement that
the proposed area be a local community or
rural district.
The well-defined local community
requirement is met if:
• Single Political Jurisdiction—The area to
be served is in a recognized Single Political
Jurisdiction, i.e., a city, county, or their
political equivalent, or any contiguous
portion thereof. A Congressional district
qualifies as Single Political Jurisdiction. If
redistricting were to redraw the boundaries
of a Congressional district into two or more
Congressional districts, an FOM consisting of
the original Congressional district would no
longer be available to be served by any other
credit union.
• Statistical Area—The area is a designated
Core Based Statistical Area or allowing a
portion thereof, or in the case of a Core Based
Statistical Area with Metropolitan Divisions,
the area is a Metropolitan Division or is a
portion thereof; or
• The area is a designated a Combined
Statistical Area or a portion thereof; AND
• The Core Based Statistical Area,
Metropolitan Division or Combined
Statistical Area, or the portion thereof, must
have a population of 2.5 million or less
people.
• Compelling Evidence of Interaction or
Common Interests—In lieu of a statistical
area as defined above, this option applies
when an area is substantially a Core Based
Statistical Area or Combined Statistical Area,
but also has an additional portion falling
outside, and which is immediately adjacent
to, the Core Based Statistical Area or
Combined Statistical Area, and thus may
demonstrate a sufficient level of interaction
to qualify as a local community. For these
situations, applicants have the option of
submitting a narrative to NCUA to discuss
how the residents meet the requirements for
being a local community. NCUA will base its
decision on a consideration of the following
factors with respect to the proposed service
area in its entirety:
Economic Hub: Evidence indicates
residents commonly travel to a
geographically compact locale within the
area for work and major commerce needs.
Traffic flows, the presence of common or
related industries, or unified economic
planning demonstrate how the locales have
economic interdependence.
Population Center: Area has a dominant
county or municipality with a significant
portion of the area’s population and evidence
exists to support the relevance of the
population center to all residents within the
area.
Quasi-Governmental Agencies: A quasigovernmental agency, such as a regional
planning commission, covers the proposed
service area in its entirety and derives its
leadership from the area to advance
meaningful objectives advancing the
residents’ common interests in economic
development and/or improving quality of
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life. Success of agency in meeting its mission
depends upon collaboration from throughout
the area.
Government Designations: A division of a
federal or state agency specifically designates
the proposed service area as its area of
coverage or as a target area for specific
programs.
Shared Public Services/Facilities: Formal
agreements exist that provide for a common
need shared by all of the residents, such as
common police or fire protection, or public
utilities.
Colleges and Universities: Evidence exists
to demonstrate the common relevance of an
institution or institutions to the entire area,
such as unique educational initiatives to
support economic objectives benefiting all
residents and/or partnerships with local
businesses or high schools.
The rural district requirement is met if:
• Rural District—
• The district has well-defined, contiguous
geographic boundaries;
• The total population of the district does
not exceed 1,000,000.
• Either more than 50% of the district’s
population resides in census blocks or other
geographic areas that are designated as rural
by either the Consumer Financial Protection
Bureau or the United States Census Bureau,
OR the district has a population density of
100 persons or fewer per square mile; and
• The boundaries of the well-defined rural
district do not exceed the outer boundaries
of the states that are immediately contiguous
to the state in which the credit union
maintains its headquarters (i.e., not to exceed
the outer perimeter of the layer of states
immediately surrounding the headquarters
state). The affinities that apply to rural
districts are the same as those that apply to
well-defined local communities. The OMB
definitions of Core Based Statistical Area and
Metropolitan Division may be found at
https://www.whitehouse.gov/sites/default/
files/omb/bulletins/2013/b-13-01.pdf. Access
to these definitions is available through the
main page of the Federal Register Web site
at https://www.gpoaccess.gov/fr/
and on NCUA’s Web site at https://
www.ncua.gov.
The requirements in Chapter 2, Sections
V.A.4 through V.G. of this manual also apply
to a credit union that serves a rural district.
V.A.3—Previously Approved Communities
If prior to July 26, 2010 NCUA has
determined that a specific geographic area is
a well-defined local community, then a new
applicant need not reestablish that fact as
part of its application to serve the exact area.
The new applicant must, however, note
NCUA’s previous determination as part of its
overall application. An applicant applying
for an area after that date that is not exactly
the same as the previously approved well
defined local community must comply with
the current criteria in place for determining
a well-defined local community.
V.A.4—Business Plan Requirements for a
Community Credit Union
A community credit union is frequently
more susceptible to competition from other
local financial institutions and generally does
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not have substantial support from any single
sponsoring company or association. As a
result, a community credit union will often
encounter financial and operational factors
that differ from an occupational or
associational charter. Its diverse membership
may require special marketing programs
targeted to different segments of the
community. For example, the lack of payroll
deduction creates special challenges in the
development and promotion of savings
programs and in the collection of loans.
Accordingly, to support an application for a
community charter, an applicant Federal
credit union must develop a business plan
incorporating the following data:
• Pro forma financial statements for a
minimum of 24 months after the proposed
conversion, including the underlying
assumptions and rationale for projected
member, share, loan, and asset growth;
• Anticipated financial impact on the
credit union, including the need for
additional employees and fixed assets, and
the associated costs;
• A description of the current and
proposed office/branch structure, including a
general description of the location(s); parking
availability, public transportation
availability, drive-through service, lobby
capacity, or any other service feature
illustrating community access;
• A marketing plan addressing how the
community will be served for the 24-month
period after the proposed conversion to a
community charter, including detailing: how
the credit union will implement its business
plan; the unique needs of the various
demographic groups in the proposed
community; how the credit union will
market to each group, particularly
underserved groups; which communitybased organizations the credit union will
target in its outreach efforts; the credit
union’s marketing budget projections
dedicating greater resources to reaching new
members; and the credit union’s timetable for
implementation, not just a calendar of events;
• Details, terms and conditions of the
credit union’s financial products, programs,
and services to be provided to the entire
community; and
• Maps showing the current and proposed
service facilities, ATMs, political boundaries,
major roads, and other pertinent information.
An existing Federal credit union may
apply to convert to a community charter.
Groups currently in the credit union’s field
of membership, but outside the new
community credit union’s boundaries, may
not be included in the new community
charter. Therefore, the credit union must
notify groups that will be removed from the
field of membership as a result of the
conversion. Members of record can continue
to be served.
Before approval of an application to
convert to a community credit union, NCUA
must be satisfied that the credit union will
be viable and capable of providing services
to its members.
Community credit unions will be expected
to regularly review and to follow, to the
fullest extent economically possible, the
marketing and business plans submitted with
their applications. Additionally, NCUA will
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follow-up with an FCU every year for three
years after the FCU has been granted a new
or expanded community charter, and at any
other intervals NCUA believes appropriate, to
determine if the FCU is satisfying the terms
of its marketing and business plans. An FCU
failing to satisfy those terms will be subject
to supervisory action. As part of this review
process, the regional office will report to the
NCUA Board instances where an FCU is
failing to satisfy the terms of its marketing
and business plan and indicate what
supervisory actions the region intends to
take.
V.A.5—Community Boundaries
The geographic boundaries of a community
Federal credit union are the areas defined in
its charter. The boundaries can usually be
defined using political borders, streets,
rivers, railroad tracks, or other static
geographical feature.
A community that is a recognized legal
entity may be stated in the field of
membership—for example, ‘‘Gus Township,
Texas,’’ ‘‘Isabella City, Georgia,’’ or ‘‘Fairfax
County, Virginia.’’
A community that is a recognized Core
Based Statistical Area must state in the field
of membership the political jurisdiction(s)
that comprise the Core Based Statistical Area.
V.A.6—Special Community Charters
A community field of membership may
include persons who work or attend school
in a particular industrial park, shopping
mall, office building or complex, or similar
development. The proposed field of
membership must have clearly defined
geographic boundaries.
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V.A.7—Sample Community Fields of
Membership
A community charter does not have to
include all four affinities (i.e., live, work,
worship, or attend school in a community).
Some examples of community fields of
membership are:
• Persons who live, work, worship, or
attend school in, and businesses located in
the area of Johnson City, Tennessee, bounded
by Fern Street on the north, Long Street on
the east, Fourth Street on the south, and Elm
Avenue on the west;
• Persons who live or work in Green
County, Maine;
• Persons who live, worship, work (or
regularly conduct business in), or attend
school on the University of Dayton campus,
in Dayton, Ohio;
• Persons who work for businesses located
in Clifton Country Mall, in Clifton Park, New
York;
• Persons who live, work, or worship in
the Binghamton, New York, Core Based
Statistical Area, consisting of Broome and
Tioga Counties, New York (a qualifying Core
Based Statistical Area in its entirety);
• Persons who live, work, worship, or
attend school in the portion of the Oklahoma
City, OK Metropolitan Statistical Area that
includes Canadian and Oklahoma counties,
Oklahoma (two contiguous counties in a
portion of a qualifying Core Based Statistical
Area that has seven counties in total); or
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• Persons who live, work, worship, or
attend school in Uinta County or Lincoln
County, Wyoming, a rural district.
Some examples of insufficiently defined
local communities, neighborhoods, or rural
districts are:
• Persons who live or work within and
businesses located within a ten-mile radius
of Washington, DC (using a radius does not
establish a well-defined area);
• Persons who live or work in the
industrial section of New York, New York.
(not a well-defined neighborhood,
community, or rural district); or
• Persons who live or work in the greater
Boston area. (not a well-defined
neighborhood, community, or rural district).
Some examples of unacceptable local
communities, neighborhoods, or rural
districts are:
• Persons who live or work in the State of
California. (does not meet the definition of
local community, neighborhood, or rural
district).
V.B—Field of Membership Amendments
A community credit union may amend its
field of membership by adding additional
affinities or removing exclusionary clauses.
This can be accomplished with a
housekeeping amendment.
A community credit union also may
expand its geographic boundaries. Persons
who live, work, worship, or attend school
within the proposed well-defined local
community, neighborhood or rural district
must have common interests and/or interact.
The credit union must follow the
requirements of Section V.A.4 of this chapter.
A community credit union that is based on
a Single Political Jurisdiction, a Statistical
Area (e.g., Core Based Statistical Area or
Combined Statistical Area) or a rural district
may expand its geographic boundaries to add
a bordering area, provided the area is well
defined and the credit union demonstrates by
subjective evidence that persons who live,
work, worship, or attend school within the
proposed expanded community (i.e., on both
sides of the boundary separating the existing
community and the bordering area) have
common interests and/or interact. Such a
credit union applying to expand its
geographic boundaries to add a bordering
area must follow a streamlined version of the
business plan requirements of Section V.A.4
of this chapter and the expanded community
would be subject to the corresponding
population limit—2.5 million in the case of
a Core Based Statistical Area, and 1 million
in the case of a rural district. The streamlined
business plan requirements for adding a
bordering area are:
• Anticipated marginal financial impact on
the credit union of adding the proposed
bordering area, including the need for
additional employees and fixed assets, and
the associated costs;
• A description of the current and, if
applicable, proposed office/branch structure
specific to serving the proposed bordering
area;
• A marketing plan addressing how the
new community will be served for the 24month period after the proposed expansion
of a community charter, including detailing
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how the credit union will address the unique
needs of any demographic groups in the
proposed bordering community not presently
served by the credit union and how the credit
union will market to any new groups; and
• Details, terms and conditions of any new
financial products, programs, and services to
be introduced as part of this expansion.
V.C—NCUA Procedures for Amending the
Field of Membership
V.C.1—General
All requests for approval to amend a
community credit union’s charter must be
submitted to the Office of Consumer
Protection Director. If a decision cannot be
made within a reasonable period of time, the
Office of Consumer Protection Director will
notify the credit union.
V.C.2—NCUA’s Decision
The financial and operational condition of
the requesting credit union will be
considered in every instance. The economic
advisability of expanding the field of
membership of a credit union with financial
or operational problems must be carefully
considered.
In most cases, field of membership
amendments will only be approved for credit
unions that are operating satisfactorily.
Generally, if a federal credit union is having
difficulty providing service to its current
membership, or is experiencing financial or
other operational problems, it may have more
difficulty serving an expanded field of
membership.
Occasionally, however, an expanded field
of membership may provide the basis for
reversing current financial problems. In such
cases, an amendment to expand the field of
membership may be granted notwithstanding
the credit union’s financial or operational
problems. The applicant credit union must
clearly establish that the expanded field of
membership is in the best interest of the
members and will not increase the risk to the
NCUSIF.
V.C.3—NCUA Approval
If the requested amendment is approved by
NCUA, the credit union will be issued an
amendment to Section 5 of its charter.
V.C.4—NCUA Disapproval
When NCUA disapproves any application
to amend the field of membership, in whole
or in part, under this chapter, the applicant
will be informed in writing of the:
• Specific reasons for the action;
• If appropriate, options or suggestions
that could be considered for gaining
approval; and
• Appeal procedures.
V.C.5—Appeal of Office of Consumer
Protection Director Decision
If a field of membership expansion request,
merger, or spin-off is denied by staff, the
federal credit union may appeal the decision
to the NCUA Board. An appeal must be sent
to the NCUA Board Secretary within 60 days
of the date of denial and must be clearly
identified as such and address the specific
reason(s) the federal credit union disagrees
with the denial. A copy of the appeal must
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be sent to the Office of Consumer Protection
or, as applicable, the appropriate regional
office. NCUA central office staff will make an
independent review of the facts and present
the appeal to the NCUA Board with a
recommendation.
Before appealing, the credit union may,
within 30 days of the denial, provide
supplemental information to the office
rendering the initial decision for
reconsideration. A reconsideration will
contain new and material evidence
addressing the reasons for the initial denial.
The office rendering the initial decision will
have 30 days from the date of the receipt of
the request for reconsideration to make a
final decision. If the request is again denied,
the applicant may proceed with the appeal
process within 60 days of the date of the last
denial. A second request for reconsideration
will be treated as an appeal to the NCUA
Board.
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V.D—Mergers, Purchase and Assumptions,
and Spin-Offs
There are three additional ways a
community federal credit union can expand
its field of membership:
• By taking in the field of membership of
another credit union through a merger;
• By taking in the field of membership
through a purchase and assumption (P&A); or
• By taking a portion of another credit
union’s field of membership through a spinoff.
V.D.1—Standard Mergers
Generally, the requirements applicable to
field of membership expansions apply to
mergers where the continuing credit union is
a community federal charter.
Where both credit unions are community
charters, the continuing credit union must
meet the criteria for expanding the
community boundaries. A community credit
union cannot merge into a single
occupational/associational, or multiple
common bond credit union, except in an
emergency merger. However, a single
occupational or associational, or multiple
common bond credit union can merge into a
community charter as long as the merging
credit union has a service facility within the
community boundaries or a majority of the
merging credit union’s field of membership
would qualify for membership in the
community charter. While a community
charter may take in an occupational,
associational, or multiple common bond
credit union in a merger, it will remain a
community charter.
Groups within the merging credit union’s
field of membership located outside of the
community boundaries may not continue to
be served. The merging credit union must
notify groups that will be removed from the
field of membership as a result of the merger.
However, the credit union may continue to
serve members of record.
Where a state-chartered credit union is
merging into a community federal credit
union, the continuing federal credit union’s
field of membership will be worded in
accordance with NCUA policy. Any
subsequent field of membership expansions
must comply with applicable amendment
procedures.
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Mergers must be approved by the NCUA
regional director where the continuing credit
union is headquartered, with the concurrence
of the regional director of the merging credit
union, and, as applicable, the state
regulators.
V.D.2—Emergency Mergers
An emergency merger may be approved by
NCUA without regard to common bond or
other legal constraints. An emergency merger
involves NCUA’s direct intervention and
approval. The credit union to be merged
must either be insolvent or in danger of
insolvency, as defined in the Glossary, and
NCUA must determine that:
• An emergency requiring expeditious
action exists;
• Other alternatives are not reasonably
available; and
• The public interest would best be served
by approving the merger.
If not corrected, conditions that could lead
to insolvency include, but are not limited to:
• Abandonment by management;
• Loss of sponsor;
• Serious and persistent record-keeping
problems; or
• Serious and persistent operational
concerns.
In an emergency merger situation, NCUA
will take an active role in finding a suitable
merger partner (continuing credit union).
NCUA is primarily concerned that the
continuing credit union has the financial
strength and management expertise to absorb
the troubled credit union without adversely
affecting its own financial condition and
stability.
As a stipulated condition to an emergency
merger, the field of membership of the
merging credit union may be transferred
intact to the continuing federal credit union
without regard to any field of membership
restrictions, including the service facility
requirement. Under this authority, a federal
credit union may take in any dissimilar field
of membership.
Even though the merging credit union is a
single common bond credit union or multiple
common bond credit union or community
credit union, the continuing credit union will
remain a community charter. Future
community expansions will be based on the
continuing credit union’s original
community area.
Emergency mergers involving federally
insured credit unions in different NCUA
regions must be approved by the regional
director where the continuing credit union is
headquartered, with the concurrence of the
regional director of the merging credit union
and, as applicable, the state regulators.
V.D.3—Purchase and Assumption (P&A)
Another alternative for acquiring the field
of membership of a failing credit union is
through a consolidation known as a P&A.
Generally, the requirements applicable to
community expansions found in this chapter
apply to purchase and assumptions where
the purchasing credit union is a federal
charter.
A P&A has limited application because, in
most instances, the failing credit union must
be placed into involuntary liquidation.
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However, in the few instances where a P&A
may occur, the assuming federal credit
union, as with emergency mergers, may
acquire the entire field of membership if the
emergency criteria are satisfied.
In a P&A processed under the emergency
criteria, specified loans, shares, and certain
other designated assets and liabilities may
also be acquired without regard to field of
membership restrictions and without
changing the character of the continuing
federal credit union for purposes of future
field of membership amendments.
If the P&A does not meet the emergency
criteria, then only members of record can be
obtained unless they otherwise qualify for
membership in the community charter.
P&As involving federally insured credit
unions in different NCUA regions must be
approved by the regional director where the
continuing credit union is headquartered,
with the concurrence of the regional director
of the purchased and/or assumed credit
union and, as applicable, the state regulators.
V.D.4—Spin-Offs
A spin-off occurs when, by agreement of
the parties, a portion of the field of
membership, assets, liabilities, shares, and
capital of a credit union are transferred to a
new or existing credit union. A spin-off is
unique in that usually one credit union has
a field of membership expansion and the
other loses a portion of its field of
membership.
All field of membership requirements
apply regardless of whether the spun-off
group goes to a new or existing federal
charter.
The request for approval of a spin-off must
be supported with a plan that addresses, at
a minimum:
• Why the spin-off is being requested;
• What part of the field of membership is
to be spun off;
• Whether the field of membership
requirements are met;
• Which assets, liabilities, shares, and
capital are to be transferred;
• The financial impact the spin-off will
have on the affected credit unions;
• The ability of the acquiring credit union
to effectively serve the new members;
• The proposed spin-off date; and
• Disclosure to the members of the
requirements set forth above.
The spin-off request must also include
current financial statements from the affected
credit unions and the proposed voting ballot.
For federal credit unions spinning off a
portion of the community, membership
notice and voting requirements and
procedures are the same as for mergers (see
part 708 of the NCUA Rules and
Regulations), except that only the members
directly affected by the spin-off—those
whose shares are to be transferred—are
permitted to vote. Members whose shares are
not being transferred will not be afforded the
opportunity to vote. All members of the
group to be spun off (whether they voted in
favor, against, or not at all) will be transferred
if the spin-off is approved by the voting
membership. Voting requirements for
federally insured state credit unions are
governed by state law.
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V.E—Overlaps
V.E.1—General
Generally, an overlap exists when a group
of persons is eligible for membership in two
or more credit unions. NCUA will permit
community credit unions to overlap any
other charters without performing an overlap
analysis.
V.E.2—Exclusionary Clauses
An exclusionary clause is a limitation
precluding the credit union from serving the
primary members of a portion of a group or
community otherwise included in its field of
membership. NCUA no longer grants
exclusionary clauses. Those granted prior to
the adoption of this new Chartering and Field
of Membership Manual will remain in effect
unless the credit unions agree to remove
them or one of the affected credit unions
submits a housekeeping amendment to have
it removed.
clause is included in the field of
membership. However, it is necessary for the
immediate family member or household
member to first join in order for that person’s
immediate family member or household
member to join the credit union. A credit
union can adopt a more restrictive definition
of immediate family or household.
Under the Federal Credit Union Act, once
a person becomes a member of the credit
union, such person may remain a member of
the credit union until the person chooses to
withdraw or is expelled from the
membership of the credit union. This is
commonly referred to as ‘‘once a member,
always a member.’’ The ‘‘once a member,
always a member’’ provision does not
prevent a credit union from restricting
services to members who are no longer
within the field of membership.
II.B—Special Programs
A credit union with a low-income
designation has greater flexibility in
accepting nonmember deposits insured by
the NCUSIF, are exempt from the aggregate
loan limit on business loans, and may offer
secondary capital accounts to strengthen its
capital base. It also may participate in special
funding programs such as the Community
Development Revolving Loan Program for
Credit Unions (CDRLP) if it is involved in the
stimulation of economic development and
community revitalization efforts.
The CDRLP provides both loans and grants
for technical assistance to low-income credit
unions. The requirements for participation in
the revolving loan program are in part 705 of
the NCUA Rules and Regulations. Only
operating credit unions are eligible for
participation in this program.
Chapter 3—Low-Income Credit Unions and
Credit Unions Serving Underserved Areas
II.C—Low-Income Documentation
A federal credit union charter applicant or
existing credit union wishing to receive a
low-income designation should forward a
separate request for the designation to the
Office of Consumer Protection Director, along
with appropriate documentation supporting
the request.
For community charter applicants, the
supporting material should include the
median family income or annual wage figures
for the community to be served. If this
information is unavailable, the applicant
should identify the individual zip codes or
census tracts that comprise the community
and NCUA will assist in obtaining the
necessary demographic data.
Similarly, if single occupational or
associational or multiple common bond
charter applicants cannot supply income data
on its potential members, they should
provide the Office of Consumer Protection
Director with a list which includes the
number of potential members, sorted by their
residential zip codes, and NCUA will assist
in obtaining the necessary demographic data.
An existing credit union can perform a
loan or membership survey to determine if
the credit union is primarily serving lowincome members.
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V.F—Charter Conversions
A community federal credit union may
convert to a single occupational or
associational, or multiple common bond
credit union. The converting credit union
must meet all occupational, associational,
and multiple common bond requirements, as
applicable. The converting credit union may
continue to serve members of record of the
prior field of membership as of the date of
the conversion, and any groups or
communities obtained in an emergency
merger or P&A. A change to the credit
union’s field of membership and designated
common bond will be necessary.
A community credit union may convert to
serve a new geographical area provided the
field of membership requirements of V.A.3 of
this chapter are met. Members of record of
the original community can continue to be
served.
I—Introduction
V.G—Other Persons With a Relationship to
the Community
A number of persons who have a close
relationship to the community may be
included, at the charter applicant’s option, in
the field of membership. These include the
following:
• Spouses of persons who died while
within the field of membership of this credit
union;
• Employees of this credit union;
• Volunteers in the community;
• Members of the immediate family or
household; and
• Organizations of such persons
Immediate family is defined as spouse,
child, sibling, parent, grandparent, or
grandchild. This includes stepparents,
stepchildren, stepsiblings, and adoptive
relationships.
Household is defined as persons living in
the same residence maintaining a single
economic unit.
Membership eligibility is extended only to
individuals who are members of an
‘‘immediate family or household’’ of a credit
union member. It is not necessary for the
primary member to join the credit union in
order for the immediate family or household
member of the primary member to join,
provided the immediate family or household
II—Low-Income Credit Union
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One of the primary reasons for the creation
of federal credit unions is to make credit
available to people of modest means for
provident and productive purposes. To help
NCUA fulfill this mission, the agency has
established special operational policies for
federal credit unions that serve low-income
groups and underserved areas. The policies
provide a greater degree of flexibility that
will enhance and invigorate capital infusion
into low-income groups, low-income
communities, and underserved areas. These
unique policies are necessary to provide
credit unions serving low-income groups
with financial stability and potential for
controlled growth and to encourage the
formation of new charters as well as the
delivery of credit union services in lowincome communities.
II.A—Defined
A credit union serving predominantly lowincome members may be designated as a lowincome credit union. Section 701.34 of
NCUA’s Rules and Regulations defines the
term ‘‘low-income members’’ as those
members:
• Who make less than 80 percent of the
average for all wage earners as established by
the Bureau of Labor Statistics; or
• Whose median family income falls at or
below 80 percent of the median family
income for the nation as established by the
Census Bureau.
The term ‘‘low-income members’’ also
includes members who are full-time or parttime students in a college, university, high
school, or vocational school.
To obtain a low-income designation from
NCUA, an existing credit union must
establish that a majority of its members meet
the low-income definition. An existing
community credit union that serves a
geographic area where a majority of residents
meet the annual income standard is
presumed to be serving predominantly lowincome members. A low-income designation
for a new credit union charter may be based
on a majority of the potential membership.
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II.D—Third-Party Assistance
A low-income federal credit union charter
applicant may contract with a third party to
assist in the chartering and low-income
designation process. If the charter is granted,
a low-income credit union may contract with
a third party to provide necessary
management services. Such contracts should
not exceed the duration of one year subject
to renewal.
II.E—Special Rules for Low-Income Federal
Credit Unions
In recognition of the unique efforts needed
to help make credit union service available
to low-income groups, NCUA has adopted
special rules that pertain to low-income
credit union charters, as well as field of
membership additions for low-income credit
unions. These special rules provide
additional latitude to enable underserved,
low-income individuals to gain access to
credit union service.
NCUA permits credit union chartering and
field of membership amendments based on
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associational groups formed for the sole
purpose of making credit union service
available to low-income persons. The
association must be defined so that all of its
members will meet the low-income
definition of § 701.34 of the NCUA Rules and
Regulations. Any multiple common bond
credit union can add low-income
associations to their fields of membership.
A low-income designated community
federal credit union has additional latitude in
serving persons who are affiliated with the
community. In addition to serving members
who live, work, worship, or attend school in
the community, a low-income community
federal credit union may also serve persons
who participate in programs to alleviate
poverty or distress, or who participate in
associations headquartered in the
community.
Examples of a low-income designated
community and an associational-based lowincome federal credit union are as follows:
• Persons who live in [the target area];
persons who work, worship, attend school, or
participate in associations headquartered in
[the target area]; persons participating in
programs to alleviate poverty or distress
which are located in [the target area];
incorporated and unincorporated
organizations located in [the target area] or
maintaining a facility in [the target area]; and
organizations of such persons.
• Members of the Canarsie Economic
Assistance League, in Brooklyn, NY, an
association whose members all meet the lowincome definition of § 701.34 of the NCUA
Rules and Regulations.
III—Service to Underserved Communities
III.A—General
A multiple common bond federal credit
union may include in its field of
membership, without regard to location, an
‘‘underserved area’’ as defined by the Federal
Credit Union Act. 12 U.S.C. 1759(c)(2). The
addition of an ‘‘underserved area’’ will not
change the charter type of the multiple
common bond federal credit union. More
than one multiple common-bond federal
credit union can serve the same
‘‘underserved area,’’ provided each credit
union is approved as provided below.
By adding an ‘‘underserved area,’’ a
multiple common bond federal credit union
does not become eligible to receive the
benefits afforded to low-income designated
credit unions, such as expanded use of
nonmember deposits and access to the
Community Development Revolving Loan
Program for Credit Unions.
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III.B—‘‘Underserved Area’’ Defined
The Federal Credit Union Act defines an
‘‘underserved area’’ as (1) a ‘‘local
community, neighborhood, or rural district’’
that (2) meets the definition of an
‘‘investment area’’ under section 103(16) of
the Community Development Banking and
Financial Institutions Act of 1994 (‘‘CDFI’’),
12 U.S.C. 4702(16), and (3) is ‘‘underserved
by other depository institutions’’ based on
data of the NCUA Board and the federal
banking agencies.
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III.B.1—Local Community
To be eligible for approval as
‘‘underserved,’’ a proposed area must be a
well-defined local community,
neighborhood, or rural district as defined in
Chapter 2, sections V.A.1. and V.A.2. of this
manual.
III.B.2—Investment Area
To be approved as an ‘‘underserved area,’’
the proposed area must meet the CDFI
definition of an ‘‘investment area.’’ Id.
Section 4702(16). A proposed area that, at the
time the credit union applies, is designated
in its entirety as an Empowerment Zone or
Enterprise Community (id. Section 1391)
automatically qualifies as an ‘‘investment
area’’; no further criteria of an ‘‘investment
area’’ must be met. Id. Section 4702(16)(B).
A proposed area that is not designated as
such must qualify as an ‘‘investment area’’
under ‘‘the objective criteria of economic
distress’’ developed by the CDFI Fund
(‘‘distress criteria’’) based on current
decennial U.S. Census data, and also must
have ‘‘significant unmet needs’’ for loans and
financial services that credit unions are
authorized to offer to their members. Id.
Section 4702(16)(A).
III.B.2.a—Economic Distress Criteria
Geographic Unit(s) By Proposed Area’s
Location. The location of a proposed
‘‘underserved area’’ either within or outside
of a Metropolitan Statistical Area
corresponding to the most recent completed
decennial census published by the U.S.
Bureau of the Census (‘‘decennial Census’’)
determines the geographic unit(s) that apply
to determine whether the area meets the
distress criteria.
Within a Metropolitan Statistical Area. For
a proposed area located, in whole or in part,
within a Metropolitan Statistical Area, the
permissible geographic units (‘‘Metro units’’)
for implementing the economic distress
criteria are: (i) A census tract; (ii) a block
group; and (iii) an American Indian or
Alaskan Native area. 12 CFR
1805.201(b)(3)(ii)(B) (2008). For ease of
implementation, it is advisable to use a
census tract as the proposed area’s Metro
unit.
Outside a Metropolitan Statistical Area.
For a proposed area that is located entirely
outside a Metropolitan Statistical Area, the
permissible units (‘‘Non-Metro units’’) for
implementing the economic distress criteria
are: (i) A county or equivalent area; (ii) a
minor civil division that is a unit of local
government; (iii) an incorporated place; (iv)
a census tract; (v) a block numbering area;
(vi) a block group; and (vii) an American
Indian or Alaskan Native area. Id. For ease
of implementation, it is advisable to use
either a census tract or county, as the case
may be, as the proposed area’s Non-Metro
unit.
Proposed Area Consisting of a Single Metro
Unit. A proposed area consisting of a single
whole Metro unit (e.g., a single census tract
located within a Metropolitan Statistical
Area) must meet one of the following distress
criteria, as reported by the most recent
decennial Census:
• Unemployment. The proposed area’s
unemployment rate is at least 1.5 times the
national average; or
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• Poverty. At least 20 percent (20%) of the
proposed area’s population lives in poverty;
or
• Median Family Income. The proposed
area’s Median Family Income (‘‘MFI’’) is at or
below 80 percent (80%) of either the MFI of
the corresponding Metropolitan Statistical
Area, or of the national MFI for Metro Areas,
whichever is greater; or
• Other Criterion. Any other economic
distress criterion the CDFI Fund may adopt
in the future.
Id. § 1805.201(b)(3)(ii)(D)(1),
(b)(3)(ii)(D)(2)(i) and (b)(3)(ii)(D)(3) (2008).
Proposed Area Consisting of a Single NonMetro Unit. A proposed area consisting of a
single whole Non-Metro unit (e.g., a single
county located outside a Metropolitan
Statistical Area) must meet one of the
following distress criteria, as reported by the
most recent decennial Census:
• Unemployment. The proposed area’s
unemployment rate is at least 1.5 times the
national average; or
• Poverty. At least 20 percent (20%) of the
proposed area’s population lives in poverty;
or
• Median Family Income. The proposed
area’s MFI is at or below 80 percent (80%)
of either the corresponding state’s Non-Metro
MFI or the national MFI for Non-Metro
Areas, whichever is greater; or
• Other Criterion. Any other economic
distress criterion the CDFI Fund may adopt
in the future.
Id. § 1805.201(b)(3)(ii)(D)(1),
(b)(3)(ii)(D)(2)(ii) and (b)(3)(ii)(D)(3) (2008).
Alternatively, a proposed area consisting of
a single Non-Metro county (located outside a
Metropolitan Statistical Area) may instead
meet either of the following two criteria, as
reported by the decennial Census:
• County Population Loss. County’s
population loss of at least 10 percent (10%)
between the most recent and the preceding
decennial Census; or
• County Migration Loss. County’s net
migration loss of at least 5 percent (5%) in
the 5-year period preceding the most recent
decennial Census.
Id. § 1805.201(b)(3)(ii)(D)(4) and (5) (2008).
Proposed Area Consisting of Multiple
Contiguous Units. When a proposed area
consists of either multiple contiguous Metro
units (e.g., a group of adjoining census tracts)
or multiple contiguous Non-Metro units (e.g.,
a group of adjoining counties), a population
threshold applies when implementing the
economic distress criteria. At least 85 percent
(85%) of the area’s total population must
reside within the units that are ‘‘distressed,’’
i.e., that meet one of the applicable economic
distress criteria above, as reported by the
decennial Census (Unemployment, Poverty
and MFI for census tracts plus, for counties
only, Population Loss and Migration Loss);
the balance of the area’s population may
reside in the non-‘‘distressed’’ tract(s). The
population threshold is met, and the whole
proposed area qualifies as ‘‘distressed,’’ when
the ‘‘distressed’’ units represent at least 85
percent of the area’s total population.
III.B.2.b—Proposed Area’s ‘‘Significant
Unmet Needs’’
A proposed area that is ‘‘distressed’’ also
must display ‘‘significant unmet needs’’ for
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loans or for one or more of the financial
services credit unions are authorized to offer.
To meet this criterion, the credit union must
include within its Business Plan a section,
one page in length, entitled ‘‘Significant
Unmet Needs for Credit Union Services’’
(‘‘SUN section’’) that establishes the
existence of such unmet needs by identifying
the credit and depository needs of the
community and detailing how the credit
union plans to serve those needs. The credit
union may choose which among the
following ‘‘credit and depository needs’’ to
address in the SUN section: Loans, share
draft accounts, savings accounts, check
cashing, money orders, certified checks,
automated teller machines, deposit taking,
safe deposit box services, and similar
services. The existence of each ‘‘credit and
depository need’’ the credit union identifies
and plans to serve must be supported by
objective reasons and/or accompanying
documentation derived from an identified,
authoritative source of the credit union’s
choice. Third-party documentation generally
is the most compelling.
III.B.3—Underserved by Other Depository
Institutions
A proposed area that meets the CDFI
definition of an ‘‘investment area’’ (i.e., is
‘‘distressed’’ and has ‘‘significant unmet
needs’’) must also be underserved by other
insured depository institutions, including
credit unions. 12 U.S.C. 1759(c)(2)(A)(ii).
This statutory criterion is met when the
concentration of depository institution
facilities among the population of the
proposed area’s non-‘‘distressed’’ tracts—
which sets a benchmark level of adequate
service—is greater than the concentration of
facilities among the population of all of the
proposed area’s census tracts combined. This
establishes the area’s concentration of
facilities ratio. If there are no non‘‘distressed’’ tracts within a proposed area, a
non-‘‘distressed’’ census tract or larger
geographic unit (e.g., city or county) of the
credit union’s choice that adjoins the
proposed area may be used to set the
benchmark concentration ratio.
Without regard to a proposed area’s
location within or outside a Metropolitan
Statistical Area, this criterion compares two
ratios: The ratio of facilities to the population
of the non-‘‘distressed’’ tracts (the
benchmark) versus the same facilities-topopulation ratio among all the tracts of the
proposed area as a whole. If the benchmark
ratio is greater than the ratio for the whole
area, then the area is ‘‘underserved by other
depository institutions,’’ and vice versa.
When, as the result of an initial
Concentration of Facilities ratio calculation,
a proposed area does not qualify as
‘‘underserved by other depository
institutions,’’ NCUA will exclude nondepository banks (e.g., trust companies) and
non-community credit unions (i.e., those
institutions unable to serve the general
public) from the computation. For the
purposes of this analysis, a multiple common
bond credit union already serving the area as
an underserved area is considered able to
serve the general public. With both of these
exclusions, NCUA will recalculate the
concentration of facilities ratio to determine
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whether, as a result, the proposed area
qualifies as ‘‘underserved by other depository
institutions.’’
As one alternative to the concentration of
facilities ratio, a proposed area will qualify
as ‘‘underserved by other depository
institutions’’ if it is designated an
‘‘underserved county’’ by NCUA based on
data produced by the Consumer Financial
Protection Bureau (available at: https://
www.consumerfinance.gov/guidance/
#ruralunderserved). NCUA will make its list
of ‘‘underserved counties’’ available on its
Web site.
As another alternative to the concentration
of facilities ratio, a proposed area will qualify
as ‘‘underserved by other depository
institutions’’ if the credit seeking to serve it,
using a metric of its own choosing that is
based on NCUA or other Federal banking
agency data, establishes to NCUA’s
satisfaction that the proposed area is
‘‘underserved by other depository
institutions.’’
III.C—NCUA Approval
If NCUA approves the request to add an
‘‘underserved area,’’ the credit union will be
issued an amendment to Section 5 of its
charter.
III.D—Approval to Serve an Already
Approved ‘‘Underserved Area’’
Once a credit union is initially approved
to serve an ‘‘underserved area,’’ other credit
unions that subsequently apply may be
approved to serve the same area. To be
approved, the area must qualify as
‘‘underserved’’ at the time the new applicant
applies. An applicant must demonstrate the
area continues to be ‘‘distressed’’, as
provided above, only if a new decennial
Census has been published since the date the
area was last approved. In any case, the
applicant must demonstrate that the area still
has ‘‘significant unmet needs’’ for loans or
credit union services (to qualify as an
‘‘investment area’’), and remains
‘‘underserved by other depository
institutions’’ (to qualify as ‘‘underserved’’).
III.E—Business Plan
A federal credit union that desires to
include an underserved community in its
field of membership must first develop, and
submit for approval, a business plan
specifying how it will serve the community.
In addition, the business plan must include
a SUN section as provided in Section
III.B.2.b. above. The credit union will be
expected to regularly review the business
plan to determine if the community is being
adequately served. The Office of Consumer
Protection Director may require periodic
service status reports from a credit union
about the ‘‘underserved area’’ to ensure that
the needs of the community are being met,
and must require such reports before NCUA
allows a multiple common bond federal
credit union to add an additional
‘‘underserved area.’’
III.F—Service Facility
Once an ‘‘underserved area’’ has been
added to a federal credit union’s field of
membership, the credit union must establish
within two years, and maintain, an office or
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service facility in the community. A service
facility is defined as a place where shares are
accepted for members’ accounts, loan
applications are accepted and loans are
disbursed. By definition, a service facility
includes a credit union-owned branch, a
shared branch, a mobile branch, or an office
operated on a regularly scheduled weekly
basis or a credit union owned electronic
facility that meets, at a minimum, the above
requirements. This definition does not
include an ATM or the credit union’s
Internet Web site.
IV—Appeal Procedures for Denial of
Underserved Area
IV.A—NCUA Disapproval
When NCUA disapproves any application
to add an ‘‘underserved area’’ in whole or in
part, under this chapter, the applicant will be
informed in writing of the:
• Specific reasons for the action;
• Options to consider, if appropriate, for
gaining approval; and
• Appeal procedures.
IV.B—Appeal of Office of Consumer
Protection Director Decision
If the Office of Consumer Protection
Director denies an ‘‘underserved area’’
request, the federal credit union may appeal
the decision to the NCUA Board. An appeal
must be sent to the NCUA Board Secretary
within 60 days of the date of denial. The
appeal must be clearly identified as such and
address the specific reason(s) the federal
credit union disagrees with the denial. A
copy of the appeal must be sent to the Office
of Consumer Protection. NCUA central office
staff will make an independent review of the
facts and present the appeal to the NCUA
Board with a recommendation.
Before appealing, the credit union may,
within 30 days of the denial, provide
supplemental information to the Office of
Consumer Protection Director for
reconsideration. A reconsideration will
contain new and material evidence
addressing the reasons for the initial denial.
The Office of Consumer Protection Director
will have 30 days from the date of the receipt
of the request for reconsideration to make a
final decision. If the request is again denied,
the applicant may proceed with the appeal
process within 60 days of the date of the last
denial. A second request for reconsideration
will be treated as an appeal to the NCUA
Board.
Chapter 4—Charter Conversions
I—Introduction
A charter conversion is a change in the
jurisdictional authority under which a credit
union operates.
Federal credit unions receive their charters
from NCUA and are subject to its
supervision, examination, and regulation.
State-chartered credit unions are
incorporated in a particular state, receiving
their charter from the state agency
responsible for credit unions and subject to
the state’s regulator. If the state-chartered
credit union’s deposits are federally insured,
it will also fall under NCUA’s jurisdiction.
A federal credit union’s power and
authority are derived from the Federal Credit
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Union Act and NCUA Rules and Regulations.
State-chartered credit unions are governed by
state law and regulation. Certain federal laws
and regulations also apply to federally
insured state chartered credit unions.
There are two types of charter conversions:
Federal charter to state charter and state
charter to federal charter. Common bond and
community requirements are not an issue
from NCUA’s standpoint in the case of a
federal to state charter conversion. The
procedures and forms relevant to both types
of charter conversion are included in
appendix 4 of this manual.
II—Conversion of a State Credit Union to a
Federal Credit Union
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II.A—General Requirements
Any state-chartered credit union may
apply to convert to a federal credit union. In
order to do so it must:
• Comply with state law regarding
conversion and file proof of compliance with
NCUA;
• File the required conversion application,
proposed federal credit union organization
certificate, and other documents with NCUA;
• Comply with the requirements of the
Federal Credit Union Act, e.g., chartering and
reserve requirements; and
• Be granted federal share insurance by
NCUA.
Conversions are treated the same as any
initial application for a federal charter,
including an on-site examination by NCUA
where appropriate. NCUA will also consult
with the appropriate state authority regarding
the credit union’s current financial
condition, management expertise, and past
performance. Since the applicant in a
conversion is an ongoing credit union, the
economic advisability of granting a charter is
more readily determinable than in the case of
an initial charter applicant.
A converting state credit union’s field of
membership must conform to NCUA’s
chartering policy. The field of membership
will be phrased in accordance with NCUA
chartering policy. However, if the converting
credit union is a multiple group charter and
the new federal charter is a multiple group,
then the new federal charter may retain in its
field of membership any group that the state
credit union was serving at the time of
conversion. Subsequent changes must
conform to NCUA chartering policy in effect
at that time.
If the converting credit union is a
community charter and the new federal
charter is community-based, it must meet the
community field of membership
requirements set forth in Chapter 2, Section
V of this manual. If the state-chartered credit
union’s community boundary is more
expansive than the approved federal
boundary, only members of record outside of
the new community boundary may continue
to be served.
The converting credit union, regardless of
charter type, may continue to serve members
of record. The converting credit union may
retain in its field of membership any group
or community added pursuant to state
emergency provisions.
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II.B—Submission of Conversion Proposal to
NCUA
The following documents must be
submitted with the conversion proposal:
• Conversion of State Charter to Federal
Charter (NCUA 4000);
• Organization Certificate (NCUA 4008).
Only Part (3) and the signature/notary section
should be completed and, where applicable,
signed by the credit union officials.
• Report of Officials and Agreement to
Serve (NCUA 4012);
• The Application to Convert From State
Credit Union to Federal Credit Union (NCUA
4401);
• The Application and Agreements for
Insurance of Accounts (NCUA 9500);
• Certification of Resolution (NCUA 9501);
• Written evidence regarding whether the
state regulator is in agreement with the
conversion proposal; and
• Business plan, as appropriate, including
the most current financial report and
delinquent loan schedule.
If the state charter is applying to become
a federal community charter, it must also
comply with the documentation
requirements included in Chapter 2, Section
V.A.2 of this manual.
II.C—NCUA Consideration of Application To
Convert
II.C.1—Review by the Office of Consumer
Protection Director
The application will be reviewed to
determine that it is complete and that the
proposal is in compliance with Section 125
of the Federal Credit Union Act. This review
will include a determination that the state
credit union’s field of membership is in
compliance with NCUA’s chartering policies.
The Office of Consumer Protection Director
may make further investigation into the
proposal and may require the submission of
additional information to support the request
to convert.
II.C.2—On-Site Review
NCUA may conduct an on-site examination
of the books and records of the credit union.
Non-federally insured credit unions will be
assessed an insurance application fee.
II.C.3—Approval by the Office of Consumer
Protection Director and Conditions to the
Approval
The conversion will be approved by the
Office of Consumer Protection Director if it
is in compliance with Section 125 of the
Federal Credit Union Act and meets the
criteria for federal insurance. Where
applicable, the Office of Consumer Protection
Director will specify any special conditions
that the credit union must meet in order to
convert to a federal charter, including
changes to the credit union’s field of
membership in order to conform to NCUA’s
chartering policies. Some of these conditions
may be set forth in a Letter of Understanding
and Agreement (LUA), which requires the
signature of the officials and the appropriate
NCUA regional director.
II.C.4—Notification
The Office of Consumer Protection Director
will notify both the credit union and the state
regulator of the decision on the conversion.
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II.C.5—NCUA Disapproval
When NCUA disapproves any application
to convert to a federal charter, the applicant
will be informed in writing of the:
• Specific reasons for the action;
• Options to consider, if appropriate, for
gaining approval; and
• Appeal procedures.
II.C.6—Appeal of Office of Consumer
Protection Director Decision
If a conversion to a federal charter is
denied by the Office of Consumer Protection
Director, the applicant credit union may
appeal the decision to the NCUA Board. An
appeal must be sent to the NCUA Board
Secretary within 60 days of the date of
denial. The appeal must be clearly identified
as such and address the specific reason(s) the
credit union disagrees with the denial. A
copy of the appeal must be sent to the Office
of Consumer Protection. NCUA central office
staff will make an independent review of the
facts and present the appeal to the NCUA
Board with a recommendation.
Before appealing, the credit union may,
within 30 days of the denial, provide
supplemental information to the Office of
Consumer Protection Director for
reconsideration. The request will not be
considered as an appeal, but a request for
reconsideration by the Office of Consumer
Protection Director. The Office of Consumer
Protection Director will have 30 business
days from the date of the receipt of the
request for reconsideration to make a final
decision. If the application is again denied,
the credit union may proceed with the appeal
process to the NCUA Board within 60 days
of the date of the last denial by the Office of
Consumer Protection Director.
II.D—Action by Board of Directors
II.D.1—General
Upon being informed of the Office of
Consumer Protection Director’s preliminary
approval, the board must:
• Comply with all requirements of the
state regulator that will enable the credit
union to convert to a federal charter and
cease being a state credit union;
• Obtain a letter or official statement from
the state regulator certifying that the credit
union has met all of the state requirements
and will cease to be a state credit union upon
its receiving a federal charter. A copy of this
document must be submitted to the Office of
Consumer Protection Director;
• Obtain a letter from the private share
insurer (includes excess share insurers), if
applicable, certifying that the credit union
has met all withdrawal requirements. A copy
of this document must be submitted to the
Office of Consumer Protection Director; and
• Submit a statement of the action taken to
comply with any conditions imposed by the
Office of Consumer Protection Director in the
preliminary approval of the conversion
proposal and, if applicable, submit the signed
LUA.
II.D.2—Application for a Federal Charter
When the Office of Consumer Protection
Director has received evidence that the board
of directors has satisfactorily completed the
actions described above, the federal charter
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and new Certificate of Insurance will be
issued.
The credit union may then complete the
conversion as discussed in the following
section. A denial of a conversion application
can be appealed. Refer to Section II.C.6 of
this chapter.
II.E—Completion of the Conversion
II.E.1—Effective Date of Conversion
The date on which the Office of Consumer
Protection Director approves the
Organization Certificate and the Application
and Agreements for Insurance of Accounts is
the date on which the credit union becomes
a federal credit union. The Office of
Consumer Protection Director will notify the
credit union and the state regulator of the
date of the conversion.
II.E.2—Assumption of Assets and Liabilities
As of the effective date of the conversion,
the federal credit union will be the owner of
all of the assets and will be responsible for
all of the liabilities and share accounts of the
state credit union.
II.E.3—Board of Directors’ Meeting
Upon receipt of its federal charter, the
board will hold its first meeting as a federal
credit union. At this meeting, the board will
transact such business as is necessary to
complete the conversion as approved and to
operate the credit union in accordance with
the requirements of the Federal Credit Union
Act and NCUA Rules and Regulations.
As of the commencement of operations, the
accounting system, records, and forms must
conform to the standards established by
NCUA.
II.E.4—Credit Union’s Name
Changing of the credit union’s name on all
signage, records, accounts, investments, and
other documents should be accomplished as
soon as possible after conversion. The credit
union has 180 days from the effective date of
the conversion to change its signage and
promotional material. This requires the credit
union to discontinue using any remaining
stock of ‘‘state credit union’’ stationery
immediately, and discontinue using credit
cards, ATM cards, etc., within 180 days after
the effective date of the conversion, or the
reissue date whichever is later. The Office of
Consumer Protection Director has the
discretion to extend the timeframe for an
additional 180 days. Member share drafts
with the state-chartered name can be used by
the members until depleted.
II.E.5—Reports to NCUA
Within 10 business days after
commencement of operations, the recently
converted federal credit union must submit
to the Office of Consumer Protection Director
the following:
• Report of Officials (NCUA 4501); and
• Financial and Statistical Reports, as of
the commencement of business of the federal
credit union.
III—Conversion of a Federal Credit Union to
a State Credit Union
III.A—General Requirements
Any federal credit union may apply to
convert to a state credit union. In order to do
so, it must:
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• Notify NCUA prior to commencing the
process to convert to a state charter and state
the reason(s) for the conversion;
• Comply with the requirements of Section
125 of the Federal Credit Union Act that
enable it to convert to a state credit union
and to cease being a federal credit union; and
• Comply with applicable state law and
the requirements of the state regulator.
It is important that the credit union
provide an accurate disclosure of the reasons
for the conversion. These reasons should be
stated in specific terms, not as generalities.
The federal credit union converting to a state
charter remains responsible for the entire
operating fee for the year in which it
converts.
III.B—Special Provisions Regarding Federal
Share Insurance
If the federal credit union intends to
continue federal share insurance after the
conversion to a state credit union, it must
submit an Application for Insurance of
Accounts (NCUA 9600) to the Office of
Consumer Protection Director at the time it
requests approval of the conversion proposal.
The Office of Consumer Protection Director
has the authority to approve or disapprove
the application.
If the converting federal credit union does
not intend to continue federal share
insurance or if its application for continued
insurance is denied, insurance will cease in
accordance with the provisions of Section
206 of the Federal Credit Union Act.
If, upon its conversion to a state credit
union, the federal credit union will be
terminating its federal share insurance or
converting from federal to non-federal share
insurance, it must comply with the
membership notice and voting procedures set
forth in Section 206 of the Federal Credit
Union Act and part 708 of NCUA’s Rules and
Regulations, and address the criteria set forth
in Section 205(c) of the Federal Credit Union
Act.
Where the state credit union will be nonfederally insured, federal insurance ceases on
the effective date of the charter conversion.
If it will be otherwise uninsured, then federal
insurance will cease one year after the date
of conversion subject to the restrictions in
Section 206(d)(1) of the Federal Credit Union
Act. In either case, the state credit union will
be entitled to a refund of the federal credit
union’s NCUSIF capitalization deposit after
the final date on which any of its shares are
federally insured.
The NCUA Board reserves the right to
delay the refund of the capitalization deposit
for up to one year if it determines that
payment would jeopardize the NCUSIF.
III.C—Submission of Conversion Proposal to
NCUA
Upon approval of a proposition for
conversion by a majority vote of the board of
directors at a meeting held in accordance
with the federal credit union’s bylaws, the
conversion proposal will be submitted to the
Office of Consumer Protection Director and
will include:
• A current financial report;
• A current delinquent loan schedule;
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• An explanation and appropriate
documents relative to any changes in
insurance of member accounts;
• A resolution of the board of directors;
• A proposed Notice of Special Meeting of
the Members (NCUA 4221);
• A copy of the ballot to be sent to all
members (NCUA 4506);
• If the credit union intends to continue
with federal share insurance, an application
for insurance of accounts (NCUA 9600);
• Evidence that the state regulator is in
agreement with the conversion proposal; and
• A statement of reasons supporting the
request to convert.
III.D—Approval of Proposal to Convert
III.D.1—Review by the Office of Consumer
Protection Director
The proposal will be reviewed to
determine that it is complete and is in
compliance with Section 125 of the Federal
Credit Union Act. The Office of Consumer
Protection Director may make further
investigation into the proposal and require
the submission of additional information to
support the request.
III.D.2—Conditions to the Approval
The Office of Consumer Protection Director
will specify any special conditions that the
credit union must meet in order to proceed
with the conversion.
III.D.3—Approval by the Office of Consumer
Protection Director
The proposal will be approved by the
Office of Consumer Protection Director if it
is in compliance with Section 125 and, in the
case where the state credit union will no
longer be federally insured, the notice and
voting requirements of Section 206 of the
Federal Credit Union Act.
III.D.4—Notification
The Office of Consumer Protection Director
will notify both the credit union and the state
regulator of the decision on the proposal.
III.D.5—NCUA Disapproval
When NCUA disapproves any application
to convert to a state charter, the applicant
will be informed in writing of the:
• Specific reasons for the action;
• If appropriate, options or suggestions
that could be considered for gaining
approval; and
• Appeal procedures.
III.D.6—Appeal of Office of Consumer
Protection Director Decision
If the Office of Consumer Protection
Director denies a conversion to a state
charter, the federal credit union may appeal
the decision to the NCUA Board. An appeal
must be sent to the NCUA Board Secretary
within 60 days of the date of denial. The
appeal must be clearly identified as such and
address the specific reason(s) the federal
credit union disagrees with the denial. A
copy of the appeal must be sent to the Office
of Consumer Protection. NCUA central office
staff will make an independent review of the
facts and present the appeal to the NCUA
Board with a recommendation.
Before appealing, the credit union may,
within 30 days of the denial, provide
supplemental information to the Office of
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Consumer Protection Director for
reconsideration. The request will not be
considered as an appeal, but a request for
reconsideration by the Office of Consumer
Protection Director. The Office of Consumer
Protection Director will have 30 business
days from the date of the receipt of the
request for reconsideration to make a final
decision. If the application is again denied,
the credit union may proceed with the appeal
process to the NCUA Board within 60 days
of the date of the last denial by the Office of
Consumer Protection Director.
III.E—Approval of Proposal by Members
The members may not vote on the proposal
until it is approved by the Office of
Consumer Protection Director. Once approval
of the proposal is received, the following
actions will be taken by the board of
directors:
• The proposal must be submitted to the
members for approval and a date set for a
meeting to vote on the proposal. The
proposal may be acted on at the annual
meeting or at a special meeting for that
purpose. The members must also be given the
opportunity to vote by written ballot to be
filed by the date set for the meeting.
• Members must be given advance notice
(NCUA 4221) of the meeting at which the
proposal is to be submitted. The notice must:
• Specify the purpose, time and place of
the meeting;
• Include a brief, complete, and accurate
statement of the reasons for and against the
proposed conversion, including any effects it
could have upon share holdings, insurance of
member accounts, and the policies and
practices of the credit union;
• Specify the costs of the conversion, i.e.,
changing the credit union’s name,
examination and operating fees, attorney and
consulting fees, tax liability, etc.;
• Inform the members that they have the
right to vote on the proposal at the meeting,
or by written ballot to be filed not later than
the date and time announced for the annual
meeting, or at the special meeting called for
that purpose;
• Be accompanied by a Federal to State
Conversion—Ballot for Conversion Proposal
(NCUA 4506); and
• State in bold face type that the issue will
be decided by a majority of members who
vote.
• The proposed conversion must be
approved by a majority of all of the members
who vote on the proposal, a quorum being
present, in order for the credit union to
proceed further with the proposition,
provided federal insurance is maintained. If
the proposed state-chartered credit union
will not be federally insured, 20 percent of
the total membership must participate in the
voting, and of those, a majority must vote in
favor of the proposal. Ballots cast by
members who did not attend the meeting but
who submitted their ballots in accordance
with instructions above will be counted with
votes cast at the meeting. In order to have a
suitable record of the vote, the voting at the
meeting should be by written ballot as well.
• The board of directors shall, within 10
days, certify the results of the membership
vote to the Office of Consumer Protection
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Director. The statement shall be verified by
affidavits of the Chief Executive Officer and
the Recording Officer on NCUA 4505.
III.F—Compliance With State Laws
If the proposal for conversion is approved
by a majority of all members who voted, the
board of directors will:
• Ensure that all requirements of state law
and the state regulator have been
accommodated;
• Ensure that the state charter or the
license has been received within 90 days
from the date the members approved the
proposal to convert; and
• Ensure that the Office of Consumer
Protection Director is kept informed as to
progress toward conversion and of any
material delay or of substantial difficulties
which may be encountered.
If the conversion cannot be completed
within the 90-day period, the Office of
Consumer Protection Director should be
informed of the reasons for the delay. The
Office of Consumer Protection Director may
set a new date for the conversion to be
completed.
III.G—Completion of Conversion
In order for the conversion to be
completed, the following steps are necessary:
• The board of directors will submit a copy
of the state charter to the Office of Consumer
Protection Director within 10 days of its
receipt. This will be accompanied by the
federal charter and the federal insurance
certificate. A copy of the financial reports as
of the preceding month-end should be
submitted at this time.
• The Office of Consumer Protection
Director will notify the credit union and the
state regulator in writing of the receipt of
evidence that the credit union has been
authorized to operate as a state credit union.
• The credit union shall cease to be a
federal credit union as of the effective date
of the state charter.
• If the Office of Consumer Protection
Director finds a material deviation from the
provisions that would invalidate any steps
taken in the conversion, the credit union and
the state regulator shall be promptly notified
in writing. This notice may be either before
or after the copy of the state charter is filed
with the Office of Consumer Protection
Director. The notice will inform the credit
union as to the nature of the adverse
findings. The conversion will not be effective
and completed until the improper actions
and steps have been corrected.
• Upon ceasing to be a federal credit
union, the credit union shall no longer be
subject to any of the provisions of the Federal
Credit Union Act, except as may apply if
federal share insurance coverage is
continued. The successor state credit union
shall be immediately vested with all of the
assets and shall continue to be responsible
for all of the obligations of the federal credit
union to the same extent as though the
conversion had not taken place. Operation of
the credit union from this point will be in
accordance with the requirements of state
law and the state regulator.
• If the Office of Consumer Protection
Director is satisfied that the conversion has
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been accomplished in accordance with the
approved proposal, the federal charter will be
canceled.
• There is no federal requirement for
closing the records of the federal credit union
at the time of conversion or for the manner
in which the records shall be maintained
thereafter. The converting credit union is
advised to contact the state regulator for
applicable state requirements.
• The credit union shall neither use the
words ‘‘Federal Credit Union’’ in its name
nor represent itself in any manner as being
a federal credit union.
• Changing of the credit union’s name on
all signage, records, accounts, investments,
and other documents should be
accomplished as soon as possible after
conversion. Unless it violates state law, the
credit union has 180 days from the effective
date of the conversion to change its signage
and promotional material. This requires the
credit union to discontinue using any
remaining stock of ‘‘federal credit union’’
stationery immediately, and discontinue
using credit cards, ATM cards, etc., within
180 days after the effective date of the
conversion, or the reissue date, whichever is
later. The Office of Consumer Protection
Director has the discretion to extend the
timeframe for an additional 180 days.
Member share drafts with the federal
chartered name can be used by the members
until depleted. If the state credit union is not
federally insured, it must change its name
and must immediately cease using any credit
union documents referencing federal
insurance.
• If the state credit union is to be federally
insured, the Office of Consumer Protection
Director will issue a new insurance
certificate.
APPENDIX 1—GLOSSARY
These definitions apply only for use with
this manual. Definitions are not intended to
be all inclusive or comprehensive. This
manual, the Federal Credit Union Act, and
NCUA Rules and Regulations, as well as state
laws, may be used for further reference.
Adequately capitalized—A credit union is
considered ‘‘adequately capitalized’’ when it
meets the ‘‘adequately capitalized’’ definition
in part 702 of NCUA’s Rules and Regulations.
A multiple common bond credit union must
be ‘‘adequately capitalized’’ in order to add
new groups to its charter. The Office of
Consumer Protection director, with input
from the appropriate regional director, may
determine that a less than ‘‘adequately
capitalized’’ credit union can qualify for an
expansion if it is making reasonable progress
toward becoming ‘‘adequately capitalized,’’
and the addition of the group would not
adversely affect the credit union’s
capitalization level.
Affinity—A relationship upon which a
community charter is based. Acceptable
affinities include living, working,
worshiping, or attending school in a
community.
Appeal—The right of a credit union or
charter applicant to request a formal review
of the Office of Consumer Protection or
regional director’s adverse decision by the
National Credit Union Administration Board.
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Associational common bond—A common
bond comprised of members and employees
of a recognized association. It includes
individuals (natural persons) and/or groups
(non-natural persons) whose members
participate in activities developing common
loyalties, mutual benefits, and mutual
interests.
Business plan—Plan submitted by a charter
applicant or existing federal credit union
addressing the economic advisability of a
proposed charter or field of membership
addition.
Charter—The document which authorizes
a group to operate as a credit union and
defines the fundamental limits of its
operating authority, generally including the
persons the credit union is permitted to
accept for membership. Charters are issued
by the National Credit Union Administration
for federal credit unions and by the
designated state chartering authority for
credit unions organized under the laws of
that state.
Common bond—The characteristic or
combination of characteristics which
distinguishes a particular group of persons
from the general public. There are two
common bonds which can serve as a basis for
a group forming a federal credit union or
being included in an existing federal credit
union’s field of membership: Occupational—
employment by the same company, related
companies or in a trade, industry, or
profession (TIP); and associational—
membership in the same association.
Community credit union—A credit union
whose field of membership consists of
persons who live, work, worship, or attend
school in the same well-defined local
community, neighborhood, or rural district.
Credit union—A member-owned, not-forprofit cooperative financial institution
formed to permit those in the field of
membership specified in the charter to save,
borrow, and obtain related financial services.
Economic advisability—An overall
evaluation of the credit union’s or charter
applicant’s ability to operate successfully.
Emergency merger—Pursuant to Section
205(h) of the Federal Credit Union Act,
authority of NCUA to merge two credit
unions without regard to common bond
policy.
Exclusionary clause—A limitation, written
in a credit union’s charter, which precludes
the credit union from serving a portion of a
group which otherwise could be included in
its field of membership.
Federal share insurance—Insurance
coverage provided by the National Credit
Union Share Insurance Fund and
administered by the National Credit Union
Administration. Coverage is provided for
qualified accounts in all federal credit unions
and participating state credit unions.
Field of membership—The persons
(including organizations and other legal
entities) a credit union is permitted to accept
for membership.
Household—Persons living in the same
residence maintaining a single economic
unit.
Housekeeping Amendment—A field of
membership amendment to delete groups,
change group names, change group locations,
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remove exclusionary clauses, and to add
other persons eligible for credit union
membership by virtue of their close
relationship to a common bond group or the
community for community charters.
Immediate family member—A spouse,
child, sibling, parent, grandparent, or
grandchild. This includes stepparents,
stepchildren, stepsiblings, and adoptive
relationships.
In danger of insolvency—In making the
determination that a particular credit union
is in danger of insolvency, NCUA will
establish that the credit union falls into one
or more of the following categories:
1. The credit union’s net worth is declining
at a rate that will render it insolvent within
24 months. In projecting future net worth,
NCUA may rely on data in addition to Call
Report data. The trend must be supported by
at least 12 months of historic data.
2. The credit union’s net worth is declining
at a rate that will take it under two percent
(2%) net worth within 12 months. In
projecting future net worth, NCUA may rely
on data in addition to Call Report data. The
trend must be supported by at least 12
months of historic data.
3. The credit union’s net worth, as selfreported on its Call Report, is significantly
undercapitalized, and NCUA determines that
there is no reasonable prospect of the credit
union becoming adequately capitalized in the
succeeding 36 months. In making its
determination on the prospect of achieving
adequate capitalization, NCUA will assume
that, if adverse economic conditions are
affecting the value of the credit union’s assets
and liabilities, including property values and
loan delinquencies related to unemployment,
these adverse conditions will not further
deteriorate.
Letter of Understanding and Agreement—
Agreement between NCUA and federal credit
union officials not to engage in certain
activities and/or to establish reasonable
operational goals. These are normally entered
into with new charter applicants for a limited
time.
Mentor—An individual who provides
guidance and assistance to newly chartered,
small, or low-income credit unions. All new
federal credit unions are encouraged to
establish a mentor relationship with a
trained, experienced credit union individual
or an existing credit union.
Metropolitan Statistical Area—The Office
of Management and Budget defines a
metropolitan statistical area as an urbanized
area that has at least one urbanized area in
excess of 50,000 and ‘‘comprises the central
county or counties containing the core, plus
adjacent outlying counties having a high
degree of social and economic integration
with the central county as measured through
commuting.’’
Merger—Absorption by one credit union of
all of the assets, liabilities and equity of
another credit union. Mergers must be
approved by the National Credit Union
Administration and by the appropriate state
regulator whenever a state credit union is
involved.
Multiple common bond credit union—A
credit union whose field of membership
consists of more than one group, each of
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76781
which has a common bond of occupation or
association.
Occupational common bond—
Employment by the same entity or related
entities or a Trade, Industry, or Profession.
Once a member, always a member—A
provision of the Federal Credit Union Act
which permits an individual to remain a
member of the credit union until he or she
chooses to withdraw or is expelled from the
membership of the credit union. Under this
provision, leaving a group that is named in
the credit union’s charter does not terminate
an individual’s membership in the credit
union.
Organizations of such persons—An
organization or organizations composed
exclusively of persons who are within the
field of membership of the credit union.
Overlap—The situation which results
when a group is eligible for membership in
more than one credit union.
Primary potential members—Members or
employees who belong to an associational or
occupational group.
Purchase and assumption—Purchase of all
or part of the assets of and assumption of all
or part of the liabilities of one credit union
by another credit union. The purchased and
assumed credit union must first be placed
into involuntary liquidation.
Service area—The area that can reasonably
be served by the service facilities accessible
to the groups within the field of membership.
Service facility—Includes the means for a
multiple common bond credit union to
accept shares for a member’s account, accept
loan applications from the member, or
disburse funds on approved loans. This
definition includes a credit union owned
branch, a mobile branch, an office operated
on a regularly scheduled weekly basis, a
credit union owned ATM, or a credit union
owned electronic facility that meets, at a
minimum, these transactional requirements.
A service facility also includes a shared
branch or a shared branch network if either:
(1) The credit union has an ownership
interest in the service facility either directly
or through a CUSO or similar organization;
or (2) the service facility is local to the credit
union and the credit union is an authorized
participant in the service center. For
purposes of serving an underserved area, a
service facility does not include an
informational or transactional Web site, an
ATM or an interest in a shared branch
network.
Single associational common bond credit
union—A credit union whose field of
membership includes members and
employees of a recognized association.
Single common bond credit union—A
credit union whose field of membership
consists of one group which has a common
bond of occupation or association.
Single occupational common bond credit
union—A credit union whose field of
membership consists of employees of the
same entity or related entities or part of a
Trade, Industry, or Profession (TIP).
Spin-off—The transfer of a portion of the
field of membership, assets, liabilities,
shares, and capital of one credit union to a
new or existing credit union.
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Subscribers—For a federal credit union, at
least seven individuals who sign the charter
application and pledge at least one share.
Trade, Industry, or Profession (TIP)—A
single occupational common bond credit
union based on employment in a trade,
industry, or profession including
employment at any number of corporations
or other legal entities that while not under
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common ownership—have a common bond
by virtue of producing similar products,
providing similar services, or participating in
the same type of business.
Underserved community—A local
community, neighborhood, or rural district
that is an ‘‘investment area’’ as defined in
Section 103(16) of the Community
Development Banking and Financial
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Institutions Act of 1994. The area must also
be underserved based on other NCUA and
federal banking agency data.
Unsafe or unsound practice—Any action,
or lack of action, which would result in an
abnormal risk or loss to the credit union, its
members, or the National Credit Union Share
Insurance Fund.
BILLING CODE 7535–01–P
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76783
APPENDIX2
LEITER OF UNDERSTANDING AND AGREEMENT
To the Board of Directors and Other Officials
_ _ _ _ _ Federal Credit Union
Since the purposes of credit unions are to promote thrift and to make funds available for
loans to credit union members for provident and productive purposes, and since newly
chartered credit unions do not 9enerally have sufficient reserves to cover large losses on
loans or meet unduly large liqUidio/. requirements, Federal insurance coverage of member
accounts under the National Cred1t Union Share Insurance Fund will be granted to the above
named credit union subject to the conditions listed in this Letter of Understanding and
Agreement and in the Organization Certificate and Application and Agreements for Insurance
of Accounts. These terms are listed below and are subject to acceptance by authorized
credit union officials.
1. The credit union will refrain from soliciting or accepting brokered fund deposits from any
source without the prior written approval of the Regional Director.
2. The credit union will refrain from the making of large loans, that is, loans in excess of 5
percent of unimpaired capital and surplus, to any one member or group of members without
the prior written approval of the Regional Director.
3. The credit union will not establish or invest in a Credit Union Service Organization (CUSO)
without the prior written approval of the Regional Director.
4. The credit union will not enter into any insurance programs whereby the credit union
member finances the payment of insurance premiums through loans from the credit union.
5. Any special insurance plan/program, that is, insurance other than usual and normal surety
bonding or casualty or liability or loan protection and life savings insurance coverage, which
the credit union officials intend to undertake, will be submitted to the Regional Director of the
National Credit Union Administration for written approval prior to the officials committing the
credit union thereto.
6. The credit union will prepare and mail to the district examiner financial and statistical
reports as required by the Federal Credit Union Act and Bylaws by the 20th of each month
following that for which the report is prepared.
7. As the credit union's officials gain experience and the credit union achieves target levels of
growth and profitability, the above terms and conditions may be renegotiated by the two
parties.
Federal Credit Union, as
We, the undersigned officials of the
authorized by the board of directors, acknowledge receipt of and agree to the attached Letter
of Understanding and Agreement dated _ _ _ _ _ _ _ __
This Letter of Understanding and Agreement has been voluntarily entered into with the
National Credit Union Administration. We agree to comply with all terms and conditions
expressed in this Letter of Understanding and Agreement.
Should the NCUA Board determine that these terms and conditions have not been complied
with or that the board of directors or other officials have not conducted the affairs of the credit
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union in a sound and prudent manner, the NCUA Board may terminate insurance coverage
of the credit union. If actions by the officials, in violation of this Letter of Understanding and
Agreement, cause the credit union to become insolvent, the officials assume such personal
liability as may result from their actions.
The term of this Letter of Understanding and Agreement shall be for the period of at least 24
months from the date the credit union is insured. This Letter of Understanding and
Agreement may, at the option of the Regional Director, be extended for an additional24
months at the end of the initial term of this agreement.
Dated this
(day)
of---,--.,...,--(month)
(year)·
NATIONAL CREDIT UNION ADMINISTRATION BOARD
ON BEHALF OF THE NA-TIONAL CREDIT UNION SHARE INSURANCE FUND
Office of Consumer Protection Director
_ _ _ _ _ _ _ _ _ _ _Federal Credit Union
By:
Chief Executive Officer
Date
Chief Financial Officer
Date
Secretary
Date
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76785
APPENDIX 3
NCUA OFFICES
OFFICE OF CONSUMER PROTECTION
1775 Duke Street
Alcxundria. VA 22314-3428
Phone:
Fax:
EMAIL:
REGION 3- ATLA~TA
7000 Central Parkway. Suite 1600
Atlanta, GA 30328-4598
Phone:
Fax:
EMAil.:
703-518-1150
703-518-6672
dcamaii@J.ncua.gov
Within the Ollice ofCon~umcr Protection, the
Division of Consumer Access and Division of
Consumer Acce~s -·South share the responsibility
for chancring and field-of-membership matters.
low-income designations. chatter conversions and
bylaw amendments.
RI<:GlON 1- ALBANY
9 Washington Square
Washington Avenue Extension
Alb<my, 1\Y 12205
States in Region 3 include Alabama, Arkansas.
Florida, GtX1rgia, Indiana. Kentucky, Louisiana.
\iii>sissippi, North Carolina. South Carolina and
Tennessee, as well as Puerto Rico and the U.S.
Virgin Islands.
REGION 4- ALSTIN
4807 Spicewood Springs Rd.
Suite 5200
Austin, TX 78759-8490
Phone:
Phone:
Fax:
EMAIL:
Fax:
EMAIL:
518-862-7 400
518-862-7420
Region l @ncuagov
RtJgion I is re~ponsihle f(lr all federally insured
cn.:dit unions in Connecticut, Maine,
Massachusetts, Michigan, New Hampshire. 1\cw
York, l<hod.: Island, Vennont.<Uld Wisconsin.
678-44 3-3000
678-443-3020
Rcgion3(1j,'-ncua.gov
512-342-5600
512-342-5620
Rcgion4:fi}n~,;ua.gov
Region 4. headquartered in Austin Texas, covers
Colorado, Illinois, Iowa, Kansas, Minn.:solu,
.V1issouri, Montana, Ncbmska, :\cw Mexico,
North Dakota, Oklahoma, South Dakota, Texas,
and Wyoming.
REGION 5- TE\fi,K
1230 W. Washington Strcc!
REGION 2- CAPITAL
I 900 Duke Street, Suite 300
Alexandria, VA 22314
Phone:
Fax:
EMAIL:
Suite 101
Tempt:, /\Z 8528 I
Phone:
fax:
Region 2 is headquartered in Alexandria, Virginia.
and encompasses the states of L>claware,
Maryland, New Jersey. Ohio, Pennsylvania,
Virginia and West Virginia, and the District or
Columbia.
602-302-6000
602-302-6024
EMAil.:
703-5 I9-4600
703-519-4620
Rcgion2(li}ncua.gov
Rcgion5(c_iincua.gov
Region 5 headquartered in Tempe, Ali:wna,
covers Alaska. Arizona, California. Guam,
Hawaii, Idaho, Nevada. Oregon, Utah, and
Washington.
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APPENDIX4
NCUAFORMS
Form Number
Form Title
NCUA 4000
Conversion of State Charter to a Federal Charter- Federal Credit Union
Investigation Report
NCUA 4001
Federal Credit Union Investigation Report
NCUA 4008
Organization Certificate
NCUA 4009
Approval of Organization Certificate and Certification of Insurance
NCUA 4012
Report of Official and Agreement to Serve
NCUA 4015
Application for Field of Membership Amendment (use for all multiple common
bond expansions involving groups of 5,000 or more persons)
NCUA 4015-A
Application for Field of Membership Amendment (use for all multiple common
bond expansions involving groups of 3,000 to 4,999 persons)
NCUA 4015-EZ
Application for Field of Membership Amendment (use for all single common
bond expansions and multiple common bond expansions involving groups
of less than 3,000 persons)
NCUA 4221
Notice of Meeting of Members to Convert from a Federal to State
Chartered Credit Union
NCUA4401
Application to Convert from a State to a Federal Credit Union
NCUA4505
Affidavit - Proof of Results of Membership Vote - Proposed Conversion
From Federal Credit Union to State Credit Union
NCUA4506
Federal to State Conversion- Ballot for Conversion Proposal
NCUA 9500
Application and Agreements for Insurance of Accounts
NCUA 9501
Certification of Resolutions
NCUA 9600
Information to be Provided in Support of the Application of a State
Chartered Credit Union for Insurance of Accounts
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76787
CONVERSION OF STATE CHARTER TO FEDERAL CHARTER
FEDERAL CREDIT UNION INVESTIGATION REPORT
This report must be filled in completely and submitted with the other completed
forms listed in Chapter 4 and in the instructions for this form.
A. INFORMATION FOR CHARTER AND BYLAWS
1. Proposed Name: - - - - - - - - - - - - F e d e r a l Credit Union
Second Choice of Name:
Federal Credit Union
2. ConbctPe~on~~-----~~~~~~---=~
Bus. Tel. No./Area Code: ______Res. Tel. No./Area Code._ _ _ _ __
3. The credit union will maintain its office at:
(City)
(County)
(State)
(Zip)
4. Perman_ent mailing address of credit union:
5. Define proposed field of membe~hip (Attach a copy of current state charter
field of membe~hip):
6. The board will have (an odd number 5 to 15) ___ membe~; the credit
committee (an odd number, 3 to 7) ___ membe~; the supervisory committee
(3 to 5) ___ members. Each official must complete a Report of Official and
Agreement to Serve (NCUA 4012) which is to be submitted with this investigation
report.
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B. CHARACTER AND FITNESS OF SUBSCRIBERS
7. Type or print the list of the subscribers who have signed the organization
certificate (7 not more than 10 persons). Names should be IDENTICAL to
signatures on the Organization Certificate (NCUA 4008). Each subscriber listed
below has subscribed to at least one share in accordance with Section 103 of the
Federal Credit Union Act:
Name:
Address:
Occu ation:
Name:
Address:
Occu ation:
Name:
Address:
Occu ation:
Name:
Address:
Occu ation:
Name:
Address:
Years of Membershi
Years of Membershi
Years of Membershi
Y~ars
Q~~!J_p~~~ll=
of Membership:
Years of Members#J~p:
Name:
Address:
-Occupation:
Name:
Address:
Occu ation:
Name:
Address:
Occu ation:
Name:
Address:
Years of Me_mbership:
Years of Membership:
Y_ef~rs
Q!?pye_atlon:
Name:
······································-···
of Membership:
Years of Membershi
Address:
_Q~cupation:
Years of Membership:
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76789
ANY ADDITIONAL COMMENTS OR INFORMATION THAT IS DEEMED PERTINENT
OR HELPFUL IN GIVING CONSIDERATION TO THIS APPLICATION SHOULD BE
INCLUDED AS AN ATTACHMENT.
The undersigned certifies that to the best of his/her knowledge and belief the
above information is true and correct.
I do (do not) recommend that a charter be granted to this group.
Signature
, Organizer
Organizer's A d d r e s s : - - - - - - - - - - -
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FORM 4000 INSTRUCTIONS
A. INFORMATION FOR CHARTERS AND BYLAWS
The subscriber should select a name for the proposed credit union. It is the
responsibility of the federal credit union organizers to ensure that the proposed
federal credit union name does not constitute an infringement on the name of any
corporation in its trade area. The last three words in the name must be "Federal
Credit Union." Since the name selected should not duplicate exactly the name of
an existing credit union, item 1 provides space for a second choice.
The territory of operations of a Federal credit union is described in the field of
membership, item 5. The principal office of the credit union will usually be
maintained at a location described in the field of membership.
The proposed field of membership should be defined so clearly that it leaves no
room for any doubt as to whom the credit union is to serve or the area which it is
to operate. Corporations and other organizations referred to in the definition of
the field of membership should be designated by the exact names rather than by
some local or popular contraction of these names. Any segment of a larger
organization should be identified with the parent. The field of membership for
each type of common bond and samples are discussed in detail in Chapter 2 of
the "Chartering and Field of Membership Manual."
With the guidance of the organizer, the subscribers to the Organization Certificate
decide on the number of directors and credit committee members. The board and
credit committee must be composed of an odd number of members. The
supervisory committee is appointed by the board of directors.
B. CHARACTER AND FITNESS OF SUBSCRIBERS
The names and address of the subscribers should be recorded legibly and
completely in item 7 of this report. It is from this information that the National
Credit Union Administration prepares Section 3 of the charter. The names of the
subscribers must be IDENTICAL to their signatures on the Organization
Certificate.
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C. SUBMITTAL OF CHARTER APPLICATION
In addition to this Investigation Report, the following should be submitted to the
appropriate regional director of NCUA:
1. Application to Convert, NCUA 4401- one original;
2. Written evidence regarding whether the state regulator Is in agreement with
the conversion proposal;
3. Application and Agreements for Insurance of Accounts, NCUA 9500 -one
original;
4. Certificate of Resolution, NCUA 9501 -one original;
5. Organization Certificate, NCUA 4008 -one notarized original. At least seven,
but no more than ten persons, must sign the organization certificate. The person
administering the oath must not be one of the subscribers. The oath on the
organization certificate must be executed and show the notary's seal and date the
commission expires as required by State law;
6. Report of Official and Agreement to Serve, NCUA 4012- one original for each
board member, credit committee member, and supervisory committee member;
1.. Most current financial report and delinquent loan schedule; and
8. Business Plan - refer to Chapter 1 of the Chartering and Field of Membership
Manual for a discussion of the components of an acceptable business plan.
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FEDERAL CREDIT UNION INVESTIGATION REPORT
This form must be filled in completely and submitted with the other completed
forms listed in the instructions to this form.
A. INFORMATION FOR CHARTER AND BYLAWS
1. Proposed n a m e : - - - - - - - - - - - , Federal Credit Union
Second choice:
Federal Credit Union
2.
Con~ctPe~on:
________________
Business Tel.: - - - - - - - - - - - - - Residence T e l . : - - - - - - - - - - - Address: - - - - - - - - - - - - - - - - - - - - -
3. The credit union will maintain its offices at:
(City,
S~te,
County, Zip Code)
3a. Proposed permanent mailing address of credit union:
4. Define proposed field of membership:-------------------
5. The board will have (an odd number, 5 to 15) _ _members; the credit
committee will have (an odd number, 3 to 7) _ _members; the supervisory
committee will have (3 to 5) _ _ membe~. Each official must complete a Report
of Official and Agreement to Serve (NCUA 4012) which is to be submitted with
this investigation report.
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B. ECONOMIC ADVISABILITY OF ORGANIZING PROPOSED CREDIT UNION
(Attach a separate sheet if space available is not adequate.)
GENERAL INFORMATION
1. Potential membership: _ _ _ __
NOTE: Number of employees for occupational, active members for
associational (or families for religious groups), or population per most recent
census for community-type fields of membership.
2. Potential interest (survey results).
NOTE: Sample must consist of a minimum of 250 potential members. Copy of
survey form(s) utilized should be attached.
Number of people surveyed: _ _ __
Number of people responding to survey: _ _ __
Number of people pledging an initial deposit: _ _ __
Total dollars pledged: $~:----=-Number pledging systematic savings: _ _ __
Total dollars pledged (per month): $._ _ __
3. Number of persons attending the charter-organization meeting: _ _ __
4. Attach a business plan containing, at a minimum, the following elements:
•
mission statement;
•
analysis of market conditions, including if applicable, geographic, demographic,
employment, income, housing, and other economic data;
evidence of member support;
•
goals for shares, loans, and for number of members;
•
financial services needed/desired;
financial services to be provided to members of all segments within the field of
membership;
how/when services are to be implemented;
organizational/management plan addressing qualification and planned training of
officials/employees;
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
continuity plan for directors, committee members, and management staff;
operating facilities, to include office space/equipment and supplies, safeguarding
of assets, insurance coverage, etc.;
type of record keeping and data processing system;
detailed semiannual pro forma financial statements (balance sheet, income and
expense projections) for 1st and 2nd year, including assumptions. e.g., loan and
dividend rates;
plans for operating independently;
written policies (shares, lending, Investments, funds management, capital
accumulation, dividends, collections, etc.);
•
source of funds to pay expenses during initial months of operation, Including any
subsidies, assistance, etc., and terms or conditions of such resources; and
•
evidence of sponsor commitment (or other source of support) if subsidies are
critical to success of the federal credit union. Evidence may be in the form of
letters, contracts, financial statements from the sponsor, and any other such
document on which the proposed federal credit union can substantiate its
projections.
5. What potential difficulties do you detect in the elected officials carrying out
their management responsibilities or in the FCU achieving its stated objectives?
6. What provisions have been made to overcome potential difficulties?
Dates of planned contacts by organizer to determine progress and to assist the
group:
First Contact Date:
Second Contact Date:
Third Contact Date:
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76795
SPECIFIC INFORMATION- OCCUPATIONAL (same company) CHARTER
APPLICANTS
1. How long has the sponsor company been in existence? _ __
2. What was the highest number of employees during the past three years?
_ _ Lowest number during the past three years? _ _ If a large variance,
please explain. - - - - - - - - - - - - - - - - - - - - - - - - -
3. Are there any contemplated changes in the corporate structure of the
company? _ _ If yes, e x p l a i n . - - - - - - - - - - - - - - - - - - -
4. Have there been any significant changes in the corporate structure in the past
three years? _ _ If yes, please e x p l a i n . - - - - - - - - - - - - - - -
5. Are there any negotiations now in progress between management and labor
that could lead to work stoppages? _ _ If yes, please explain. - - - - - -
6. If the credit union cannot operate on the employer's property, explain how the
credit union will be able to transact business effectively with the members.
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
7. If the employees to be served by the credit union work in more than one
location or city, identify each location with the corresponding number of
employees working at e a c h . - - - - - - - - - - - - - - - - - - - -
8. Are there other employees of the company who are not being included in the
proposed field of membership? _ _ If so, give the number and location of the
other employees and explain why they are not included in the proposed credit
union's field of m e m b e r s h i p . - - - - - - - - - - - - - - - - - - - -
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76797
SPECIFIC INFORMATION - OCCUPATIONAL (trade, industry or professiont
CHARTER APPLICANTS
1. Explain how the credit union will be able to transact business effectively with
themembe~·----------------------------------------------
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
SPECIFIC INFORMATION- ASSOCIATIONAL CHARTER APPLICANTS
1. State the purpose and goals of the organization sponsoring this charter.
2. List the types of activities and their frequency, which the organization
sponsors that provide contact among the members and from which common
loyalties, mutual benefits, and mutual interests are developed.-------
3. In what year was the organization established? _ _ Is it incorporated? _ _
Where is the headquarters l o c a t e d ? - - - - - - - - - - - - - - - - 4. Give statistics as to trends in membership during the last five years. _ _ __
5. What is the frequency of membership meetings? _ _
Average attendance: _ _ Dues required: $_ _
6. State the geographic territory where members reside. - - - - - - - - -
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76799
7. Submit a copy of the current bylaws of the association, the constitution,
articles of incorporation, or equivalent documentation and recent financial
statements, i.e. balance sheet, and income and expense statement, with this
application.
8. If the bylaws, constitution, articles of incorporation, or equivalent
documentation provide for more than one type of membership and if all classes
of membership are to be included in the credit union's field of membership,
provide justification for the inclusion of other than "regular" members.
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76800
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
SPECIFIC INFORMATION - MULTIPLE COMMON BOND CHARTER APPLICANTS
1. Explain how the credit union will be able to transact business effectively with
------------------------------------------------
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76801
SPECIFIC INFORMATION - COMMUNITY CHARTER APPLICANTS
1. Community charters must be based on a well-defined local community,
neighborhood, or rural district where individuals have common interests and/or
interact. Please refer to Chapter 2, Section V of the "Chartering and Field of
Membership Manual" when answering this question.
2. Provide a map which clearly outlines the credit union's proposed community
boundaries and Identify proposed service facilities.
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
C. CHARACTER AND FITNESS OF SUBSCRIBERS
1. List of subscribers who have signed the Organization Certificate (7 not more
than 10 persons). Names should be IDENTICAL to signature on the Organization
Certificate (NCUA 4008). Each subscriber listed below has subscribed to at least
one share in accordance with Section 103 of the Federal Credit Union Act:
Name:
Addres_s_:________________________
Occupation:~-------------------Years of Residence: ______
Name: __________________________
Address: _______________________
Occupation:
Years of Res::-id-:-e-n_c_e_:--------------Name:
Addres_s_:_______________________
Occupation:~---------Years of Residence: _______
Name:
Addres_s_:______________________
Occupation:
YearsofRes~id~e-n_c_e_:
____________
Name:
Addres_s_:_______________________
Occupation:~----------------Years of Residence: _____
Name:
Addres_s_:________________________
Occupation:~--------------
Years of Residence:-------
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76803
Name: __________________ ________
Address: __________________ ______
Occupation:~-------------------
Years of Residence: ------
Name:
Addres_s_:__________________ ______
Occupation: :-:---------------- ---Years of Residence: _______
Name: __________________ _______
Address: __________________ ______
Occupation: :-:--------------- ---Years of Residence: _ _ __
Name: __________________ ________
Address: __________________ ______
Occupation: :-:---------------- ---Years of Residence: ________
2. Are all of the subscribers within the field of membership?
Do they
appear to be representative of the group described in the definition of the field of
membership?
If not, explain. - - - - - - - - - - - - - - - - - - - - - - - - - - - -
NCUA4001
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3. Does your investigation indicate that the subscribers are persons of good
character?
If not, explain. - - - - - - - - - - - - - - - - - - - - - - - - - - - -
76804
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
4. From your investigation, is it your judgment that the directors and committee
members are persons of good character, and that they have the ability and
determination to operate a credit union satisfactorily? _ _ If not, explain. _ _
5. Does It appear that there are any factions within the group which may render
smooth and efficient credit union operations difficult? _ _ If so, explain. _ __
6. Is there any indication that the proposed credit union would be used for selfish
gain by any person or group of persons within the group to be served?_ _ __
7. Is an application for a State Charter now p e n d i n g ? - - - - - - - - - 8. Has the group ever had a credit union? ___ If so, when did it liquidate or
merge? __________ ______
ANY ADDITIONAL COMMENTS OR INFORMATION THAT IS DEEMED PERTINENT
OR HELPFUL IN GIVING CONSIDERATION TO THIS APPLICATION SHOULD BE
INCLUDED AS AN ATTACHMENT.
The undersigned certifies that to the best of their knowledge and belief the above
information is true and correct.
I do (do not) recommend that a charter be granted to this group.
Signature:
Organizer's Address:
, Organizer
Telephone No.:
Date:------ -----
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76805
FORM 4001 INSTRUCTIONS
A. INFORMATION FOR CHARTER AND BYLAWS
The subscriber should select a name for the proposed credit union. It is
the responsibility of the federal credit union organizers to ensure that the
proposed federal credit union name does not constitute an infringement
on the name of any corporation in its trade area. The last three words in
the name must be "Federal Credit Union." Since the name selected
should not duplicate exactly the name of an existing credit union, Item 1
provides space for a second choice.
The territory of operations of a Federal Credit Union is described in the
field of membership, item 4. The principal office of the credit union will
usually be maintained at a location described in the field of membership.
The proposed field of membership should be defined so clearly that it
leaves no room for any doubt as to whom the credit union Is to serve or
the area which It is to operate. Corporations and other organizations
referred to in the definition of the field of membership should be
designated by the exact names rather than by some local or popular
contraction of these names. The field of membership for each type of
common bond and samples are discussed in detail in Chapter 2 of the
"Chartering and Field of Membership Manual."
With the guidance of the organizer, the subscribers to the Organization
Certificate decide on tho number of directors and credit committee
members. The board and credit committee must be composed of an odd
number of members. The supervisory committee is appointed by the
board of directors.
B. ECONOMIC ADVISABILITY OF ORGANIZING PROPOSED CREDIT
UNION
This section of the report contains Information on the required business
plan elements and other information needed to make a decision on the
economic advisability of chartering the proposed credit union.
C. CHARACTER AND FITNESS OF SUBSCRIBERS
The names and addresses of the subscribers should be recorded legibly
and completely in Item C. 1. of this report. It is from this information that
the National Credit Union Administration prepares Section 3 of the
charter. The names of the subscribers must be IDENTICAL to their
signatures on the Organization Certificate.
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
D. SUBMITTAL OF CHARTER APPLICATION
In addition to this Investigation Report, the following should be submitted
to the appropriate regional director of NCUA:
1. Organization Certificate, NCUA 4008 -one notarized original. At least seven,
but no more than ten persons, must sign the organization certificate. The person
administering the oath must not be one of the subscribers. The oath on the
organization certificate must be executed and show the notary's seal and date the
commission expires as required by State law;
2. Report of Official and Agreement to Serve, NCUA 4012- one original for each
board member, credit committee member, and supervisory committee member;
3. Business Plan -refer to Part B, question 4 of this form and Chapter 1 of the
Chartering and Field of Membership Manual for a discussion of the components
of an acceptable business plan;
4. Application and Agreements for Insurance of Accounts, NCUA 9500 - one
original; and
5. Certification of Resolutions, NCUA 9501 - one original.
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76807
NATIONAL CREDIT UNION ADMINISTRATION
FEDERAL CREDIT UNION
(A corporation chartered under
the laws of the United States)
CHARTER N O . - - - -
NCUA4008
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76808
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
ORGANIZATION CERTIFICATE
- - - - - - - - F E D E R A L CREDIT UNION
Charter No. _________
TO NATIONAL CREDIT UNION ADMINISTRATION:
We, the undersigned, do hereby associate ourselves as a Federal Credit Union for
the purposes indicated in and in accordance with the provisions of the Federal
Credit Union Act, (12 U.S. C. 1751 et seq.}. We hereby request approval of this
organization certificate; we hereby apply for insurance of member accounts; we
agree to comply with the requirements of said Act, with the terms of this
organization certificate and with all laws, rules, and regulations now or hereafter
applicable to Federal Credit Unions.
(1)
The name of this credit union shall b e - - - - - - - - - - - Federal Credit
Union.
(2)
This credit union will maintain its office and will operate in the territory de·
scribed in the field of membership.
NCUA4008
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
(3)
76809
The names and addresses of the subscribers to this certifiCate and the
number of shares subscribed by each are as follows:
NAME
ADDRESS
SHARES
I
(4)
The par value of the shares of this credit union will be stated In the uv•'"-"'-
(5)
The field of membership shall be limited to those having the following
common
NCUA4008
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
(6)
The term of this credit union's existence shall be perpetual: Provided,
however, that upon the finding that this credit union is bankrupt or insolvent
or has violated any provision of this organization certificate, of the bylaws,
of the Federal Credit Union Act including any amendments thereto or
thereof, or of any regulations issued thereunder, this organization certificate
may be suspended or revoked under the provisions of Section 120(b) of the
Federal Credit Union Act
(7)
This certificate is made to enable the undersigned to avail themselves of the
advantages of said Act.
(8}
The management of this credit union, the conduct of its affairs, and the
powers, duties, and privileges of its directors, officers, committees and
membership shall be set forth in the approved bylaws and any approved
amendments thereto or thereof.
IN WITNESS THEREOF we 1 have here unto subscribed our names this
(day)
(month)
(year)
Subscribed before me, an officer competent to
administer oaths, at---------~------
CITY/STATE
this _ _ _ _ __
(day)
(month)
(year)
Signed------------Title_ _ _ _ _ _ _ _ _ _ _ _ __
(Notary public or other competent officer)
1 At least seven signers non& of whom should administer the oath.
NCUA4008
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~---·----
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76811
APPROVAL OF ORGANIZATION CERTIFICATE
AND
CERTIFICATION OF INSURANCE
Pursuant to the provisions of the Federal Credit Union Act (12 U.S.C. 1751 et.
Seq.), the foregoing organization certificate and insurance of member accounts of
- - - - - - - - - - - - - - Federal Credit Union are approved this
(day)
(month)
(year)
CHAIRPERSON
NATIONAL CREDIT UNION ADMINISTRATION
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76812
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
REPORT OF OFFICIAL AND AGREEMENT TO SERVE
TO: NATIONAL CREDIT UNION ADMINISTRATION
P r o p o s e d - - - - - - - - - - - - - - - - - - Federal Credit Union
Title of Prospective Position: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Name:
~M~r.~/M~s-.~,M~~-.~La-s~t-,F=i~~~~-M~id~d~le---------------------------
Maiden Name (If Different From A b o v e ) : - - - - - - - - - - - - - - Address (Res.): =-::---:------'---------=-:-:---------:----:::-:--:-~Street,
City,
State, Zip Code
Telephone Number: (_),_ _ _ _ _ _ _ _ _ __
Place of Birth: -=:-:--::::-:--:-:-::------ ----Date of Birth: - - - - - City/State/Country
Employer:---------Social Security Number (Optional): ________
Type of Business: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Number of years with present employer: ______ Your position title: _____
Education background (enter highest grade completed)
High School: ____ College:
Major Field of Study:-------Other training or experience:
Are you willing to accept the position of trust for which you have been selected
and to remain in office until a qualified successor is found? _ YES _ NO
Have you been informed as to the general duties and responsibilities of an official
of the proposed Federal Credit Union and are you willing to devote the time
necessary to familiarize you~elf with and to perform your duties?
YES
NO
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76813
Estimated number of hours per month you will be able to volunteer: _ _
IF THE ANSWER IS YES TO THE FOLLOWING QUESTION, PLEASE PROVIDE
INFORMATION AS INSTRUCTED ON THE FOLLOWING PAGE:
Have you ever been convicted of any CRIMINAL OFFENSE involving dishonesty
or a breach of trust?
YES
NO
To facilitate the process of obtaining a credit and background check, please
provide the following:
1. Any other names which you have used:
and,
2. Previous address, (if your address changed over the past 2 years):
3.NameofSpouse: ____________________________
READ THE FOLLOWING CAREFULLY BEFORE SIGNING
CERTIFICAliON AND AGREEMENT TO SERVE
I certify tllat the information provided on this form is true and correct. Further, I,
the undersigned, having been duly designated to occupy the position(s) indicated
above, do hereby agree to serve in the above-stated office(s) of this proposed
credit union until the first annual meeting held in accordance with the Federal
Credit Union Act and the bylaws of this credit union and until the election of my
successor(s). I further pledge to carry out the duties and responsibilities
commensurate with said office(s) as promulgated by the Federal Credit Union Act
and the bylaws of this credit union. I have read the Privacy Act Notice that
follows.
Signature
Witness
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Date
76814
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
PRIVACY ACT NOTICE
The Privacy Act of 1974 (Public Law 93-579) requires that you be advised as to
the legal authority, purpose and uses of the information solicited by this form.
Pursuant to Sections 104 and 205(d) of the Federal Credit Union Act, the
information in this form is requested for the purpose of completing the
investigation required for a new Federal credit union. The information in this form
will be primarily used in considering the soundness of the management for the
proposed Federal credit union. However, this form may be disclosed to any ofthe
following sources: a congressional office in response to your inquiry to that
office; an appropriate Federal, state or local authority in the investigation or
enforcement of a statute or regulation; or employees of a Federal agency for audit
purposes. Failure to complete this form or omission of any item of information,
except for disclosure of your social security number, may result in a delay in the
process for chartering the proposed Federal credit union. In accordance with
Section 792.68 of NCUA's regulations, you are not required to furnish your social
security number on this form. Your social security number, if voluntarily
provided, will be used to more easily verify the information required by this form.
No penalty will result to you as a management official or to the chartering of the
proposed Federal credit union if you do not provide your social security number.
Further information needed if answer to CRIMINAL OFFENSE question on the
previous page was YES:
CRIMINAL OFFENSE:
Nature of o f f e n s e : - - - - - - - - - - - - - - - - Date of occurrence:------- Date of conviction:-----Sentence conferred: ---:-:--:-c:---~:-....,...,.--------
tAttach a separate sheet If space provided is not adequato)
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76815
CRIMINAL OFFENSE GUIDELINES
The Federal Credit Union Act, Subchapter II, Section 205(d), requires that, except
with the written consent of the NCUA Board, no person shall serve as director,
officer, committee member, or employee of an insured credit union who has been
convicted or who is hereafter convicted, of any criminal offense involving
dishonesty or breach of trust. To assist the NCUA Board in making a
determination of the fitness of a person who is selected to serve and who the
organizer believes is qualified to serve as an official, the specific information
above will need to be furnished.
If the NCUA Board believes that, in view of the facts presented and the date of the
offense, they can give their consent to the appointment they will so advise that
person in writing. If on the other hand, the NCUA Board believes after careful
consideration that they cannot in good conscience give their written consent to
the appointment they will contact the organizer and ask that another person be
selected for the position. The person selected will have to complete a Report of
Official and Agreement to Serve.
An indication of whether the bonding company would agree to provide coverage
should be included if the person is to serve as treasurer. Bonding company
agrees to provide coverage: _YES_ NO
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76816
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
AUTHORIZATION TO OBTAIN A CREDIT REPORT
The National Credit Union Administration (NCUA) may evaluate the competence,
experience, character, and integrity of any individual who is to serve as an
official, employee, or committee member of a federally insured credit union, in
accordance with §1790a of the Federal Credit Union Act and Chapter 1, §V.B.4 of
the NCUA Chartering and Field of Membership Manual.
NCUA may disapprove any individual whose employment it believes will not be in
the best interest of the credit union or of the public. To assist in the evaluation
process, NCUA may obtain and review an individual's credit report.
Your signature on this document authorizes NCUA to obtain
report.
Last
a copy of your credit
First
Middle
Social Security Number: - - - - - - - - - - - - Date of Birth: _ _ __
Signature
Date
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76817
APPLICATION FOR FJELD OF MEMBERSHIP AMENDMENT
NCUA FORM 4015
USE FOR MULTIPLE COMMON BOND EXPANSION FOR GROUPS OF
5,000 OR MORE PERSONS
Attach a separate application for each group included in your request for
expansion. The application must be complete or it will be returned unprocessed.
1. Name and address of credit union:
Telephone Number:
Charter Number:
2. Name and address of group:
Telephone Number: _ _ _ __
If the group is an association:
D
Include a statement indicating whether the association has
been formed primarily for the purpose of expanding credit
union membership. Such a group is not eligible for inclusion
in a multiple common bond credit union unless it qualifies as
a low-income association; and
If the group is an association AND it is NOT one of the
categories of pre-approved groups outlined in Chapter 2,
Section III.A.1.b of the Chartering Manual:
0
Include a copy of the association's Charter/Bylaws or other
equivalent organizational documentation.
3. Provide the proposed field of membership wording. Use the example wording
found in NCUA's Chartering and Field of Membership Manual, Chapter 2,
Section IV.A2.
4. How many primary potential members (excluding immediate family and
household members) are in the group:
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76818
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
5. (a) What service facility 1 which accepts share deposits, loan applications, or
disburses loans, is within reasonable proximity of the group (Reference
Chapter 2, Section IV.A.1 ):
(b) Describe the service facility (e.g., office location, mobile branch,
transactional website):
(c) Describe the service area 2 primarily served by the above service facility
6. Is the group in the field of membership of !mY other credit union? Yes_
No
If yes, and the overlapped credit union is not a community credit union or a
non-federally insured credit union, please address the following:
0 Provide the name and location of the other servicing credit union:
0 Include a letter from the overlapped credit union indicating whether it
concurs or objects to the overlap. If the overlapped credit union objects or
fails to respond, document attempts to resolve the issue:
1 A service facility
includes a credit union owned branch, a mobile branch, an office
operated on a regularly scheduled weekly basis, a credit union owned ATM, a credit union
owned electronic facility, or a credit union's transactional website.
2 A federal
credit union's service area Is the area that can reasonably be served by the
service facility accessible to the groups within the neld of membership. It will most often
coincide with that geographic area primarily served by the service facility.
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76819
0 Explain how the expansion's beneficial effect in meeting the convenience
and needs of the members of the group clearly outweighs any adverse
effect on the overlapped credit union:
7. Attach a letter, or equivalent documentation, from the group requesting credit
union service indicating:
0 that the group wants to be added to the federal credit union's field of
membership;
0 whether the group presently has other credit union service available;
0 the number of persons currently included within the group to be added and
the group's location(s);
0 how the group is within reasonable proximity to the credit union; and
0 why the formation of a separate credit union for the group is not practical
The criteria for demonstrating formation of a separate credit union is not
practical are outlined in Chapter 2, Section IV.B.2 of NCUA 's Chartering
and Field of Membership Manual.
8. Other comments:
Name and title of credit union board-authorized representative (e.g.,
President/CEO):
(Signature)
(Date)
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(Typed/Printed Name)
76820
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
APPLICATION FOR FIELD OF MEMBERSHIP AMENDMENT
NCUA FORM 4015-A
USE FOR MULTIPLE COMMON BONo EXPANSION FOR GROups OF
3.000 to 4.999 PERSONS
Attach a separate application for each group included in your request for expansion.
The application must be complete or it will be returned unprocessed
1. Name and address of credit union:
Telephone Number: _ _ _ __
Charter Number:
2. Name and address of group:
Telephone Number: - - - - -
If the group is an association:
0
Include a statement indicating whether the association has been
fanned primarily for the purpose of expanding credit union
membership. Such a group is not eligible for inclusion in a multiple
common bond credit union unless it qualifies as a low-income
association; and
If the group is an association AND it is NOT one of the categories of
pre-approved groups outlined in Chapter 2, Section III.A.1.b of the
Chartering Manual:
D Include a copy of the association's Charter/Bylaws or other
equivalent organizational documentation.
3. Provide the proposed field of membership wording. Use the example
wording found in NCUA's Chartering and Field of Membership Manual.
Chapter 2, Section IV.A.2.
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76821
4. How many primary potential members (excluding immediate family and
household members) are in the group:
5. (a) What service facility 1 wh1ch accepts share deposits, loan applications, or
disburses loans, is within reasonable proximity of the group (Reference Chapter
2, Section IV.A.1 ):
(b) Describe the service facility (e.g., office location, mobile branch, transactional
website):
(c) Describe the service area 2 primarily served by the above service facility:
6. Attach a letter, or equivalent documentation, from the group requesting credit
union service indicating:
0
0
0
0
that the group wants to be added to the federal credit union's field of
membership
the number of persons currently included w1thin the group to be added and the
group's location(s);
how the group is within reasonable proximity to the credit union; and
the formation of a separate credit union for the group is not practical.
Include a statement indicating the fonnation of a separate credit union is not
practical because the group lacks available subsidies, interest among the
group's members, and sufficient resources. No additional infonnation or
documentation is necessary.
1 A service facility Includes
a credit union owned branch, a mobile branch, an office operated on a
regularly scheduled weekly basis, a credit union owned ATM, a credit union owned electronic
facility, or a credit union's transactional website.
'A federal credit union's service area Is the area that can reasonably be served by the service
facility accessible to the groups within the field of membership. It will most often coincide with
that geographic area primarily served by the service facility.
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76822
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
7. Other comments:
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NCUA4015-A
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76823
APPLICATION FOR FIELD OF MEMBERSHIP AMENDMENT
NCUA FORM 4015-EZ
USE FOR MULTIPLE COMMON BOND EXPANSIONS OF LESS THAN 3,000
PERSONS AND ALL SINGLE COMMON BOND EXPANSIONS
Attach a separate application for each group included in your request for expansion.
The application must be complete or it will be returned unprocessed.
1. Name and address of credit union:
Telephone Number: _ _ _ _ __
Charter Number:
2. Name and address of group:
Telephone Number: _ _ _ _ __
If the group is an association:
0
Include a statement indicating whether the association has been
formed primarily for the purpose of expanding credit union
membership. Such a group is not eligible for inclusion in a multiple
common bond credit union unless it qualifies as a/ow-income
association; and
If the group is an association AND it is NOT one of the categories of
pre-approved groups outlined In Chapter 2, Section III.A.1.b of the
Chartering Manual:
D
Include a copy of the association's Charter/Bylaws or other
equivalent organizational documentation.
3. Provide the proposed field of membership wording: _ _ _ _ __
4. Multiple Common Bond Expansions Only: Attach a letter, or equivalent
documentation, from the group requesting credit union service indicating:
0 that the group wants to be added to the federal credit union's field of membership;
0 the number of persons to be added and the group's location(s); and
0 how the group is wi1hin reasonable proximity to the credit union.
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76824
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
5. Single Common Bond Expansions Only: How the group shares the occupational
or associational common bond ____________________
How many primary potential members (excluding immediate family and household
members) are in the group: __
Name and title of credit union board-authorized representative (e.g., President/CEO):
(Signature)
(Date)
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(Typed/Printed Name and Title)
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76825
NOTICE OF MEETING OF MEMBERS TO CONVERT
FROM A FEDERAL TO A STATE CHARTERED CREDIT UNION
- - - - - - - - - F E D E R A L CREDIT UNION
(City)
(State)
THIS PROPOSITION WILL BE DECIDED BY A MAJORITY OF THE MEMBERS WHO
VOTE.
Notice is hereby given that a meeting of the members of
Federal Credit Union has been called and will be held at - - - - - - - -----....,----,--------on
, at
o'clock, _.M. for
the purpose of considering and voting upon the following resolution:
"RESOLVED, That the
Federal Credit Union be
converted to a credit union chartered under the laws of the State of
-::----:":"----:--and that its operation under Federal charter be
discontinued.
RESOLVED FURTHER, That the board of directors and the officers of this
credit union and are hereby authorized and directed to do all things
necessary to effect and to complete the conversion of this credit union
from a Federal to State-chartered credit union."
The board of directors of this credit union has given careful consideration to the
advantages and the disadvantages of the proposed conversion and believes it to
be in the best interest of the members for the following reasons:
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NCUA4221
76826
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
The proposed conversion would result in the following disadvantages or adverse
changes in services and benefits to the members of the credit union:
The proposed conversion would result in the following costs of conversion (i.e.
changing the credit unions name, examination and operating fees, attorney and
consulting fees, tax liability, etc):
The board of directors recommends that the members approve the proposal to
convert to a State charter.
The members' accounts will 0 will not 0 continue to be insured by the National
Credit Union Share Insurance Fund.
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NCUA4221
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76827
Attached is your ballot You are urged to bring your ballot to the meeting and to
cast your vote after hearing the discussion of the proposal. If you cannot attend
the meeting, you are urged to mark your vote, date and sign your ballot, and
return it to the following address by no later than the date and the time
announced for the meeting of the members:
BY ORDER OF THE BOARD
OF DIRECTORS
TITLE: ~-::-::=-:--:-:-:.,.----
(CHAIRPERSON)
TITLE:~==~:::-::--
(BOARD SECRETARY)
_ _ _ _ _ _ _ _ (Date)
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Issued
76828
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
APPLICATION TO CONVERT FROM A STATE TO A FEDERAL CREDIT UNION
The
Credit Union of
(city),
(State),
Incorporated under the laws of the State of
on
by decision of
its board of directors, hereby makes application to the National Credit Union
Administration to convert to a Federal credit union.
1. Field of membership. Provide a copy of the credit union's charter, articles of
incorporation or bylaws, as amended to date.
2. Is proposed Federal charter to cover same field of membership? Yes 0 No 0 If
answer is "No," explain f u l l y : - - - - - - - - - - - - - - - - - - - -
3. Standard financial and statistical reports as of
or comparable forms of
reports, certified correct by the treasurer and verified by the affidavit of the
president or vice-president, are attached.
4. A schedule of delinquent loans classified 2 to 6 months, 6 to 12 months, and 12
months and over delinquent is attached.
5. The following policies on loans to members are currently in effect in this credit
union:
a. Interest rates on loans: _ _ __
b. Charges incident to making loans which are passed on to borrowers: _ __
c. Maturity l i m i t s : - - - - - - - - - d. Unsecured loan limit: _ _ _ _ __
e. Secured loan limit: _ _ _ _ _ __
f. Types of security a c c e p t e d : - - - - - - - - - g. Requirements of amortization (Repayment requirements): - - - - - - 6. Attached is a list of unsecured loans in excess of the amounts stipulated in the
Act. (For each loan show account number, original amount, terms, and unpaid
balance.)
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76829
7. Attached is a list of loans with maturities in excess of periods stipulated in the Act
and the NCUA Rules and Regulations. (For each loan show account number,
original amount, terms, unpaid balance, and security.)
8. Types of accounts which members are required or are permitted to maintain:
ShareD Deposit D Other D ( d e s c r i b e ) : - - - - - - - - - - - - - -
9. Describe any real estate owned by credit union, including a list of its current
market v a l u e : - - - - - - - - - - - - - - - - - - - - - - - - - -
10. Describe and list any investments which are outside of the investment powers of
Federal credit unions (Refer to Section 107(7), Federal Credit Union Act): _ _ __
11. Names and locations of any depository institutions in which the credit union
deposits its funds but which are beyond the purview of deposit powers authorized
by Section 107(8) of the Federal Credit Union A c t : - - - - - - - - - - -
12. Describe any services rendered to or on behalf of members or of the public, other
than accepting and maintaining accounts of members and making loans to
members: - - - - - - - - - - - - - - - - - - - - - - - - - - - -
13. Describe what you propose to do about any policies, procedures, assets or
liabilities which do not comply with the Federal Credit Union Act: _ _ _ _ __
14. Give specific reasons as to why you desire to convert to a Federal credit union:
We hereby authorize the National Credit Union Administration to examine our books
and our records.
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76830
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
We, the undersigned
Chief Executive Officer and
- - - - - - - - - - - - - - - - - - - C h i e f Financial Officer of the
- - - - - - - - - - - - - - - - - - - - - - - - C r e d i t Union of
- - - - - - - - - - - - - - - - - - - - - - - - - - - S t a t e of
. . , . . - - - - - - - - - - - , - - - - - certify: That we are the duly elected
Chairperson and the Chief Financial Officer, respectfully, of said credit union; that the
statements made in this Application to Convert from a State to a Federal Credit Union
and the schedules attached hereto are true, complete, and correct to the best of our
knowledge and belief and are made in good faith.
TITLE:_===~---
(CHAIRPERSON)
TITLE:~~~~~~~~
(CHIEF FINANCIAL OFFICER)
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76831
AFFIDAVIT
PROOF OF RESULTS OF MEMBERSHIP VOTE • PROPOSED CONVERSION FROM
FEDERAL CREDIT UNION TO STATE CREDIT UNION
We, the undersigned-------------,------ chairperson and
----------------secretary
Federal Credit Union, hereby swear or affirm as follows:
1. That the conversion proposal as set forth in the attached Notice of Meeting of
the Members was fully explained to the members present at said meeting of
members.
2. That on the date of the said meeting of members there were _ _ _ members
of this credit union qualified to vote; _ _ _ members were present at said
meeting; of those members present,
members voted in favor of the
conversion and _ _ _ members voted against the conversion; of those
members not present at the meeting but who filed ballots, ___ members
voted in favor of the conversion and ____ members voted against the
conversion; and that, without duplication of the votes of any member, a total
of
members voted in favor of the conversion and
members
voted against the conversion.
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NCUA 4505
76832
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
3. That the action of the members of this credit union at said meeting is fully and
completely recorded in the minutes of said meeting and all ballots cast by the
members on the question of conversion, either at the meeting or by delivery to
the credit union, are on file with the secretary of this credit union.
TITLE:------(CHAIRPERSON)
TITLE:~-,------,.,--~-
(BOARD SECRETARY)
FEDERAL CREDIT UNION
Subscribed before me, an officer competent to administer oaths, at _ _ __
_________________ ,this ________________________________
(day)
(month)
(year)
Signed ----------------
(SEAL)
Title--------(Notary Public or other
competent officer)
My Commission Expires _ _ , _ __
(year}
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NCUA4505
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76833
FEDERAL TO STATE CONVERSION
BALLOT FOR CONVERSION PROPOSAL
I have read the notice concerning the meeting of the members of the
- - - - - - - Federal Credit Union called for
to consider and
to vote upon the following proposition:
"RESOLVED, That the
Federal Credit
Union be converted to a credit union chartered under the Jaws of the State
of
and operation under Federal Charter Number
be
discontinued.
RESOLVED FURTHER, That the board of directors and the officers of this
credit union are hereby authorized and directed to do all things necessary
to effect and to complete the conversion of this credit union from a Federal
to State-chartered credit union."
I hereby cast my vote on the proposition: (Place an X in the square opposite
the appropriate statement.)
I vote for the conversion
0
I vote against the conversion
(Account Number)
0
(Signature of Member)
Date: _____________
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NCUA4506
76834
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
APPLICATION AND AGREEMENTS FOR INSURANCE OF ACCOUNTS
Date: _ _ _ _ __
TO: The National Credit Union Administration Board (Board)
The proposed---------- Federal Credit Union
(Street Address)
(City)
(State)
(Zip Code)
applies for insurance of its accounts as provided in Title II of the Federal Credit
Union Act, and in consideration of the granting of insurance, hereby agrees:
1.
To pay the reasonable cost of such examinations as the Board may deem
necessary In connection with determining the eligibility of the application for
insurance.
2.
To permit and pay the reasonable cost of such examinations as in the
judgment of the Board may from time to time be necessary for the protection
of the fund and other insured credit unions.
3.
To permit the Board to have access to any information or report with respect
to any examination made by or for any public regulatory authority and
furnish such additional information with respect thereto as the Board may
require.
4.
To provide protection and indemnity against burglary, defalcation, and other
similar insurable losses, of the type, in the form, and in an amount at least
equal to that required by the laws under which the credit union is organized
and operates.
5.
To maintain such special reserves as the Board, by regulation or in special
cases, may require for protecting the interest of members.
6.
Not to issue or have outstanding any account or security the form of which,
by regulation or in special cases, has not been approved by the Board.
7.
To pay and maintain the capitalization deposit required by Title II of the
Federal Credit Union Act.
8.
To pay the premium charges for insurance imposed by Title II of the Federal
Credit Union Acl
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NCUA9500
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
9.
76835
To comply with the requirements of Title II of the Federal Credit Union Act
and of regulations prescribed by the Board pursuant thereto.
10. To permit the Board to have access to all records and information
concerning the affairs of the credit union and to furnish such information
pertinent thereto that the Board may require.
11. To comply with Title 18 of the United States Code and other pertinent Federal
statutes as they may exist or. may be hereafter promulgated or amended.
We, the undersigned, certify to the correctness of the information submitted. We,
the undersigned, further certify that to the best of our knowledge and belief no
proposed officer, committee member, or employee of this credit union has been
convicted of any criminal offense involving dishonesty or a breach of trust,
except as noted in attachments to this application. We further agree to notify the
Board if any proposed or future officer commits a criminal offense.
Chairperson
Chief Financial Officer
Note: A willfully false certification is a criminal offense. U.S. Code, Title 18, Sec.
1001.
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76836
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
CERTIFICATION OF RESOLUTIONS
- - - - - - - - F E D E R A L CREDIT UNION (PROPOSED)
We certify that we are the duly elected and qualified chief executive officer and
recording officer of the above-named proposed Federal credit union and that at
the charter-organization meeting, the board of directors passed the following
resolution and recorded it in its minutes:
"Be it resolved that this credit union apply to the National Credit
Union Administration Board for insurance of its accounts as
provided in Title II of the Federal Credit Union Act.
Be it further resolved that the president and treasurer be
authorized and directed to execute the Application and
Agreements for Insurance of Accounts as prescribed by the
Board and any other papers and documents required in
connection therewith; to pay all expenses and do all other
things necessary or proper to secure and continue in force
such insurance."
Chief Executive Officer
Recording Officer, Board of Directors
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76837
INFORMATION TO BE PROVIDED IN SUPPORT OF THE APPLICATION OF A
STATE CHARTERED CREDIT UNION FOR INSURANCE OF ACCOUNTS
Existing credit unions must complete the entire application. All other applicants
do not have to complete questions 8, 11, 12, 13, 15, and 16.
_ _ _ _ _ _ _ _ _Credit Union
1.
Show below the location of the credit union's books and records.
(Street Address)
(City)
(State)
(Zip)
(Telephone)
2.
Show the date (month, day, year} in which the credit union was chartered.
3.
Attach a copy of the credit union's f~eld of membership as shown in the
charter, articles of incorporation and/or bylaws, as amended to date. Please
identify it as the first schedule in the consecutive number sequence as
discussed in the instructions. Schedule No. _ _ __
4.
Potential membership (total number of persons who could be served
including present members). _ _ __
5.
Identify charter type (e.g., single common bond, multiple common bond,
community).-----------------
6.
Does the credit union operate under standard bylaws provided by the state
supervisory authority? Yes 0
No 0
(Complete a.)
a. Attach a copy of the current official bylaws under which the
credit union operated. Schedule No. _ __
7.
Is the credit union under any administrative restraints by the State
Supervisory Authority? Yes 0
No 0
(Complete a.)
a. Explain fully on an attached schedule. Schedule No. _ _ __
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NCUA 9600
76838
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
8.
Attach a copy of the latest State supervisory authority examination. Copies
of any correspondence from the accountant's report if made in lieu of a State
supervisory authority examination. Copies of any correspondence from the
State supervisory authority which accompanied the examination report
should also be included.
9.
Attach copies of tt)e Balance Sheet and Statement of Income and Expense
(or Financial and Statistical Report) for the month preceding the date of this
application and for the same month of the preceding year.
Schedule Nos. _ __
10. Reserves
Show below the requirements of the State law and/or your bylaws for
transfer of earnings to reserves (either monthly or at the end of each
accounting period).
11. Delinquent Loans and Charged-off Loans
a. Attach a copy of the delinquent loan list as of the month-end preceding
the date of this application. See instructions pertaining to Item No. 11a.
Schedule No. _ __
b. List below the requested information on delinquent loans for the latest
four calendar quarters preceding the date of the application (March 31,
June 30, September 30 and December 31 ). Also show total share and loan
balances for all members for the same period.
(a)
*Other
I Delinquent
· Categories
!---·
r-----
..
-·
(b)
Delinquent
Categories
Date
2 to less than
Smos.
6 to less than
, 12 mos.
12 mos. and
over
Date
Date
$
$
$
$
$
$
$
$
~~
$
-
························----
Totals
$
$
$
$
Share Balances
$
$
$
$
Loan Balances
$
$
-
S__j
*See instructions pertaining to Item No. 11 b.
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76839
c. List below the requested infonnation on loans charged off during the last
three years and the current year. List total of all reserves both revocable
and irrevocable for the same period as (balance at year-end and or current
period).
- c
I
Year
Year
Total
Charaed Off
Total
Recovered
Net
C_h~rg~_!:l_
Current Yr. To
Date
Year
i
*Totals
Since
Organization
i
---
Of!
'
i
I
I
.
*If th1s mfonnat1on 1s available .
12. Does the credit union have any unrecorded or contingent liabilities,
(including pending law suits or civil actions)? Yes
0
No 0 Complete a.
a. List on an attached schedule the complete description of such liabilities,
including amounts, status of the items, and a description of the
circumstances creating the liabilities or contingent liabilities. Schedule No.
13. Do any asset accounts other than loans to members, investments, and real
estate have actual values less than the book values shown on the Balance
Sheet?
List on a separate schedule a description of such assets, showing at least
the following information; account number, description of item, book value
and actual value. Schedule No.
14. List below or on an attached schedule, any investments or real estate as
discussed in the instructions pertaining to Item No. 14. Schedule No. _ _ .
Attach a copy of the credit union's current investment policies.
Investments/Loans to Credit Union Service Organization (CUSO) should be
listed separately.
Description of Item
Current Market ValueCurrent Book Value
------------------~----------~------------~-----
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76840
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
15.1ndividual Share and Loan Ledgers:
a. Were the totals of the trial balance of the individual share and loan
ledgers in agreement with the balances of the respective general ledger
control accounts as of the month-end preceding the date of this
application?-----b. What are the differences as of the month and preceding the date of this
application?
Shares
$
$
$
$
$
Balances in General Ledger
Totals of the trial balance of the
individual ledgers
Differences
Loans
$
16. Supervisory Committee:
a. What is the effective date of the last complete comprehensive annual
audit performed by the supervisory committee?
Effective Date _ _ _ __
(1) If the effective date of the annual audit is not within the last 18 months
what is the supervisory committee's target date for completion of a
comprehensive audit? Date _ _ __
b. Show the effective date of the supervisory committee's last controlled
verification of all members' accounts:
Effective Date _ _ __
(1) If all members' accounts have not been verified under controlled
conditions during the last two years, what is the supervisory committee's
target date for completion of the verification program?
Date _ __
c. If It is necessary to complete either 16a(1) or 16 b(1); please describe the
directors' plans for seeing that the target dates are met. (Discuss below or
on an attached schedule.) Schedule No. _ _ __
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76841
17. List below the credit union's surety bond coverage.
a. Name of carrier _ __
b. Standard form number of the bond (i.e., 23, 576,
other) _ _ __
5n, 578, 581, 562 CU-1,
c. Basic amount of coverage $._ _ _ __
d. Bond premium paid to (date) _ _ _ _ __
e. What is the amount of coverage required by State law or your bylaws?
f. Riders to the bond (list below) (i.e., faithful performance, forgery,
misplacement, etc.)
18. Does the credit union render any services to or perform any functions on
behalf of the members, non-members, organizations, or the public other than
the usual savings and loan services for members? _ __
Attach a schedule describing each activity in full. Schedule No. _ __
19. Does the board of directors or management know of any adverse economic
condition that is affecting or will affect the credit union's present or future
operation or that of the sponsor organization?
Attach a schedule describing the condition and its possible effect on the
credit union's future. Schedule No. _ _ _ __
20. To the best of the credit union's knowledge and belief, has any director,
officer, committee member, or employee been convicted of any criminal
offense involving dishonesty or breach of trust? _ _ _ __
a. Attach a statement describing the circumstances. Schedule No.
21. Lending policies and practices:
a. Complete the following schedule showing the present policies and
practices on loans to members.
b. Complete the following schedule of largest loans with the attached
instructions pertaining to Item No. 21.
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Page5
NCUA 9600
76842
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
LENDING POLICIES AND PRACTICES
Maximum
Loan
Amount
Maximum
Period
of
Amount of
Down Payment
1. Credit Union Policies and
Practices
a. Unsecured loan limits
b. Secured loan limits
(1) New Auto Collateral
(2} Used Auto Collateral
(3) Real Estate
(a) First Mortgage
(b) Second Mortgage
(4) Comaker&
(6) Others (describe)
c. loans to Organizations
d. loans to Directors,
Officers, or Committee
Members
2. State Credit Union law;
Bylaws
a. Unsecured loan limits
b. Secured loan limits
c. Loans to Directors,
Officers, or Committee
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76843
List on an attached page, any additional policies, including the interest rates
applied to members' loans and the method of assessing and accounting for
interest income, i.e.: add-on, discount or unpaid balance.
SCHEDULE OF LARGEST LOANS
ete t h'IS f ~rm as d'ISCUSSed.1n t he .
~nstru«?tions _E_e rta"
_mm to ~m 21b
Repayment Status Appraised
Collateral
Account Unpaid
Repayment
No.
Bal.
Period (Mths) Current
c~nfte~al Description
Mths Oelq.
a ue
,--
c
-~
..
1-·
!
I
!
.
.
·--
..
-
1---·--
..
-----·--
'
f---··
..
..
---
-
1---·
'
·---·
·--
--·-~-
t=3=
·-
··----
I
--
j
-.
..If there is more than one typ e of collateral asslg n value to each typ e.
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76844
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
CREDIT UNION SERVICE ORGANIZATION
(CUSO)
1. NameofCUSO _____________________________
2. Date of CUSO'S Organization---------(Date of obtaining charter from State)
3. Type of organization (check one):
a. General Partnership
D c.
Joint Ownership D
b. Limited Partnership D d. Corporation
D
4. Owners of CUSO (list name, charter number if FCU, and percentage of
ownership, if possible).
a.--:-:-------- - - - - - - - - - - - -------Name
Charter Number (If FCU)
b. _ _ _ _ __
Name
Charter Number (If FCU)
%
(Continue on reverse side if additional space is required)
5. Capitalization (list investors and amount of investment in CUSO).
a.--:-:-------- - - - - - - - - - - Name
Charter Number (If FCU)
b.-:-:-------- - - - - - - - - - - Name
Charter Number (If FCU)
Amount
---::-----~
Amount
(Continue on reverse side if additional space is required)
6. List all known services which are being offered by CUSO (be as specific as
possible).,__________________________________________
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76845
7. Comments {include all other pertinent information, if applicable, not
previously d i s c u s s e d ) . - - - - - - - - - - - - - - - - - - - - - -
8. Attach the latest Financial and Statistical Report of CUSO, if available.
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Page9
NCUA 9600
76846
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
FORM 9600 INSTRUCTIONS
APPLICATION OF A STATE CHARTERED CREDIT UNION
FOR INSURANCE OF ACCOUNTS
Existing credit unions must complete
the entire application. All other
applicants do not have to complete
questions 8, 11, 12, 13, 15, and 16.
Existing credit unions must submit
current policies and financial
statements as noted in the application.
All other applicants must submit
proposed policies and pro forma
financial statements for the first and
second year of operation.
When an item specifies that a schedule
should be prepared and attached,
please assign a schedule number in
consecutive order, starting with
number one. Please show the schedule
number at the top right-hand corner of
the schedule.
Some of the items are self-explanatory
and require no special instructions.
Other items, however, need special
explanations, definitions, and
instructions for completion. These are
listed below, identified by the same
item numbers as appear in Exhibit A.
Item No. 10: Reserves: The term
"reserves" means that account, or
accounts, which represents
segregated portions of earnings as
provided by the law, bylaws, and/or the
credit union's management for the
absorption of losses relating to loans
to members.
Item No. 11a: The delinquent loan list
requested should include, for each
delinquent loan, the account number of
the borrower, date of loan, original
amount of loan, unpaid balance, date
of last payment of principle, excluding
transfers from pledged shares,
collateral, and comments regarding the
collectibility of each loan in the
categories 6 months to less than 12
months and 12 months and over.
Payments of interest only should be so
identified.
Item No. 11 b: The schedule provided
for the delinquent loan information is
set up in delinquency categories of 2
months to less than 6 months, 6 to less
than 12 months, and 12 months and
over. Credit unions that compute
delinquency using categories other
than shown in column (b) may use
these other categories and show them
in column (a). Credit unions using
column (a) need not show the
delinquencies in the column (b)
categories. It is not necessary to report
on loans which are delinquent less
than 2 months.
Adverse Trends: If items 8, 9, or 11
indicate adverse trends such as
significant decreases in shares, loans
or reserves, increases in loan
delinquency or loan charge-offs, or
unresolved serious exceptions shown
in the State examination report, the
credit union may attach an explanation
and identify It as "Explanation of
Adverse Trends or Unresolved
Page 10
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The application and all supporting
documents should be prepared,
photocopied, and submitted in
accordance with these instructions.
Additional schedules may be included
if deemed appropriate.
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
below has been shown. The number of
such loans to be listed will be
determined as follows:
Item No.14: This item need be
completed only if the credit union
owns any of the following:
If your
credit
union has
the
following
no. of
outstanding
loans
A. Investments in U.S. Government
securities guaranteed as to
principle and interest or Federal
Agency securities, the market value
of which is now less than the book
value.
Under100
100 to 199
200 to 299
300 to 399
400 or more
B. Real estate other than that used
entirely for the credit union's own
office(s).
C. Other investments of any type
except:
1. Loans to other credit unions.
2. Certificates of, or accounts in,
federally insured financial
institutions.
3. Deposits or accounts in
corporate credit unions.
If corporate bonds are listed, please
show maturity date, rate of interest on
bonds and current yield rate.
If stocks are listed, please show
number of shares and bid price.
Please identify the source of the
market valuation information and the
date of such information.
Item No. 21 b: In selecting the largest
loans for this Exhibit, list the largest
outstanding unpaid loan balance and
proceed in descending order by dollar
amount until the number specified
You should
list the
following
no. of
the largest
unpaid
balances
5
10
15
20
25
If any of the above loans are
delinquent, please show the number of
months delinquent in the appropriate
"Status of Re-payment" column.
Complete the Credit Union Service
Organization (CUSO) schedule for each
investment/loan to a CUSO.
TERMINATION OF INSURANCE
Should the credit union, after obtaining
insurance of member accounts, desire
to terminate its insured status, this
could be accomplished by complying
with the provisions of Section 206(a),
(c) and (d) of Title II of the Federal
Credit Union Act. This action would
require approval by a vote of the
majority of the members, and ninety
days written notice of the proposed
termination date to NCUA. Member
accounts would continue to be insured
for one year following termination of
insurance and the insurance premium
Page 11
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Examination Exceptions" and assign it
a schedule number.
76847
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
would be paid during that period. After
termination of insurance, the credit
union shall give prompt and
reasonable notice to all members
whose accounts are insured that it has
ceased to be an insured credit union.
Sections 206(a)(2) and 208(d)(2) and (3)
of the Act provide that an Insured
credit union may also terminate its
insurance by converting from its status
as an insured credit union under the
Act to insurance from a corporation
authorized and duly licensed to insure
member accounts. In this event,
approval is required by a majority of all
the directors and by affirmative vote of
a majority of the members voting,
provided that at least 20 percent of the
members have voted on the
proposition. Under this provision for
termination, insurance of member
accounts would cease as of the date of
termination.
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76848
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
76849
APPLICATION AND AGREEMENTS FOR INSURANCE OF ACCOUNTS
STATE CHARTERED CREDIT UNION
TO: The National Credit Union Administration Board
The
Date _ _ _ __
Credit Union,
Insurance Certificate Number
(if applicable)
(mailing address)
(city)
(state)
(zip code)
applies for insurance of its accounts as provided in Title II of the Federal Credit
Union Act, and in consideration of the granting of insurance, hereby agrees:
1. To permit and pay the cost of such
examinations as the NCUA Board
deems necessary for the protection
of the interests of the National
Credit Union Share Insurance Fund.
on Federal Credit Unions by Part
702 of NCUA's regulations, and to
maintain such special reserves as
the NCUA Board may be regulation
or on a case-by-case basis
determine are necessary to protect
the interests of members. Any
waivers of the statutory reserve or
full and fair disclosure
requirements or any direct charges
to the statutory reserve other than
loss loans must have the prior
written approval of the NCUA
Board. In addition, corporate credit
unions shall be subject to the
reserve requirements specified in
Part 704 of NCUA's regulations.
2. To permit the Board to have access
to all records and information
concerning the affairs of the credit
union, including any information or
report related to an examination
made by or for any other regulating
authority, and to furnish such
records, information, and reports
upon request of the NCUA Board.
4. To meet, at a minimum, the
statutory reserve and full and fair
disclosure requirements imposed
5. Not to issue or have outstanding
any account or security the form of
which has not been approved by
the NCUA Board, exceptaccounts
authorized by state law for state
credit unions.
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3. To possess such fidelity coverage
and such coverage against
burglary, robbery, and other losses
as is required by Parts 713 and 741
of NCUA's regulations.
Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Proposed Rules
6. To maintain the deposit and pay the
insurance premium charges
imposed as a condition of
insurance pursuant to Title II (Share
Insurance) of the Federal Credit
Union Act.
7. To comply with the requirement of
Title II (Share Insurance) of the
Federal Credit Union Act and of
regulations prescribed by the NCUA
Board pursuant thereto.
8. For any investments other than
loans to members and obligations
or securities expressly authorized
in Title I of the Federal Credit Union
Act, as amended to establish now
and maintain at the end of each
accounting period and prior to
payment of any dividend, an
Investment Valuation Reserve
Account in an amount at least equal
to the net excess of book value over
current market value of the
investments. If the market value
cannot be determined, an amount
equal to the full book value will be
established. When, as of the end of
any dividend period, the amount in
the Investment Valuation Reserve
exceeds the difference between
book value and market value, the
board of directors may authorize
the transfer of the excess to
Undivided Earnings.
from sources other than other
credit unions and public units, such
nonmember accounts shall be
identified as nonmember shares or
deposits on any statement or report
required by the NCUA Board for
insurance purposes. Immediately
after a state-chartered credit union
receives notice from NCUA that its
member accounts are federally
insured, the credit union will advise
any present nonmember share and
deposit holders by letter that their
accounts are not insured by the
National Credit Union Share
Insurance Fund. Also, future
nonmember share and deposit fund
holders will be so advised by letter
as they open accounts.
10. In the event a state-chartered credit
union chooses to terminate its
status as a federally-insured credit
union, then it shall meet the
requirements imposed by Sections
206(a)(1) and 206(c) of the Federal
Credit Union Act and Part 741.208
of NCUA's regulations.
9. When a state-chartered credit union
is permitted by state law to accept
nonmember shares or deposits
11.1n the event a state-chartered credit
union chooses to convert from
federal insurance to some other
insurance from a corporation
authorized and duly licensed to
insure member accounts, then it
shall meet the requirements
imposed by Sections 206(a)(2),
206(c), 206(d)(2), and 206(d)(3) of
the Federal Credit Union Act and
any other applicable federal law.
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76851
In support of this application we submit the following schedules:
Title
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Schedule No.
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CERTIFICATIONS AND RESOLUTIONS
We, the undersigned, certify that we are the duly elected and qualified presiding
officer and recording officer of the credit union and that at a properly called and
regular or special meeting of its board of directors, at which a quorum was
present, the following resolutions were passed and recorded in its minutes:
We, the undersigned, certify to the correctness of the information
submitted.
Be it resolved that this credit union apply to the National Credit Union
Administration Board for insurance of its accounts as provided in Title II
of the Federal Credit Union Act.
Be it resolved that the presiding officer and recording officer be
authorized and directed to execute the Application and Agreement for
Insurance of Accounts as prescribed by the NCUA Board and any other
papers and documents required in connection therewith and to pay all
expenses and do all such other things necessary or proper to secure
and continue in force such insurance.
We further certify that to the best of our knowledge and belief no
existing or proposed officer, committee member, or employee of this
credit union has been convicted of any criminal offense involving
dishonesty or breach of trust, except as noted in attachments to this
application. We further agree to notify the Board if any existing,
proposed or future officer, committee member or employee is indicted
for such an offense.
(Signature} Chairperson, Board of Directors
(Print or type Chairperson's Name)
(Signature) Secretary, Board of Directors
(Print or type Secretary's Name)
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76853
APPENDIX 5
TRADE ASSOCIATIONS
Credit Union National Association
(CUNA)
www.cuna.org
P.O. Box431
Madison, WI 53701
800-356-9655
National Association of Federal
Credit Unions (NAFCU)
www.nafcu.org
3138 N. 10th Street, Suite 300
Arlington. VA 22201-2149
800-336-4644
National Association of State Credit Union
Supervisors (NASCUS)
www.nascus.org
1655 North Fort Myer Drive
Suite 650
Arlington, VA 22209
703-528-8351
National Federation of Community
Development Credit Unions
(NFCDCU)
www.cdcu.coop
39 Broadway, Suite 2140
New York, NY 10006-3063
212-809-1850
E-1
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BILLING CODE 7535–01–C
]]>Agencies
[Federal Register Volume 80, Number 237 (Thursday, December 10, 2015)]
[Proposed Rules]
[Pages 76747-76853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-30069]
[[Page 76747]]
Vol. 80
Thursday,
No. 237
December 10, 2015
Part II
National Credit Union Administration
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12 CFR Part 701
Chartering and Field of Membership Manual; Proposed Rule
Federal Register / Vol. 80 , No. 237 / Thursday, December 10, 2015 /
Proposed Rules
[[Page 76748]]
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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.
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SUMMARY: The NCUA Board proposes to comprehensively amend its
chartering and field of membership rules to put them in a more
efficient framework and to maximize access to federal credit union
services to the extent permitted by law. The amendments will implement
changes in policy affecting: The definition of a local community, a
rural district, and an underserved area; the expansion of multiple
common bond credit unions and members' proximity to them; the expansion
of single common bond credit unions based on a trade, industry or
profession; and the process for applying to charter or expand a federal
credit union.
DATES: Comments must be received on or before February 8, 2016.
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: Matthew Biliouris, Deputy Director, or
Robert Leonard, Director, Division of Consumer Access, or Rita Woods,
Director, Division of Consumer Access South, Office of Consumer
Protection, at the above address or telephone (703) 518-1140; or Senior
Staff Attorney Steven Widerman or Staff Attorney Marvin Shaw, Office of
General Counsel, at the above address or telephone (703) 518-6540.
SUPPLEMENTARY INFORMATION:
I. Background
A. Overview
NCUA's Chartering and Field of Membership Manual, incorporated as
appendix B to part 701 of its regulations (``Chartering and FOM
Manual''),\1\ implements the field of membership (``FOM'') requirements
established by the Federal Credit Union Act (``the FCU Act'') for
federal credit unions (``FCUs'').\2\ An FOM consists of those persons
and entities eligible for membership according to an FCU's type of
charter.
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\1\ Appendix B to 12 CFR part 701(``appendix B'').
\2\ 12 U.S.C. 1759.
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In adopting the Credit Union Membership Access Act of 1998
(``CUMAA''), Congress reiterated its longstanding support for credit
unions, noting their ``specif[ic] mission of meeting the credit and
savings needs of consumers, especially persons of modest means.'' \3\
As amended by CUMAA, the FCU Act provides a choice among three charter
types: A single group sharing a single occupational or associational
common bond; \4\ a multiple common bond, with each group having a
distinct occupational or associational common bond among group members;
\5\ and a community common bond among persons or organizations within a
well-defined local community, neighborhood or rural district.\6\
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\3\ Pub. L. 105-219, Section 2, 112 Stat. 913 (Aug 7, 1998).
\4\ 12 U.S.C. 1759(b)(1).
\5\ Id. Section 1759(b)(2)(A).
\6\ Id. Section 1759(b)(3).
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Based on NCUA's experience in processing applications for initial
approval and subsequent expansion of all three types of charters, the
Board periodically updates and revises the Chartering and FOM Manual to
ensure adherence to the statutory criteria, limitations and special
rules that apply to each charter type, to reflect contemporary
practice, and to enhance the user-friendliness of the Chartering and
FOM Manual for the benefit of those seeking to charter an FCU, as well
as for existing credit unions.
B. Why is NCUA Proposing this Rule?
The proposed rule will modify the Board's policies affecting the
definition of a local community, a rural district, and an underserved
area; group members' proximity to multiple common bond FCUs when they
expand; and expansion of single common bond FCUs that serve a trade,
industry or profession; and the process for applying to charter or
expand an FCU. Consistent with its responsibility under CUMAA to
facilitate access to credit unions and their delivery of services, the
Board is proposing these policy modifications in order to accomplish
several objectives. The first is to ease any undue burdens and
restrictions on an FCU's ability to provide services to consumers who
are eligible for FCU membership, particularly those of modest means and
those who may not currently be members of a credit union. The second is
to enhance the menu of strategic options for FOM expansions. The third
is to maximize competitive parity between federal and state charters,
to the extent allowed by law, while respecting the national system of
dual chartering. The Board invites public comments addressing all
aspects of the proposed rule.
II. Summary of the Proposed Rule
A. Community Common Bond
As amended in 1998, the FCU Act limits membership in a community
credit union to ``[p]ersons or organizations within a well-defined
local community, neighborhood or rural district.'' \7\ It directs the
Board to define what constitutes a well-defined local community,
neighborhood or rural district for purposes of ``making any
determination'' regarding a community credit union,\8\ and to establish
applicable criteria for any such determination.\9\ To qualify as a
well-defined local community or rural district, the Board requires the
proposed area to have ``specific geographic boundaries,'' such as those
of ``a city, township, county (single or multiple portions of a county)
or their political equivalent, school districts or a clearly
[[Page 76749]]
identifiable neighborhood.'' \10\ The boundaries themselves may consist
of political borders, streets, rivers, railroad tracks, or other static
geographical feature.\11\ The Board continues to emphasize interaction
and common interests among residents within those boundaries as
essential to the viability of a local community.
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\7\ Id. Section 1759(b).
\8\ Id. Section 1759(g)(1)(A).
\9\ Id. Section 1759(g)(1)(B).
\10\ Appendix B, Ch. 2, Section V.A.2.
\11\ Appendix B, Ch. 2, Section V.A.5.
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Since 2010, the Board has provided credit unions the option of two
uniform, nationally-recognized, objective geographic units that, by
definition, meet the statutory criteria of a well-defined local
community, neighborhood or rural district. The first is a ``Single
Political Jurisdiction . . . or any contiguous portion thereof,''
regardless of population.\12\ The second is a single U.S. Census
Bureau-designated Core Based Statistical Area or one or more
Metropolitan Divisions within, or a well-defined portion of either one,
subject in any case to a 2.5 million population limit that applies to
the Core Based Statistical Area as a whole.\13\ Under either well-
defined local community option, a credit union must be able to serve
the proposed community or rural district, as demonstrated by its
business and marketing plans that must accompany an application for
charter approval, expansion or conversion.\14\
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\12\ Appendix B, Ch. 2, Section V.A.2.
\13\ Appendix B, Ch. 2, Section V.A.2.
\14\ Appendix B, Ch. 2, Section V.A.4.
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1. Core Based Statistical Area Population Limit. As explained
above, a Core Based Statistical Area qualifies as a well-defined local
community only if its population does not exceed 2.5 million. By
design, this population limit conforms to the population parameter by
which OMB recognizes metropolitan divisions with a Core Based
Statistical Area.\15\ Upon further consideration in connection with
this rule, the Board has decided to retain the 2.5 million population
limit, but nonetheless invites public comment on whether to adjust the
limit, by what amount, and for what specific reasons.
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\15\ https://www.whitehouse.gov/sites/default/files/omb/bulletins/2015/15-01.pdf (at page 62).
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2. ``Core Area'' Service Requirement. Since 2010, NCUA has required
that when a credit union applies to serve a community consisting of a
portion of a Core Based Statistical Area, that portion must include the
Core Based Statistical Area's ``core area,'' which NCUA defines as the
most populated county or named municipality in the Core Based
Statistical Area's title.\16\ The primary purpose of this requirement
was to acknowledge the core area of a Core Based Statistical Area as
the typical focal point for common interests and interaction among
residents. An additional purpose was to extend FCU services to low-
income persons and underserved areas, both typically located primarily
in the core area of a Core Based Statistical Area. NCUA's review of
progress under approved FCUs' business and marketing plans over the
last five years indicates that those credit unions are adequately
serving low-income persons and underserved areas without regard to
their location within the community. Accordingly, NCUA proposes to
repeal the core area requirement as an indicator of service to low-
income persons and underserved areas, in favor of its practice of
annually reviewing the progress of business and marketing plans for
three years following charter approval or expansion, and relying on
those plans to assess those service objectives within an original or an
expanded community.
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\16\ 75 FR 36257, 36260 (June 25, 2010).
---------------------------------------------------------------------------
3. Population Limit as Applied to a Well-Defined Portion of a Core
Based Statistical Area. The Board presently permits a well-defined
portion of a Core Based Statistical Area to qualify as a well-defined
local community provided the population of the Core Based Statistical
Area as a whole does not exceed the 2.5 million population
limitation,\17\ disregarding whether the portion a credit union seeks
to serve alone meets that limitation. A review of requests to serve a
portion of a Core Based Statistical Area that were denied because the
population of the whole Core Based Statistical Area exceeded 2.5
million has convinced the Board that this is an unnecessarily broad
application of the population cap that produces unintended
consequences.
---------------------------------------------------------------------------
\17\ Appendix B, Ch. 2, Section V.A.2. (``statistical area''
definition).
---------------------------------------------------------------------------
To target the 2.5 million population limit strictly to the
community a credit union seeks to serve, the Board proposes to modify
its ``statistical area'' definition to specify that ``a Core Based
Statistical Area, Metropolitan Division, or well-defined portion of
either one, must itself have a population of 2.5 million or fewer
people.'' This will ensure that a portion of a Core Based Statistical
Area, or a Metropolitan Division within, qualifies as a well-defined
local community when it meets the population limit solely as applied to
that portion, even if the Core Based Statistical Area as a whole
exceeds the limit.
4. ``Combined Statistical Area'' as a Single Well-Defined Local
Community. As explained above, a Core Based Statistical Area or a
Metropolitan Division within a Core Based Statistical Area, or a well-
defined portion of either one, qualifies as a well-defined local
community subject to a population limit.\18\ Acknowledging the
interdependence among adjacent Core Based Statistical Areas, the Office
of Management and Budget (``OMB'') has recognized 169 Combined
Statistical Areas consisting of contiguous Core Based Statistical
Areas, and Metropolitan and Micropolitan Statistical Areas within, that
complement one another according to objective measurements of social
and economic integration among an area's residents.\19\
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\18\ 75 FR 36257 (June 25, 2010).
\19\ OMB Bulletin No. 15-01 to Heads of Executive Departments
and Establishments (July 15, 2015) defines a Combined Statistical
Area as ``two or more Metropolitan Statistical Areas, a Metropolitan
Statistical Area and a Micropolitan Statistical Area, two or more
Micropolitan Statistical Areas, or multiple Metropolitan and
Micropolitan Statistical Areas that have social and economic ties as
measured by commuting, but at lower levels than are found among
counties within Metropolitan and Micropolitan Statistical Areas.''
OMB characterizes Core Based Statistical Areas as ``representing
larger regions that reflect broader social and economic
interactions, such as wholesaling, commodity distribution, and
weekend recreation activities, and are likely to be of considerable
interest to regional authorities and the private sector.'' https://www.whitehouse.gov/sites/default/files/omb/bulletins/2015/15-01.pdf
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OMB's approach in designating Combined Statistical Areas is
consistent with that of the Board in relying on residents' interactions
and common interests to define a local community. Accordingly, the
Board proposes to expand the existing single Core Based Statistical
Area definition of a well-defined local community to include Combined
Statistical Areas as designated by OMB, subject to the 2.5 million
population limit. Additionally, in evaluating expansion requests, NCUA
will continue its practice of reviewing each FCU's business and
marketing plans to determine its capability and success in serving its
original and previously expanded community.
5. Addition of an Adjacent Area to a Well-Defined Local Community.
Despite the convenience, certainty and staff efficiency of using a
Single Political Jurisdiction, a Core Based Statistical Area or a
Combined Statistical Area to form a well-defined local community or
rural district, areas adjacent to the perimeter of these objective
geographic units may lack a credit union presence and/or lack
sufficient access to financial services, even though residents on both
sides of the perimeter may routinely interact or share common interests
with
[[Page 76750]]
each other. To enable residents of those adjacent areas to access
credit union services, the Board proposes to permit the addition of
such an area to a community consisting of a Single Political
Jurisdiction, Core Based Statistical Area, Combined Statistical Area,
or rural district, upon a showing by subjective evidence that residents
on both sides of the perimeter interact or share common interests.
The expanded community would be subject to the proposed population
limits for community charters (2.5 million) and rural district charters
(1 million).\20\ The more expansive the adjacent area, theoretically
even surrounding the original community's entire perimeter, the more
challenging and burdensome it may be for a credit union to, first,
subjectively demonstrate a sufficient totality of indicia of
interaction or common interests among residents of the expanded
community,\21\ and then to establish through the credit union's
business and marketing plans its ability and commitment to serve the
entire expanded community.
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\20\ See Rural District Definition discussion later in this same
section.
\21\ The proposed rule incorporates guidance identifying
compelling indicia of common interests and interaction that would be
relevant when a credit union chooses to submit a narrative to NCUA
to demonstrate that the residents of the expanded community meet the
requirements of a well-defined local community.
---------------------------------------------------------------------------
The Board recognizes that credit unions seeking to add bordering
areas to their existing community or rural district charters
historically have already established a proven track record of serving
an existing community or rural district and should not be subject to
the same requirements as those for a credit union seeking to convert to
a community or rural district charter. Therefore, the Board proposes to
require a federal credit union seeking to add a bordering area to
follow a streamlined set of business plan requirements contained in
this rule. The Board seeks comment on the appropriateness of the
proposed set of streamlined requirements, and if any specific items
should be added or removed from the proposed criteria. The Board also
seeks comment on the existing comprehensive business and marketing plan
requirements. Finally, the Board is considering whether to limit the
availability of this streamlined approach to a federal credit union
seeking a certain maximum percentage increase in its field of
membership, and is interested in receiving public comment on this
aspect of the proposal.
6. Individual Congressional District as a Well-Defined Local
Community. Since 1999, the Board has maintained that neither a
Congressional district nor a whole state qualifies as a well-defined
local community, despite recognizing that both are well-defined.\22\
These restrictions were never imposed by statute; rather, the Board
disallowed whole states and Congressional districts solely as a matter
of policy.\23\ When imposing these restrictions, the Board recognized
that--
---------------------------------------------------------------------------
\22\ 63 FR 72013, 72037 (December 30, 1998); Appendix B, Ch. 2,
Section V.A.2.
\23\ 63 FR at 72037. See also 75 FR at 36258 (affirming that
entire state is not acceptable as WDLC)
in general, a large population in a small geographic area or a
small population in a large geographic area, may meet community
chartering requirements. Conversely, . . . a large population in a
large geographic area will not normally meet community chartering
requirements. In so doing, however, the Board has not summarily
dismissed or prejudged any potential application. While an area with
a large population may require additional documentation, it still
may meet the definition of a local community.\24\
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\24\ 63 FR at 72012.
A significant change in circumstances has prompted the Board to
reconsider this policy as it applies to Congressional districts--namely
that, NCUA has, since 1999, approved 21 Single Political Jurisdictions
that each have a population in excess of 1 million, while the average
population of the United States' 435 Congressional districts is
710,767.\25\
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\25\ https://www.census.gov/fastfacts.
---------------------------------------------------------------------------
The most populous of the 435 districts is the ``at large'' district
serving the state of Montana, with a population of 1,023,579; Rhode
Island has the smallest average district size at 523,028.\26\ As
measured by population, it is appropriate to recognize each individual
Congressional district, as well as the District of Columbia and each
U.S. territory represented by a non-voting delegate,\27\ as local when
compared to Single Political Jurisdictions as large in population as
Los Angeles County, California (9.6 million), approved by the Board in
2003, and Harris County, Texas (3.45 million), approved by the Board in
2007.
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\26\ Id. Seven states presently are comprised of a single
Congressional district, effectively giving each a state-wide FOM:
Alaska, Delaware, Montana, North Dakota, South Dakota, Vermont and
Wyoming.
\27\ American Samoa, Guam, Northern Mariana Islands, Puerto
Rico, and the U.S. Virgin Islands.
---------------------------------------------------------------------------
Among residents of Single Political Jurisdictions comprised of
towns, cities and counties, the focal point of common interests and
interaction tends be local services, resources and facilities (e.g.,
taxes, schools, police and fire protection). The proposal acknowledges
that Congressional districts, structured for purposes of federal
representation, reflect interaction and common interests among each
district's constituents based on issues and matters decided at the
federal level that affect them locally (e.g., economic, agricultural,
and environmental).
Based on this rationale, the Board proposes to recognize each
individual Congressional district as a Single Political Jurisdiction,
thus qualifying it as a well-defined local community without regard to
population.\28\
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\28\ Appendix B, Ch. 2, Section V.A.1.
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As in the case of any community charter application, a credit union
that applies to serve a Congressional district must submit a business
and marketing plan demonstrating its ability and commitment to serve
the entire community. The larger the Congressional district, the more
challenging and burdensome it may be for an applicant to satisfy this
requirement.
If, as a result of redistricting, the boundaries of an individual
Congressional district were to be redrawn, the FOM consisting of the
original Congressional district would no longer be available to be
served by any other FCU. Only an FCU that was approved to serve an FOM
comprised of an individual Congressional district would be
grandfathered to continue serving that area.
B. Rural District Definition
The Board has, since 2013, imposed two requirements for a proposed
area to qualify as a well-defined ``Rural District.'' The first is that
the area's total population cannot exceed the greater of either 250,000
people or 3 percent of the population of the state in which the
majority of the proposed Rural District's residents would be
located.\29\ The second is that either at least 50 percent of the
proposed Rural District's population must reside in census blocks or
other geographic units the U.S. Census Bureau (``U.S. Census'')
designates as ``rural,'' or the proposed Rural District's population
density cannot exceed 100 persons per square mile.\30\ Independently of
these well-defined local community requirements, a credit union must be
able to serve the proposed Rural District, as demonstrated by its
business and marketing plans that must accompany
[[Page 76751]]
an application for charter approval, expansion or conversion.\31\
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\29\ Appendix B, Ch. 2, Section V.A.2.
\30\ Id.
\31\ Appendix B, Ch. 2, Section V.A.4.
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1. Population Limits. The 250,000 persons/3 percent population
limits were based on the view that a Rural District should have a
relatively small, widely disbursed population. However, a compelling
countervailing factor continues to weigh against this view: To make the
area attractive as a strategic option, a Rural District must have a
population sufficient to enable credit unions to achieve a sufficient
level of operating efficiencies and scale to deliver products and
services. Balancing these opposing population considerations, NCUA
proposes to modify the Rural District definition to increase the
population limit to 1 million persons. Because the increased population
limit would exceed 3 percent of a state's population in all states but
one (California), making that alternative redundant, the proposed rule
omits it. The Board invites public comment on whether to adjust the
proposed 1 million population limit, by what amount, and for what
specific reasons.
2. Multi-State Expansion Limit. In 1998, the Board conceded that
``While an area with a large population may require additional
documentation, it still may meet the definition of a local community.
Similarly, multiple counties, particularly in rural areas, may qualify
for a community charter.'' \32\ To achieve consistency with U.S. Census
recognition of expansive rural areas, the proposed rule modifies the
option for an area to qualify as a Rural District either because it is
among the ``rural counties'' identified by the Consumer Financial
Protection Bureau (``CFPB''),\33\ or because the area has a sparse
population density of no more than 100 people per square mile. These
criteria truly reflect an area's rural character regardless of its
physical size, as shown by the eight states in which the U.S. Census
identifies more than 40 percent of the state population as ``rural.''
\34\
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\32\ 63 FR at 72012.
\33\ See CFPB's ``Rural or underserved counties list'' available
at: https://www.consumerfinance.gov/guidance/#ruralunderserved.
\34\ https://www.census.gov/geo/reference/ua/urban-rural-2010.html (List of Population, Land Area and Percent Urban and Rural
in 2010 and Changes from 2000 to 2010).
---------------------------------------------------------------------------
As revised, the Rural District definition--a 1 million population
limit, and either a sparse population density or ``rural''
designation--would continue to permit a Rural District to extend beyond
a single state's boundaries. To prevent the overexpansion of Rural
Districts, however, the Board proposes to prohibit a single well-
defined Rural District from exceeding the boundaries of the states that
are immediately contiguous to the state in which the FCU serving the
Rural District is headquartered (i.e., not to exceed the outer
perimeter of the layer of states immediately bordering the headquarters
state).
C. Underserved Areas
The FCU Act authorizes the NCUA Board to allow multiple common bond
credit unions to serve members residing in an ``underserved area,''
provided the FCU establishes and maintains a facility in the area.\35\
For an area to be ``underserved,'' it must qualify: (1) As a well-
defined local community, neighborhood or rural district; \36\ (2) as an
``investment area'' under the Community Development Banking and
Financial Institutions Act (``CDFI Act''); \37\ and (3) as
``underserved'' by other depository institutions (as defined [by the
CDFI Act]) ``based on data of the Board and the Federal banking
agencies.'' \38\ Other than to limit the sources of data and to define
``depository institutions,'' the FCU Act prescribes no specific test or
criteria to assess ``underservice.'' Within this broad authority, the
Board seeks to refine the data used in its concentration of facilities
ratio, first introduced in 2008,\39\ to determine whether a proposed
area is underserved by other depository institutions, as well as to
propose for comment alternative methodologies and metrics as options
for making that determination.
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\35\ 12 U.S.C. 1759(c)(2).
\36\ Id.
\37\ Id. Section 4702(16).
\38\ Id. Section 1759(c)(2)(A) citing id. Section 461(b)(1)(A).
By definition, a ``depository institution'' is insured and includes
credit unions. Id. Section 461(b)(1)(A)(iv).
\39\ 73 FR 73392 (Dec. 2, 2008). Using census tracts as the unit
of measure, the concentration of facilities ratio compares the
concentration of depository institution facilities among the
population within the non-``distressed'' portions of the proposed
area against the concentration of such facilities among the
population of the area as a whole. 73 FR at 73396. Ch.3, Section
III.B.3.of appendix B. An area qualifies as underserved by other
depository institutions when the concentration of facilities ratio
within its non-``distressed'' census tracts exceeds the
concentration of facilities ratio within the census tracts of the
area as a whole.
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1. Exclusion of Non-Depository Institutions and Non-Community
Credit Unions from Concentration of Facilities Ratio. It has been
NCUA's practice to calculate an area's concentration of facilities
ratio on behalf of a credit union seeking approval to serve it as an
underserved area. To assess the presence of banks and savings
associations within geographic units that do not already qualify as
``distressed'' under the CDFI Act, NCUA has relied upon data compiled
by the Federal Deposit Insurance Corporation (``FDIC'') in its Summary
of Deposits Survey,\40\ and on NCUA data to assess the presence of
credit unions. The Board proposes to exclude two data components from
the ratio, on a contingent basis, to prevent the concentration of
facilities ratio from being diluted or distorted by over-inclusive
data, as well as to ensure compliance with the letter and the spirit of
the ``depository institutions'' definition the FCU Act references.\41\
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\40\ FDIC's ``Summary of Deposits Survey,'' e.g., https://www.fdic.gov/news/news/financial/2015/fil15024.pdf.
\41\ 12 U.S.C. 461(b)(1)(A).
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The first component is NCUA data reflecting the presence of non-
community credit unions, such as multiple common bond credit unions--
other than those already serving the proposed area as an underserved
area--because they would be unable to serve the general public of a
underserved area (i.e., unable to serve anyone not within its select
groups). The second component is FDIC data reflecting the presence of
non-depository institutions, such as trust companies, which do not
accept deposits from the general public. Excluding data reflecting the
presence of institutions that would not be capable of serving a
proposed area, either by definition or in fact, will preclude the
unwarranted denial of an application to serve an underserved area.
It would be impracticable and an inefficient use of resources for
NCUA to segregate bank and credit union data on a nationwide scale to
exclude non-depository bank and non-community credit union data.
However, in the event an initial concentration of facilities ratio
calculation fails to identify a proposed area as underserved by other
depository institutions, the proposed rule would require NCUA to then
exclude the non-depository bank and non-community credit union data and
recalculate the ratio. This will ensure the integrity of the result, as
well as maximize the identification of areas that would benefit from
the introduction of credit union service to compensate for the lack of
service by other depository institutions. This approach also will
conserve NCUA resources that otherwise would be consumed in routinely
excluding this data without regard to whether an initial concentration
of facilities ratio calculation without those exclusions would yield a
positive result.
[[Page 76752]]
2. Alternatives to Identify Areas ``Underserved by Other Depository
Institutions.'' While the concentration of facilities ratio has
generally proven to be an effective measure of underservice by other
depository institutions, it has some inherent limitations: It accounts
for the physical presence of depository institutions in a given area,
but it does not necessarily evaluate the benefit or quality of services
these institutions deliver.\42\ Accordingly, the Board proposes two
alternatives to the concentration of facilities ratio that may reflect
underservice by other depository institutions more comprehensively. The
first would be the designation of ``underserved counties'' by the
CFPB,\43\ which has rulemaking authority over Federal banking agencies'
collection of Home Mortgage Disclosure Act (``HMDA'') data used to make
those designations.\44\ The second would be a metric of a credit
union's own choosing that it would submit as evidence of underservice
in a proposed area, provided the metric is based on ``data of the Board
and the Federal banking agencies.''\45\
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\42\ The benefit and quality of services depository institutions
deliver is addressed by the ``distress'' criterion requiring the
area to have ``significant unmet need for loans and financial
services.'' 12 U.S.C. 4702(16)(A)(ii).
\43\ Although CFPB's annual ``Rural or underserved counties
list'' does not segregate ``rural'' and ``underserved'' counties,
NCUA will use the data collected by CFPB to produce and make
available a list that identifies ``underserved areas'' exclusively.
\44\ 12 U.S.C. 1813(z). Financial institutions, including
national banks, Federal savings associations, state member banks,
and FCUs report mortgage related data to their respective Federal
regulator -OCC, the Fed, FDIC and NCUA.
\45\ E.g., FDIC ``Summary of Deposits Survey.''
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The Board invites commenters to identify other methodologies and
Federal banking agency data that would be useful in identifying areas
``underserved by other depository institutions'' in an objective
manner. Examples include data from Community Reinvestment Act
examination reports prepared by the FDIC, Office of the Comptroller of
the Currency (``OCC'') or the Board of Governors of the Federal Reserve
System (``the Fed''),\46\ and HMDA data collected by these agencies.
The Board encourages commenters to suggest why and how any specific
methodology and supporting data recommended for consideration would
establish an objective basis for analysis of underservice by other
depository institutions.
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\46\ E.g., https://www.ffiec.gov/cra/default.htm.
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D. Multiple Common Bond
As amended in 1998, the FCU Act restored the Board's multiple
common bond policy, permitting a multiple common bond credit union to
serve a combination of distinct, definable occupational and/or
associational groups, each having its own common bond among group
members.\47\
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\47\ 63 FR 71998, December 30, 1998; 12 U.S.C. 1759(b)(2)(A).
See NCUA v. First National Bank & Trust Co., 522 U.S. 479 (1988).
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1. Credit Union's ``Reasonable Proximity'' through Members' Online
Access to Services. The FCU Act authorizes multiple common bond credit
unions to expand through the addition of select groups having
dissimilar common bonds, provided such a group does not exceed 3,000
members.\48\ To add a group that exceeds that limit, the group must
meet other criteria the FCU Act prescribes to establish that it ``could
not feasibly or reasonably establish a new single common bond credit
union.'' \49\ Regardless of group size, the FCU Act further requires
the Board, in deciding whether to approve a multiple common bond
expansion, ``to encourage the formation of separately chartered credit
unions . . . whenever practicable and consistent with reasonable
standards for the safe and sound operation of the credit union,'' based
on approval criteria the FCU Act prescribes.\50\
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\48\ Id. Section 1759(d)(1).
\49\ Id. Section 1759(d)(2)(A).
\50\ Id. Section 1759(f)(1)(A).
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When formation of a stand-alone single common bond credit union
either is not practicable, or would be inconsistent with reasonable
standards of safety and soundness, the FCU Act requires ``inclusion of
the group in the [FOM] of a credit union that is within reasonable
proximity to the location of the group whenever practicable and
consistent with reasonable standards for the safe and sound operation
of the credit union.'' \51\ The Chartering and FOM Manual implements
both the stand-alone feasibility criteria and the multiple common bond
expansion approval criteria.
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\51\ Id. Section 1759(f)(1)(B) (emphasis added).
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In 1998, the Board acknowledged that ``reasonable proximity'' is an
essential factor in determining whether a select group can be added to
a multiple common bond credit union.\52\ However, the Board did not
require an added group's location to be within reasonable proximity of
the credit union's main office, but rather, within the service area of
a ``service facility'' of the credit union. As currently defined, a
``service facility'' includes a credit union branch, a shared branch, a
mobile branch that visits the same location on a weekly basis, and a
credit union-owned electronic facility.\53\ To qualify as a service
facility, a group's members must be able to deposit funds, apply for a
loan or obtain funds on approved loans.\54\
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\52\ 63 FR 71998, 72002 (December 30, 1998).
\53\ Appendix B, Ch.2, Section IV.A.1 and appendix 1 (glossary).
\54\ Appendix B, Ch.2, Section IV.A.1.
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To recognize the role of advancing technologies in enabling
reasonable proximity between a credit union and the groups it serves,
the Board proposes to revise the definition of a ``service facility''
to extend it to members of occupational select groups, and members of
pre-approved associational groups,\55\ who have access to their credit
union's products and services through an online internet channel such
as a transactional Web site. This proposed change would apply solely to
meet the ``reasonable proximity'' requirement that applies to a
multiple common bond credit union and its select occupational and
associational groups; it would not apply to meet the requirement that a
credit union serving an underserved area ``must establish and maintain
an office or facility in [the underserved area].'' \56\ To provide the
same functionality currently required for a service facility, the
online internet channel must be capable of accepting shares for those
members' accounts and loan applications from them, or disbursing loan
proceeds to them. The Board emphasizes that this proposed change would
allow access to online financial services only by already existing
members of multiple common bond credit unions; it would not permit an
individual to qualify remotely for membership in a community credit
union based on electronic access to it from outside its well-defined
local community.
---------------------------------------------------------------------------
\55\ Appendix B, Ch. 2, Section III.A.1.B.
\56\ 12 U.S.C. 1759(c)(1)(B).
---------------------------------------------------------------------------
To support its proposal to incorporate online financial services in
the definition of ``service facility'' through online internet channels
via access to laptop computers, personal computers and mobile devices,
the Board has reviewed data from FCUs regarding consumer needs and
preferences. By all measures, the use of online financial services has
increased dramatically in the past 15 years. Federally insured credit
unions' Call Report data indicates that the proportion of members using
transactional Web sites has steadily increased from 27 percent of
members in the fourth quarter of 2006 (23.2 million) to 45 percent in
the second quarter of 2015 (40.5 million)--an increase of 17.3 million
users.
[[Page 76753]]
Among FCUs, only 22 percent offered home banking via an internet
Web site in 2000. This share increased to 68 percent in the fourth
quarter of 2011 (4,846 out of 7,094), and 75 percent by the second
quarter of 2015 (4,612 out of 6,159). There has been similarly
significant growth in the use of smart phones and tablets to conduct
mobile banking transactions. With such technology non-existent as late
as 2008, only 6 percent of FCUs offered mobile banking in 2009. This
share increased to 16 percent in 2011, and 47 percent by the second
quarter of 2015.
Similarly, data collected by the Boston Consulting Group (``BCG'')
indicates actual consumer use of online delivery channels has increased
significantly.\57\ Specifically, online consumer contacts with banks
nearly doubled from 2004 to 2012. Mobile and internet banking increased
from 5 percent of customer contacts in 2004 to about 48 percent by
2012. In contrast, the share of contacts conducted in branches fell
from 75 percent to 30 percent during this period. The BCG study noted
that mobile and internet banking transaction volume advanced not only
due to the increase in the number of overall contacts, but because
banking transactions accounted for a larger share of total activity.
The BCG study emphasized that to compete effectively in the financial
sector, financial institutions need to establish business plans that
make ``interactions across multiple channels simple--not disjointed or
constrained by internal organizational boundaries in a way that leads
customers to dead ends. Channels should support each other, not
compete.'' \58\ In addition, the BCG study predicted that internet
contacts as a percentage of all contacts would increase to about 66
percent by 2020.
---------------------------------------------------------------------------
\57\ Maguire, Andy, et. al., Distribution 2020: The Next Big
Journey for Retail Banking (March 2013): https://www.bcgperspectives.com/content/articles/financial_institutions_sales_channels_distribution_2020/?chapter=2.
\58\ American Bankers Association Press Release: More Consumers
Turning to Mobile Banking (August 11, 2015).
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The dramatic increase in FCUs offering mobile banking service is
consistent with the use of internet and mobile banking services by
consumers generally. An annual study sponsored by the American Bankers
Association, and conducted by Ipsos Public Affairs for 2015, surveyed
1,000 adults about their banking preferences among the following
choices: Internet banking (laptop or personal computer), mobile devices
(cell phone, Blackberry, PDA, tablet), brick and mortar branches, ATMs,
telephone, and mail. A primary question was, ``Which method do you use
most often to manage your bank accounts?'' The table below indicates
that 41 percent of customers preferred internet or mobile banking. In
contrast, only 21 percent preferred branch banking. These preferences
were similar in 2013 and in 2014. The study sponsor further stated that
``This is the sixth year in a row [2008-2014] that customers named the
Internet as their favorite way of conducting their banking business.''
\59\
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\59\ Id. at 2.
------------------------------------------------------------------------
Type of banking 2014 2013
------------------------------------------------------------------------
Online channels (laptop or PC).......... 31% 39%
Branches................................ 21% 18%
ATMs.................................... 14% 11%
Mobile (cell phone, Blackberry, PDA, 10% 8%
IPad)..................................
Telephone............................... 7% 7%
Mail.................................... 6% 7%
Don't Know/Not sure..................... 11% 10%
------------------------------------------------------------------------
Similarly, government-sponsored studies indicate dramatic increases
in online banking in the past few years. Since 2011, the Fed has
conducted an annual survey that focuses on one channel of online
banking: Smart phone technology for mobile banking.\60\ That survey
illustrates the increased reliance of smart phone technology for mobile
banking. The March 2015 Report of a December 2014 survey stated,
``Thirty nine percent of all mobile phone owners with a bank account
have used mobile banking in the 12 months prior to the survey, up from
33 percent in 2013 and 29 percent in 2012.'' Further, ``Fifty two
percent of smartphone owners with a bank account used mobile banking in
the past 12 months, up from 51 percent in 2013.'' The Federal Reserve
survey further found that another 11 percent of mobile phone users
think that they will use smart phones for online banking within 12
months.\61\
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\60\ Federal Reserve Consumers and Mobile Financial Services
(March 2015).
\61\ Id. Executive Summary at 4.
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The Federal Reserve Bank of Atlanta studied the use of mobile
banking by banks and credit unions to determine the level of and type
of mobile financial services offered by financial institutions.\62\ Of
189 respondents in Georgia, Alabama, Florida, and parts of Mississippi,
Louisiana, and Tennessee, which included banks and credit unions of all
asset sizes, only six (3 percent) did not currently offer or, plan to
offer mobile banking services. Further, the study noted, ``There was
very little difference between the bank and CU responses.'' The study
also confirmed a significant trend toward offering mobile banking,
given that 23 percent of the respondents began offering mobile banking
within the past year and 15 percent were planning to offer such
services within the next two years.
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\62\ Mobile Banking and Payments Survey of Financial
Institutions of the Sixth District, Lott, David (March 2015).
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The strong consumer preference for online financial services, as
well as for integration of online banking into financial institutions'
overall business and marketing plans indicates the need to amend the
Chartering and FOM Manual to facilitate current credit union members'
access to such online services. Accordingly, to put multiple common
bond credit unions and members of the groups they serve within
reasonable proximity of each other, as required by law, as well as to
put them in parity with their depository institution competitors, the
Board is proposing to amend the definition of ``service facility'' to
include online financial services, including computer-based and mobile
phone channels meeting certain criteria for access.
In addition to the proposal to include a transactional Web site in
the definition of ``service facility,'' the Board is considering
modifying the definition of ``service area'' to include one or more
discreet political jurisdictions such as a county or city. While the
Board historically has discouraged using mileage and distance factors
exclusively to define reasonable proximity,\63\ it acknowledges that
there may be an appropriate level of certainty in also defining
reasonable proximity to
[[Page 76754]]
encompass a city or county jurisdiction. The Board invites comments on
options to modify the definition of ``service area.''
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\63\ 63 FR 71998, 72003 (December 30, 1998).
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2. Inclusion of Select Employee Group Contractors in a Multiple
Common Bond. The Board presently includes within the definition of a
single occupational common bond the persons who work regularly for an
entity that is under contract to the sponsor of the select employee
group (``SEG'') listed in its charter, provided the contractor has a
``strong dependency relationship'' with that sponsor.\64\ This
definition relies on the presence of a ``strong dependency
relationship'' between the SEG sponsor and its contractor to establish
the ``common bond of occupation'' the FCU Act requires for a group to
be included in either a single or a multiple common bond credit
union.\65\ There being no distinction between a single and a multiple
common bond credit union for purposes of recognizing the occupational
affinity between a SEG sponsor's own employees and those of each
sponsor's contractors, the Board proposes to extend to multiple
occupational common bond credit unions the ability to add persons who
work regularly for an entity that is under contract to any of the
multiple SEG sponsors listed in its charter, provided the contractor
has a ``strong dependency relationship'' with the sponsor in each case.
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\64\ Appendix B, Ch. 2, Section II.A.1.
\65\ 12 U.S.C. 1759(b)(1) & (2).
---------------------------------------------------------------------------
3. Inclusion of Office/Industrial Park Tenants in a Multiple Common
Bond. In the past, NCUA has recognized industrial parks as a special
type of community charter.\66\ As an alternative to extend credit union
service to persons who work in an office or industrial park, the Board
now proposes to also permit a multiple common bond credit union to
include as a SEG the employees of a park's tenants (e.g., retail
tenants of a shopping mall, business tenants of an office building or
complex). The group listed in the charter would be the office/
industrial park itself; it would not be necessary to individually list
each tenant as a group sponsor. Inclusion of such office/industrial
park groups within a multiple common bond credit union would be subject
to two conditions: Each tenant within the group must have fewer than
3,000 employees working at a facility within the park, and only those
employees who work regularly at the park during their employer's
tenancy would be eligible for FCU membership. New tenants to the
industrial park would be eligible for membership subject to the above
conditions.
---------------------------------------------------------------------------
\66\ Appendix B, Ch. 2, Section V.A.6 (special community
charters).
---------------------------------------------------------------------------
The option of including a tenants' SEG within a multiple common
bond would allow those FCUs to more efficiently offer services to
employees of small businesses, avoiding an extensive outlay of
resources to obtain letters from each group requesting credit union
service. Instead, a multiple common bond credit union could serve
employees of an office/industrial park's tenants by obtaining a letter
from an authorized representative of the park itself, such as its
leasing agent.
4. Streamlined Determination of Stand-Alone Feasibility of Groups
Greater than 3,000. Based on NCUA's experience in assessing the stand-
alone feasibility of groups in excess of 3,000 members, and data
regarding the failure rate of credit unions during a 12-year
period,\67\ a trend has emerged: 80 percent of credit union failures
occurred in credit unions with fewer than 5,000 members. In view of
this trend, the Board has decided to modify NCUA's process for
assessing the stand-alone feasibility of groups that seek to be added
to the FOM of an existing multiple common bond credit union, rather
than forming the group's own single common bond credit union.
Accordingly, the Board proposes to reorganize and streamline the
application process for multiple common bond expansions according a
group's size.
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\67\ Credit union failures according to asset size and
membership as reflected in final Call Reports for 2003Q1-2015Q2.
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Groups of fewer than 3,000 members will be subject to the existing
application process, consisting of the following: A written request
using the Application for Field of Membership (NCUA 4015 EZ), a letter
from the group requesting credit union service and indicating the
desire to be added to the FCU's field of membership; the number of
persons included in the group to be added; and the group's proximity to
the credit union's nearest service facility. Applicants do not need to
support these groups' lack of ability to form their own credit union.
Since the statute presumes a group of 3,000 or more members can
form a credit union, there is a higher burden of proof to establish
that such a group cannot form its own credit union. When a group has
between 3,000 and 5,000 members and displays evidence of a lack of
available subsidies, disinterest among the group's members, and an
overall lack of sufficient resources, the Board has historically
determined that the group could not feasibly or reasonably establish a
new single common bond credit union. In such cases the Board will
accept a written statement indicating these conditions exist as
sufficient documentation the group cannot form its own credit union.
Consistent with current policy on incidental overlaps, the Board will
no longer require an overlap analysis of a group between 3,000 and
5,000 members, given that groups in this size range rarely have been
able to form a stand-alone credit union. Groups with more than 5,000
members will be subject to the existing standard application process,
requiring a group to fully describe its inability to establish a new
single common bond credit union.
However, the Board is particularly interested in comments on
whether to consider a larger number than 5,000 for this threshold.
While 80 percent of failures occurred in credit unions with fewer than
5,000 actual members, the number of potential members of those credit
unions was significantly larger. Therefore, if 5,000 actual credit
union members were deemed to be the minimum number needed to charter a
viable new credit union, the number of potential members needed to
reach 5,000 actual members would be larger.
For example, if the average penetration rate of actual members to
potential members at the smallest multiple-group credit unions is 50
percent, a group of 10,000 potential members may be needed to reach
5,000 actual members. The Board welcomes comments on how many actual
members are needed to charter a viable new credit union, and how many
potential members would be needed in order to reach that minimum number
of actual members.
There are three benefits to the proposed three-tiered process for
assessing a group's stand-alone feasibility. First, it conforms to the
stand-alone feasibility criteria the FCU Act prescribes for groups in
excess of 3,000, and the approval criteria it prescribes for the
addition of a group, regardless of its size, to an existing multiple
common bond credit union.\68\ Second, it will minimize the resource
burden on individual groups and credit unions in compiling information
and documentation to support an application to add a group, as well as
on the NCUA staff in assessing the application. Finally, it will allow
NCUA to more effectively allocate its resources by focusing its
scrutiny on individual groups based on the record of survival of newly
chartered credit unions having
[[Page 76755]]
more than 5,000 members when formed. This would enhance the agency's
ability to conduct an appropriate level of due diligence in its
reviews.
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\68\ Id. Section 1759 (d)(2) & (f)(1).
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E. Other Persons Eligible for Credit Union Membership
NCUA has historically recognized a variety of persons who, by
virtue of their relationship to a common bond group, have been entitled
to credit union membership eligibility. Principal among these persons
are members of the immediate family or household of a primary member of
a credit union members (i.e., spouse, child, sibling, parent,
grandparent, grandchild, including by step or adoptive
relationship).\69\ Other such affinity groups include spouses of
deceased credit union members, current credit union employees,
pensioners and annuitants who have retired from credit union
employment, and persons who perform volunteer work for a credit
union.\70\
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\69\ Appendix B, Ch.2, Sections II.H., IV.H., and appendix 1
(glossary definition of ``affinity'').
\70\ Appendix B, Ch.2, Sections II.H., IV.H.
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Active duty and discharged military personnel and their families
share a similar affinity, typically maintaining a close relationship
with their active duty branch of service, largely through Armed Forces
associations, publications and continued access to military bases, such
as Veterans Administration facilities, base commissaries, post
exchanges, and morale, welfare and recreation sponsored programs. To
honor the contributions of those serving in the United States Armed
Forces, and to give them the benefit of access to credit union service
throughout their lives following active duty, the Board proposes to
include within a credit union's common bond the honorably discharged
veterans of any branch of the United States Armed Forces listed in its
charter, continuing their eligibility for credit union membership
beyond active duty.
F. Trade, Industry or Profession (``TIP'') as a Single Common Bond
A TIP is a single occupational common bond based on employment at
any number of corporations or other legal entities that, while not
under common ownership, still have a common bond by reason of producing
similar products, providing similar services, sharing the same
profession or trade, or participating in the same industry.\71\ To
establish ``one group that has a common bond of occupation,'' as the
FCU Act prescribes, a TIP-based FOM must reflect a narrow commonality
of interests among those working within a specific trade, industry, or
profession, and there must be a close nexus among the entities within
the group.\72\ The commonality of interest and close nexus requirements
preclude a TIP from including third-party vendors and other suppliers
and contractors. As an example, an automobile TIP may include all
workers manufacturing automobiles but may not include the steel
suppliers or other component suppliers.
---------------------------------------------------------------------------
\71\ 68 FR 18334, 18336 (April 15, 2003); Appendix B, Ch. 2,
Section IIA.2.
\72\ Id.
---------------------------------------------------------------------------
Inclusion of ``Strong Dependency'' Vendors and Suppliers in TIP
Definition. The Board already recognizes a single occupational common
bond between a SEG sponsor's own employees and those of its
contractors, provided there is a ``strong dependency relationship''
between the sponsor and the contractor. Similarly, NCUA proposes to
clarify its definition of a TIP to include employees of types of
entities that have a strong dependency relationship on, and whose
employees work directly with employees of, other entities within the
same industry. An example would be an FCU that serves employees of
companies within the airline industry that have a strong dependency
relationship with airlines or airports, and whose employees work
directly with providers of air freight transportation, courier
services, air passenger services, in-flight food services, airport
security, baggage handling, and commercial janitorial, maintenance and
repair services. The premise of a strong relationship between these
providers and their airport and airline customers is the likelihood of
a significant economic impact, if not equally between them, if one were
unable to continue in its operations without doing business with the
other. As expanded, the TIP definition would give credit unions the
opportunity to demonstrate that an entity is ``strongly dependent'' on
the others within a TIP, and shares a narrow commonality of interest
with them, as necessary to be part of a TIP-based single occupational
common bond.
G. Technical Updates
Apart from introducing substantive revisions to NCUA's FOM rules
and policies, the proposed rule will update the Chartering and FOM
Manual to enhance its accuracy and user-friendliness for the benefit of
those seeking to charter a credit union, as well as for existing credit
unions. To that end, the proposed rule substitutes certain references
to regional office and regional director chartering responsibilities
with references to the Office of Consumer Protection as the primary
office for chartering matters within NCUA and, to address previous
comments, substitutes the Board Secretary for the Office of Consumer
Protection in reference to appeals of chartering decisions.\73\
Finally, the proposed rule corrects statutory and regulatory citations
and cross-references, as well as typos; updates the appendices to the
Chartering and FOM Manual to reflect current agency practices; and
updates references to NCUA offices and industry trade associations.
---------------------------------------------------------------------------
\73\ 87 FR 25924, 25929 (May 6, 2015).
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III. Regulatory Procedures
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.\74\ For purposes of this
analysis, NCUA considers small credit unions to be those having under
$50 million in assets.\75\ Although this rule is anticipated to
economically benefit FCUs that choose to expand their FOMs, NCUA
certifies that it will not have a significant economic impact on small
credit unions.
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\74\ 5 U.S.C. 603(a).
\75\ Effective November 23, 2015, the asset ceiling for small
credit unions will increase to $100 million. 80 FR 57512 (Sept. 24,
2015).
---------------------------------------------------------------------------
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) applies to collections of
information through which an agency creates a paperwork burden on
regulated entities or the public, or modifies an existing burden.\76\
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. The Office of Management and Budget (OMB)
previously approved the current information collection requirements for
the Chartering and Field of Membership Manual and assigned them control
number 3133-0015.
---------------------------------------------------------------------------
\76\ 44 U.S.C. 3507(d); 5 CFR part 1320.
---------------------------------------------------------------------------
The proposed rule creates new strategic options for FCUs, while
requiring essentially the same information that the existing rule
required to apply for and be granted a charter expansion or conversion,
with two exceptions. It introduces a new form within an appendix to the
[[Page 76756]]
Chartering and Field of Membership Manual to condense the application
process for adding certain groups to a multiple common bond FOM. This
new form does not add any additional burden to FCUs.
Regarding a community common bond, the proposed rule permits an FCU
to add an area adjacent to the perimeter of its existing community
consisting of a Single Political Jurisdiction, Core Based Statistical
Area, Combined Statistical Area or rural district, upon a showing by
subjective evidence that residents on both sides of the perimeter
interact or share common interests. For that purpose, the rule provides
guidance in identifying compelling indicia of interaction or common
interests that would be relevant in drafting a narrative summarizing
the indicia that demonstrate that the residents of the expanded
community meet the requirements of a well-defined local community.
NCUA has determined that the procedure for an FCU to assemble such
subjective evidence of interaction or common interests, and to draft
and submit a narrative summarizing the evidence to support its
application to expand, would create a new information collection
requirement. As required, NCUA is applying to OMB for approval to amend
the current information collection to account for the new procedure.
Approximately 1,090 FCUs have a community charter. While there is
no reasonable way to measure how many FCUs will use this particular
option, it would be available to any community FCU, regardless of asset
size. NCUA estimates that, on average, it would take an FCU's staff
approximately 24 hours to collect the evidence of interaction and
common interests and to draft a narrative to support its application to
expand. Accordingly, NCUA estimates the aggregate information
collection burden on FCUs that seek to add an area adjacent to the
perimeter of an existing community consisting of a Single Political
Jurisdiction, Core Based Statistical Area, Combined Statistical Area or
rural district would be 24 hours times 1,090 FCUs for a total of 26,160
hours. NCUA is proposing to amend the current information collection
control number 3133-0015 to account for these additional burden hours.
Organizations and individuals wishing to submit comments on this
information collection requirement should direct them to the Office of
Information and Regulatory Affairs, OMB, Attn: Shagufta Ahmed, Room
10226, New Executive Office Building, Washington, DC 20503, with a copy
to the Secretary of the Board, National Credit Union Administration,
1775 Duke Street, Alexandria, Virginia 22314-3428.
NCUA will consider comments by the public on this proposed
collection of information in:
Evaluating whether the proposed collection of information
is necessary for the proper performance of the functions of the NCUA,
including whether the information will have a practical use;
Evaluating the accuracy of NCUA's estimate of the burden
of the proposed collection of information, including the validity of
the methodology and assumptions used;
Enhancing the quality, usefulness, and clarity of the
information to be collected; and
Minimizing the burden of collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology (e.g., permitting
electronic submission of responses).
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. Primarily because this rule applies to FCUs
exclusively, it 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.
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.\77\
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\77\ Pub. L. 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 November
19, 2015.
Gerard S. Poliquin,
Secretary of the Board.
For the reasons stated above, NCUA proposes to amend 12 CFR part
701, appendix B, as follows:
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. Appendix B to part 701 is revised to read as follows:
Appendix B to Part 701--Chartering and Field of Membership Manual
Chapter 1--Federal Credit Union Chartering
I--Goals of NCUA Chartering Policy
The National Credit Union Administration's (NCUA) chartering and
field of membership policies are directed toward achieving the
following goals:
To encourage the formation of credit unions;
To uphold the provisions of the Federal Credit Union
Act;
To promote thrift and credit extension;
To promote credit union safety and soundness; and
To make quality credit union service available to all
eligible persons.
NCUA may grant a charter to single occupational/associational
groups, multiple groups, or communities if:
The occupational, associational, or multiple groups
possess an appropriate common bond or the community represents a
well-defined local community, neighborhood, or rural district;
The subscribers are of good character and are fit to
represent the proposed credit union; and
The establishment of the credit union is economically
advisable.
Generally, these are the primary criteria that NCUA will
consider. In unusual circumstances, however, NCUA may examine other
factors, such as other federal law or public policy, in deciding if
a charter should be approved. Unless otherwise noted, the policies
outlined in this manual apply only to federal credit unions.
II--Types of Charters
The Federal Credit Union Act recognizes three types of federal
credit union charters--single common bond (occupational and
associational), multiple common bond (more than one group each
having a common bond of occupation or association), and community.
[[Page 76757]]
The requirements that must be met to charter a federal credit
union are described in Chapter 2 of this manual. Special rules for
credit unions serving low-income groups are described in Chapter 3
of this manual.
If a federal credit union charter is granted, Section 5 of the
charter will describe the credit union's field of membership, which
defines those persons and entities eligible for membership.
Generally, federal credit unions are only able to grant loans and
provide services to persons within the field of membership who have
become members of the credit union.
III--Subscribers
Federal credit unions are generally organized by persons who
volunteer their time and resources and are responsible for
determining the interest, commitment, and economic advisability of
forming a federal credit union. The organization of a successful
federal credit union takes considerable planning and dedication.
Persons interested in organizing a federal credit union should
contact one of the credit union trade associations or the NCUA
regional office serving the state in which the credit union will be
organized. Lists of NCUA offices and credit union trade associations
are shown in the appendices. NCUA will provide information to groups
interested in pursuing a federal charter and will assist them in
contacting an organizer.
While anyone may organize a credit union, a person with training
and experience in chartering new federal credit unions is generally
the most effective organizer. However, extensive involvement by the
group desiring credit union service is essential.
The functions of the organizer are to provide direction,
guidance, and advice on the chartering process. The organizer also
provides the group with information about a credit union's functions
and purpose as well as technical assistance in preparing and
submitting the charter application. Close communication and
cooperation between the organizer and the proposed members are
critical to the chartering process.
The Federal Credit Union Act requires that seven or more natural
persons--the ``subscribers''--present to NCUA for approval a sworn
organization certificate stating at a minimum:
The name of the proposed federal credit union;
The location of the proposed federal credit union and
the territory in which it will operate;
The names and addresses of the subscribers to the
certificate and the number of shares subscribed by each;
The initial par value of the shares;
The detailed proposed field of membership; and
The fact that the certificate is made to enable such
persons to avail themselves of the advantages of the Federal Credit
Union Act.
False statements on any of the required documentation filed in
obtaining a federal credit union charter may be grounds for federal
criminal prosecution.
IV--Economic Advisability
IV.A--General
Before chartering a federal credit union, NCUA must be satisfied
that the institution will be viable and that it will provide needed
services to its members. Economic advisability, which is a
determination that a potential charter will have a reasonable
opportunity to succeed, is essential in order to qualify for a
credit union charter.
NCUA will conduct an independent on-site investigation of each
charter application to ensure that the proposed credit union can be
successful. In general, the success of any credit union depends on:
(a) The character and fitness of management; (b) the depth of the
members' support; and (c) present and projected market conditions.
IV.B--Proposed Management's Character and Fitness
The Federal Credit Union Act requires NCUA to ensure that the
subscribers are of good ``general character and fitness.''
Prospective officials and employees will be the subject of credit
and background investigations. The investigation report must
demonstrate each applicant's ability to effectively handle financial
matters. Employees and officials should also be competent,
experienced, honest and of good character. Factors that may lead to
disapproval of a prospective official or employee include criminal
convictions, indictments, and acts of fraud and dishonesty. Further,
factors such as serious or unresolved past due credit obligations
and bankruptcies disclosed during credit checks may disqualify an
individual.
NCUA also needs reasonable assurance that the management team
will have the requisite skills--particularly in leadership and
accounting--and the commitment to dedicate the time and effort
needed to make the proposed federal credit union a success.
Section 701.14 of NCUA's Rules and Regulations sets forth the
procedures for NCUA approval of officials of newly chartered credit
unions. If the application of a prospective official or employee to
serve is not acceptable to the Office of Consumer Protection
Director, the group can propose an alternate to act in that
individual's place. If the charter applicant feels it is essential
that the disqualified individual be retained, the individual may
appeal the Office of Consumer Protection Director's decision to the
NCUA Board. If an appeal is pursued, action on the application may
be delayed. If the appeal is denied by the NCUA Board, an acceptable
new applicant must be provided before the charter can be approved.
IV.C--Member Support
Economic advisability is a major factor in determining whether
the credit union will be chartered. An important consideration is
the degree of support from the field of membership. The charter
applicant must be able to demonstrate that membership support is
sufficient to ensure viability.
NCUA has not set a minimum field of membership size for
chartering a federal credit union. Consequently, groups of any size
may apply for a credit union charter and be approved if they
demonstrate economic advisability. However, it is important to note
that often the size of the group is indicative of the potential for
success. For that reason, a charter application with fewer than
3,000 primary potential members (e.g., employees of a corporation or
members of an association) may not be economically advisable.
Therefore, a charter applicant with a proposed field of membership
of fewer than 3,000 primary potential members may have to provide
more support than an applicant with a larger field of membership.
For example, a small occupational or associational group may be
required to demonstrate a commitment for long-term support from the
sponsor.
IV.D--Present and Future Market Conditions--Business Plan
The ability to provide effective service to members, compete in
the marketplace, and to adapt to changing market conditions are key
to the survival of any enterprise. Before NCUA will charter a credit
union, a business plan based on realistic and supportable
projections and assumptions must be submitted.
The business plan should contain, at a minimum, the following
elements:
Mission statement;
Analysis of market conditions, including if applicable,
geographic, demographic, employment, income, housing, and other
economic data;
Evidence of member support;
Goals for shares, loans, and for number of members;
Financial services needed/desired;
Financial services to be provided to members of all
segments within the field of membership;
How/when services are to be implemented;
Organizational/management plan addressing qualification
and planned training of officials/employees;
Continuity plan for directors, committee members and
management staff;
Operating facilities, to include office space/equipment
and supplies, safeguarding of assets, insurance coverage, etc.;
Type of record-keeping and data processing system;
Detailed semiannual pro forma financial statements
(balance sheet, income and expense projections) for 1st and 2nd
year, including assumptions--e.g., loan and dividend rates;
Plans for operating independently;
Written policies (shares, lending, investments, funds
management, capital accumulation, dividends, collections, etc.);
Source of funds to pay expenses during initial months
of operation, including any subsidies, assistance, etc., and terms
or conditions of such resources; and
Evidence of sponsor commitment (or other source of
support) if subsidies are critical to success of the federal credit
union. Evidence may be in the form of letters, contracts, financial
statements from the sponsor, and any other such document on which
the proposed federal credit union can substantiate its projections.
While the business plan may be prepared with outside assistance,
the subscribers and
[[Page 76758]]
proposed officials must understand and support the submitted
business plan.
V--Steps in Organizing a Federal Credit Union
V.A--Getting Started
Following the guidance contained throughout this policy, the
organizers should submit wording for the proposed field of
membership (the persons, organizations and other legal entities the
credit union will serve) to NCUA early in the application process
for written preliminary approval. The proposed field of membership
must meet all common bond or community requirements.
Once the field of membership has been given preliminary
approval, and the organizer is satisfied the application has merit,
the organizer should conduct an organizational meeting to elect
seven to ten persons to serve as subscribers. The subscribers should
locate willing individuals capable of serving on the board of
directors, credit committee, supervisory committee, and as chief
operating officer/manager of the proposed credit union.
Subsequent organizational meetings may be held to discuss the
progress of the charter investigation, to announce the proposed
slate of officials, and to respond to any questions posed at these
meetings.
If NCUA approves the charter application, the subscribers, as
their final duty, will elect the board of directors of the proposed
federal credit union. The new board of directors will then appoint
the supervisory committee.
V.B--Charter Application Documentation
V.B.1--General
As discussed previously in this chapter, the organizer of a
federal credit union charter must, at a minimum, provide evidence
that:
The group(s) possess an appropriate common bond or the
geographical area to be served is a well-defined local community,
neighborhood, or rural district;
The subscribers, prospective officials, and employees
are of good character and fitness; and
The establishment of the credit union is economically
advisable.
As part of the application process, the organizer must submit
the following forms, which are available in appendix 4 of this
manual:
Federal Credit Union Investigation Report, NCUA 4001;
Organization Certificate, NCUA 4008;
Report of Official and Agreement To Serve, NCUA 4012;
Application and Agreements for Insurance of Accounts,
NCUA 9500; and
Certification of Resolutions, NCUA 9501.
Each of these forms is described in more detail in the following
sections.
V.B.2--Federal Credit Union Investigation Report, NCUA 4001
The application for a new federal credit union will be submitted
on NCUA 4001. State-chartered credit unions applying for conversion
to a federal charter will use NCUA 4000. (See Chapter 4 for a full
discussion.) The organizer is required to certify the information
and recommend approval or disapproval, based on the investigation of
the request.
V.B.3--Organization Certificate, NCUA 4008
This document, which must be completed by the subscribers,
includes the seven criteria established by the Federal Credit Union
Act. NCUA staff assigned to the case will assist in the proper
completion of this document.
V.B.4--Report of Official and Agreement To Serve, NCUA 4012
This form documents general background information of each
official and employee of the proposed federal credit union. Each
official and employee must complete and sign this form. The
organizer must review each of the NCUA 4012s for elements that would
prevent the prospective official or employee from serving. Further,
such factors as serious, unresolved past due credit obligations and
bankruptcies disclosed during credit checks may disqualify an
individual.
V.B.5--Application and Agreements for Insurance of Accounts, NCUA 9500
This document contains the agreements with which federal credit
unions must comply in order to obtain National Credit Union Share
Insurance Fund (NCUSIF) coverage of member accounts. The document
must be completed and signed by both the chief executive officer and
chief financial officer. A federal credit union must qualify for
federal share insurance.
V.B.6--Certification of Resolutions, NCUA 9501
This document certifies that the board of directors of the
proposed federal credit union has resolved to apply for NCUSIF
insurance of member accounts and has authorized the chief executive
officer and recording officer to execute the Application and
Agreements for Insurance of Accounts. Both the chief executive
officer and recording officer of the proposed federal credit union
must sign this form.
VI--Name Selection
It is the responsibility of the federal credit union organizers
or officials of an existing credit union to ensure that the proposed
federal credit union name or federal credit union name change does
not constitute an infringement on the name of any corporation in its
trade area. This responsibility also includes researching any
service marks or trademarks used by any other corporation (including
credit unions) in its trade area. NCUA will ensure, to the extent
possible, that the credit union's name:
Is not already being officially used by another federal
credit union;
Will not be confused with NCUA or another federal or
state agency, or with another credit union; and
Does not include misleading or inappropriate language.
The last three words in the name of every credit union chartered
by NCUA must be ``Federal Credit Union.''
The word ``community,'' while not required, can only be included
in the name of federal credit unions that have been granted a
community charter.
VII--NCUA Review
VII.A--General
Once NCUA receives a complete charter application package, an
acknowledgment of receipt will be sent to the organizer. At some
point during the review process, a staff member will be assigned to
perform an on-site contact with the proposed officials and others
having an interest in the proposed federal credit union.
NCUA staff will review the application package and verify its
accuracy and reasonableness. A staff member will inquire into the
financial management experience and the suitability and commitment
of the proposed officials and employees, and will make an assessment
of economic advisability. The staff member will also provide
guidance to the subscribers in the proper completion of the
Organization Certificate, NCUA 4008.
Credit and background investigations may be conducted
concurrently by NCUA with other work being performed by the
organizer and subscribers to reduce the likelihood of delays in the
chartering process.
The staff member will analyze the prospective credit union's
business plan for realistic projections, attainable goals, adequate
service to all segments of the field of membership, sufficient
start-up capital, and time commitment by the proposed officials and
employees. Any concerns will be reviewed with the organizer and
discussed with the prospective credit union's officials. Additional
on-site contacts by NCUA staff may be necessary. The organizer and
subscribers will be expected to take the steps necessary to resolve
any issues or concerns. Such resolution efforts may delay processing
the application.
NCUA staff will then make a recommendation to the Office of
Consumer Protection Director regarding the charter application. The
recommendation may include specific provisions to be included in a
Letter of Understanding and Agreement. In most cases, NCUA will
require the prospective officials to adhere to certain operational
guidelines. Generally, the agreement is for a limited term of two to
four years. A sample Letter of Understanding and Agreement is found
in appendix 2 of this manual.
VII.B--Office of Consumer Protection Director Approval
Once approved, the board of directors of the newly formed
federal credit union will receive a signed charter and standard
bylaws from the Office of Consumer Protection Director.
Additionally, the officials will be advised of the name of the
examiner assigned responsibility for supervising and examining the
credit union.
VII.C--Office of Consumer Protection Director Disapproval
When the Office of Consumer Protection Director disapproves any
charter application, in whole or in part, the organizer will be
informed in writing of the specific reasons for the disapproval.
Where applicable, the Office of Consumer Protection Director will
provide information concerning options or suggestions that the
applicant could consider
[[Page 76759]]
for gaining approval or otherwise acquiring credit union service.
The letter of denial will include the procedures for appealing the
decision.
VII.D--Appeal of Office of Consumer Protection Director Decision
If the Office of Consumer Protection Director denies a charter
application, in whole or in part, that decision may be appealed to
the NCUA Board. An appeal must be sent to the NCUA Board Secretary
within 60 days of the date of denial and must address the specific
reasons for denial. The appeal must be clearly identified as such
and address the specific reason(s) the prospective group disagrees
with the denial. A copy of the appeal must be sent to the Office of
Consumer Protection Director. NCUA central office staff will make an
independent review of the facts and present the appeal with a
recommendation to the NCUA Board.
Before appealing, the prospective group may, within 30 days of
the denial, provide supplemental information to the Office of
Consumer Protection Director for reconsideration. A reconsideration
will contain new and material evidence addressing the reasons for
the initial denial. The Office of Consumer Protection Director will
have 30 days from the date of the receipt of the request for
reconsideration to make a final decision. If the request is again
denied, the applicant may proceed with the appeal process within 60
days of the date of the last denial. A second request for
reconsideration will be treated as an appeal to the NCUA Board.
VII.E--Commencement of Operations
Assistance in commencing operations is generally available
through the various credit union trade organizations listed in
appendix 5 of this manual.
All new federal credit unions are also encouraged to establish a
mentor relationship with a knowledgeable, experienced credit union
individual or an existing, well-operated credit union. The mentor
should provide guidance and assistance to the new credit union
through attendance at meetings and general oversight. Upon request,
NCUA will provide assistance in finding a qualified mentor.
VIII--Future Supervision
Each federal credit union will be examined regularly by NCUA to
determine that it remains in compliance with applicable laws and
regulations and to determine that it does not pose undue risk to the
NCUSIF. The examiner will contact the credit union officials shortly
after approval of the charter in order to arrange for the initial
examination (usually within the first six months of operation).
The examiner will be responsible for monitoring the progress of
the credit union and providing the necessary advice and guidance to
ensure it is in compliance with applicable laws and regulations. The
examiner will also monitor compliance with the terms of any required
Letter of Understanding and Agreement. Typically, the examiner will
require the credit union to submit copies of monthly board minutes
and financial statements.
The Federal Credit Union Act requires all newly chartered credit
unions, up to two years after the charter anniversary date, to
obtain NCUA approval prior to appointment of any new board member,
credit or supervisory committee member, or senior executive officer.
Section 701.14 of the NCUA Rules and Regulations sets forth the
notice and application requirements. If NCUA issues a Notice of
Disapproval, the newly chartered credit union is prohibited from
making the change.
NCUA may disapprove an individual serving as a director,
committee member or senior executive officer if it finds that the
competence, experience, character, or integrity of the individual
indicates it would not be in the best interests of the members of
the credit union or of the public to permit the individual to be
employed by or associated with the credit union. If a Notice of
Disapproval is issued, the credit union may appeal the decision to
the NCUA Board.
IX--Corporate Federal Credit Unions
A corporate federal credit union is one that is operated
primarily for the purpose of serving other credit unions. Corporate
federal credit unions operate under and are administered by the NCUA
Office of National Examinations and Supervision.
X--Groups Seeking Credit Union Service
NCUA will attempt to assist any group in chartering a credit
union or joining an existing credit union. If the group is not
eligible for federal credit union service, NCUA will refer the group
to the appropriate state supervisory authority where different
requirements may apply.
XI--Field of Membership Designations
NCUA will designate a credit union based on the following
criteria:
Single Occupational: If a credit union serves a single
occupational sponsor, such as ABC Corporation, it will be designated
as an occupational credit union. A single occupational common bond
credit union may also serve a trade, industry, or profession (TIP),
such as all teachers.
Single Associational: If a credit union serves a single
associational sponsor, such as the Knights of Columbus, it will be
designated as an associational credit union.
Multiple Common Bond: If a credit union serves more than one
group, each of which has a common bond of occupation and/or
association, it will be designated as a multiple common bond credit
union.
Community: All community credit unions will be designated as
such, followed by a description of their geographic boundaries,
including but not limited to city or county boundaries, roadways,
rivers, transportation lines.
Credit unions desiring to confirm or submit an application to
change their designations should contact the Office of Consumer
Protection.
XII--Foreign Branching
Federal credit unions are permitted to serve foreign nationals
within their fields of membership wherever they reside provided they
have the ability, resources, and management expertise to serve such
persons. Before a credit union opens a branch outside the United
States, it must submit an application to do so and have prior
written approval of the regional director. A federal credit union
may establish a service facility on a United States military
installation or United States embassy without prior NCUA approval.
Chapter 2--Field of Membership Requirements for Federal Credit Unions
I--Introduction
I.A.1--General
As set forth in Chapter 1, the Federal Credit Union Act provides
for three types of federal credit union charters--single common bond
(occupational or associational), multiple common bond (multiple
groups), and community. Section 109 (12 U.S.C. 1759) of the Federal
Credit Union Act sets forth the membership criteria for each of
these three types of credit unions.
The field of membership, which is specified in Section 5 of the
charter, defines those persons and entities eligible for membership.
A single common bond federal credit union consists of one group
having a common bond of occupation or association. A multiple common
bond federal credit union consists of more than one group, each of
which has a common bond of occupation or association. A community
federal credit union consists of persons or organizations within a
well-defined local community, neighborhood, or rural district.
Once chartered, a federal credit union can amend its field of
membership; however, the same common bond or community requirements
for chartering the credit union must be satisfied. Since there are
differences in the three types of charters, special rules, which are
fully discussed in the following sections of this chapter, may apply
to each.
I.A.2--Special Low-Income Rules
Generally, federal credit unions can only grant loans and
provide services to persons who have joined the credit union. The
Federal Credit Union Act states that one of the purposes of federal
credit unions is ``to serve the productive and provident credit
needs of individuals of modest means.'' Although field of membership
requirements are applicable, special rules set forth in Chapter 3 of
this manual may apply to low-income designated credit unions and
those credit unions assisting low-income groups or to a federal
credit union that adds an underserved community to its field of
membership.
II--Occupational Common Bond
II.A.1--General
A single occupational common bond federal credit union may
include in its field of membership all persons and entities who
share that common bond. NCUA permits a person's membership
eligibility in a single occupational common bond group to be
established in five ways:
Employment (or a long-term contractual relationship
equivalent to employment) in a single corporation or other legal
entity makes that person part of a single occupational common bond;
[[Page 76760]]
Employment in a corporation or other legal entity with
a controlling ownership interest (which shall not be less than 10
percent) in or by another legal entity makes that person part of a
single occupational common bond;
Employment in a corporation or other legal entity which
is related to another legal entity (such as a company under contract
and possessing a strong dependency relationship with another
company) makes that person part of a single occupational common
bond;
Employment or attendance at a school makes that person
part of a single occupational common bond (see Chapter 2, Section
III.A.1 of this manual); or
Employment in the same Trade, Industry, or Profession
(TIP) (see Chapter 2, Section II.A.2 of this manual).
A geographic limitation is not a requirement for a single
occupational common bond. However, for purposes of describing the
field of membership, the geographic areas being served may be
included in the charter. For example:
Employees, officials, and persons who work regularly
under contract in Miami, Florida for ABC Corporation and
subsidiaries;
Employees of ABC Corporation who are paid from * * *;
Employees of ABC Corporation who are supervised from *
* *;
Employees of ABC Corporation who are headquartered in *
* *; and/or
Employees of ABC Corporation who work in the United
States.
The corporation or other legal entity (i.e., the employer) may
also be included in the common bond--e.g., ``ABC Corporation.'' The
corporation or legal entity will be defined in the last clause in
Section 5 of the credit union's charter.
A charter applicant must provide documentation to establish that
the single occupational common bond requirement has been met.
Some examples of valid single occupational common bonds are:
Employees of the Hunt Manufacturing Company who work in
West Chester, Pennsylvania. (common bond--same employer with
geographic definition);
Employees of the Buffalo Manufacturing Company who work
in the United States. (common bond--same employer with geographic
definition);
Employees, elected and appointed officials of municipal
government in Parma, Ohio. (common bond--same employer with
geographic definition);
Employees of Johnson Soap Company and its majority
owned subsidiary, Johnson Toothpaste Company, who work in, are paid
from, are supervised from, or are headquartered in Augusta and
Portland, Maine. (common bond--parent and subsidiary company with
geographic definition);
Employees of MMLLJS contractor who work regularly at
the U.S. Naval Shipyard in Bremerton, Washington. (common bond--
employees of contractors with geographic definition);
Employees, doctors, medical staff, technicians, medical
and nursing students who work in or are paid from the Newport Beach
Medical Center, Newport Beach, California. (single corporation with
geographic definition);
Employees of JLS, Incorporated and MJM, Incorporated
working for the LKM Joint Venture Company in Catalina Island,
California. (common bond--same employer--ongoing dependent
relationship);
Employees of and students attending Georgetown
University. (common bond--same occupation);
Employees of all the schools supervised by the Timbrook
Board of Education in Timbrook, Georgia. (common bond--same
employer); or
All licensed nurses in Fairfax County, Virginia.
(occupational common bond TIP).
In contrast, some examples of insufficiently defined single
occupational common bonds are:
Employees of manufacturing firms in Seattle,
Washington. (no defined occupational sponsor; overly broad TIP);
Persons employed or working in Chicago, Illinois. (no
occupational common bond).
II.A.2--Trade, Industry, or Profession
A common bond based on employment in a trade, industry, or
profession can include employment at any number of corporations or
other legal entities that--while not under common ownership--have a
common bond by virtue of producing similar products, providing
similar services, or participating in the same type of business.
While proposed or existing single common bond credit unions have
some latitude in defining a trade, industry, or profession
occupational common bond, it cannot be defined so broadly as to
include groups in fields which are not closely related. For example,
the manufacturing industry, energy industry, communications
industry, retail industry, or entertainment industry would not
qualify as a TIP because each industry lacks the necessary
commonality. However, textile workers, realtors, nurses, teachers,
police officers, or U.S. military personnel are closely related and
each would qualify as a TIP.
The common bond relationship must be one that demonstrates a
narrow commonality of interests within a specific trade, industry,
or profession. If a credit union wants to serve a physician TIP, it
can serve all physicians, but that does not mean it can also serve
all clerical staff in the physicians' offices. However, if the TIP
is based on the health care industry, then clerical staff would be
able to be served by the credit union because they work in the same
industry and have the same commonality of interests.
If a credit union wants to include the airline services
industry, it can serve airline and airport personnel but not
passengers. Clients or customers of the TIP are not eligible for
credit union membership (e.g., patients in hospitals). Any company
that is involved in more than one industry cannot be included in an
industry TIP (e.g., a company that makes tobacco products, food
products, and electronics). However, employees of these companies
may be eligible for membership in a variety of trade/profession
occupational common bond TIPs.
Although a TIP must be narrowly defined, and cannot include
third-party vendors and other suppliers, it may include, on a case
by case basis with NCUA approval, employees of types of entities
that have a strong dependency relationship and work directly with
other types of entities within the industry. As one example, an FCU
may serve employees of companies within the Airline Transportation
Industry that have a strong dependency relationship with airlines or
airports, without the limitation that these employees work at an
airport. This is provided they work directly with the following: Air
transportation of freight, air courier services; air passenger
services; airport baggage handling; airport security; commercial
airport janitorial services; maintenance, servicing, and repair
services; and on board airline food services. The employees of those
entities have a narrow commonality of interests, share the single
occupational common bond, and can be included within the Air
Transportation Industry field of membership.
In general, except for credit unions serving a national field of
membership or operating in multiple states, a geographic limitation
is required for a TIP credit union. The geographic limitation will
be part of the credit union's charter and generally correspond to
its current or planned operational area. More than one federal
credit union may serve the same trade, industry, or profession, even
if both credit unions are in the same geographic location.
This type of occupational common bond is only available to
single common bond credit unions. A TIP cannot be added to a
multiple common bond or community field of membership.
To obtain a TIP designation, the proposed or existing credit
union must submit a request to the Office of Consumer Protection
Director. New charter applicants must follow the documentation
requirements in Chapter 1 of this manual. New charter applicants and
existing credit unions must submit a business plan on how the credit
union will serve the group with the request to serve the TIP. The
business plan also must address how the credit union will verify the
TIP. Examples of such verification include state licenses,
professional licenses, organizational memberships, pay statements,
union membership, or employer certification. The Office of Consumer
Protection Director must approve this type of field of membership
before a credit union can serve a TIP. Credit unions converting to a
TIP can retain members of record but cannot add new members from its
previous group or groups, unless it is part of the TIP.
Section II.B of this manual, on Occupational Common Bond
Amendments, does not apply to a TIP common bond. Removing or
changing a geographical limitation will be processed as a
housekeeping amendment. If safety and soundness concerns are
present, the Office of Consumer Protection Director may require
additional information before the request can be processed.
Section II.H, on Other Persons Eligible for Credit Union
Membership, applies to TIP based credit unions except for the
corporate
[[Page 76761]]
account provision which only applies to industry based TIPs. Credit
unions with industry based TIPs may include corporations as members
because they have the same commonality of interests as all employees
in the industry. For example, an airline service TIP (industry) can
serve an airline carrier (corporate account); however, a nurses TIP
(profession) could not serve a hospital (corporate account) because
not everyone working in the hospital shares the same profession.
If a TIP designated credit union wishes to convert to a
different TIP or employer-based occupational common bond, or
different charter type, it only retains members of record after the
conversion. The Office of Consumer Protection Director, for safety
and soundness reasons, may approve a TIP designated credit union to
convert to its original field of membership.
II.B--Occupational Common Bond Amendments
II.B.1--General
Section 5 of every single occupational federal credit union's
charter defines the field of membership the credit union can legally
serve. Only those persons or legal entities specified in the field
of membership can be served. There are a number of instances in
which Section 5 must be amended by NCUA.
First, a group sharing the credit union's common bond is added
to the field of membership. This may occur through various ways
including agreement between the group and the credit union directly,
or through a merger, corporate acquisition, purchase and assumption
(P&A), or spin-off.
Second, if the entire field of membership is acquired by another
corporation, the credit union can serve the employees of the new
corporation and any subsidiaries after receiving NCUA approval.
Third, a federal credit union qualifies to change its common
bond from:
A single occupational common bond to a single
associational common bond;
A single occupational common bond to a community
charter; or
A single occupational common bond to a multiple common
bond.
Fourth, a federal credit union removes a portion of the group
from its field of membership through agreement with the group, a
spin-off, or because a portion of the group is no longer in
existence.
An existing single occupational common bond federal credit union
that submits a request to amend its charter must provide
documentation to establish that the occupational common bond
requirement has been met. The Office of Consumer Protection Director
must approve all amendments to an occupational common bond credit
union's field of membership.
II.B.2--Corporate Restructuring
If the single common bond group that comprises a federal credit
union's field of membership undergoes a substantial restructuring,
the result is often that portions of the group are sold or spun off.
This requires a change to the credit union's field of membership.
NCUA will not permit a single common bond credit union to maintain
in its field of membership a sold or spun-off group to which it has
been providing service unless the group otherwise qualifies for
membership in the credit union or the credit union converts to a
multiple common bond credit union.
If the group comprising the single common bond of the credit
union merges with, or is acquired by, another group, the credit
union can serve the new group resulting from the merger or
acquisition after receiving a housekeeping amendment.
II.B.3--Economic Advisability
Prior to granting a common bond expansion, NCUA will examine the
amendment's likely effect on the credit union's operations and
financial condition. In most cases, the information needed for
analyzing the effect of adding a particular group will be available
to NCUA through the examination and financial and statistical
reports; however, in particular cases, the Office of Consumer
Protection Director may require additional information prior to
making a decision.
II.B.4--Documentation Requirements
A federal credit union requesting a common bond expansion must
submit an Application for Field of Membership Amendment (NCUA 4015-
EZ) to the Office of Consumer Protection Director. An authorized
credit union representative must sign the request.
II.C--NCUA's Procedures for Amending the Field of Membership
II.C.1--General
All requests for approval to amend a federal credit union's
charter must be submitted to the Office of Consumer Protection
Director.
II.C.2--Office of Consumer Protection Director Decision
NCUA staff will review all amendment requests in order to ensure
compliance with NCUA policy.
Before acting on a proposed amendment, the Office of Consumer
Protection Director may require an on-site review. In addition, the
Office of Consumer Protection Director may, after taking into
account the significance of the proposed field of membership
amendment, require the applicant to submit a business plan
addressing specific issues.
The financial and operational condition of the requesting credit
union will be considered in every instance. NCUA will carefully
consider the economic advisability of expanding the field of
membership of a credit union with financial or operational problems.
In most cases, field of membership amendments will only be
approved for credit unions that are operating satisfactorily.
Generally, if a federal credit union is having difficulty providing
service to its current membership, or is experiencing financial or
other operational problems, it may have more difficulty serving an
expanded field of membership.
Occasionally, however, an expanded field of membership may
provide the basis for reversing current financial problems. In such
cases, an amendment to expand the field of membership may be granted
notwithstanding the credit union's financial or operational
problems. The applicant credit union must clearly establish that the
expanded field of membership is in the best interest of the members
and will not increase the risk to the NCUSIF.
II.C.3--Office of Consumer Protection Director Approval
If the Office of Consumer Protection Director approves the
requested amendment, the credit union will be issued an amendment to
Section 5 of its charter.
II.C.4--Office of Consumer Protection Director Disapproval
When the Office of Consumer Protection Director disapproves any
application, in whole or in part, to amend the field of membership
under this chapter, the applicant will be informed in writing of
the:
Specific reasons for the action;
Options to consider, if appropriate, for gaining
approval; and
Appeal procedure.
II.C.5--Appeal of Office of Consumer Protection Director Decision
If a field of membership expansion request, merger, or spin-off
is denied by staff, the federal credit union may appeal the decision
to the NCUA Board. An appeal must be sent to the NCUA Board
Secretary within 60 days of the date of denial. The appeal must be
clearly identified as such and must address the specific reason(s)
the federal credit union disagrees with the denial. A copy of the
appeal must be sent to the Office of Consumer Protection, or as
applicable, the appropriate regional office. NCUA central office
staff will make an independent review of the facts and present the
appeal to the Board with a recommendation.
Before appealing, the credit union may, within 30 days of the
denial, provide supplemental information to the office rendering the
initial decision for reconsideration. A reconsideration will contain
new and material evidence addressing the reasons for the initial
denial. The office rendering the initial decision will have 30 days
from the date of the receipt of the request for reconsideration to
make a final decision. If the request is again denied, the applicant
may proceed with the appeal process within 60 days of the date of
the last denial. A second request for reconsideration will be
treated as an appeal to the NCUA Board.
II.D--Mergers, Purchase and Assumptions, and Spin-Offs
In general, other than the addition of common bond groups, there
are three additional ways a federal credit union with a single
occupational common bond can expand its field of membership:
By taking in the field of membership of another credit
union through a common bond or emergency merger;
By taking in the field of membership of another credit
union through a common bond or emergency purchase and assumption
(P&A); or
[[Page 76762]]
By taking a portion of another credit union's field of
membership through a common bond spin-off.
II.D.1--Mergers
Generally, the requirements applicable to field of membership
expansions found in this chapter apply to mergers where the
continuing credit union has a federal charter. That is, the two
credit unions must share a common bond.
Where the merging credit union is state-chartered, the common
bond rules applicable to a federal credit union apply.
Mergers must be approved by the NCUA regional director where the
continuing credit union is headquartered, with the concurrence of
the regional director of the merging credit union, and, as
applicable, the state regulators.
If a single occupational credit union wants to merge into a
multiple common bond or community credit union, Section IV.D or
Section V.D of this chapter, respectively, should be reviewed.
II.D.2--Emergency Mergers
An emergency merger may be approved by NCUA without regard to
common bond or other legal constraints. An emergency merger involves
NCUA's direct intervention and approval. The credit union to be
merged must either be insolvent or in danger of insolvency, as
defined in the Glossary, and NCUA must determine that:
An emergency requiring expeditious action exists;
Other alternatives are not reasonably available; and
The public interest would best be served by approving
the merger.
If not corrected, conditions that could lead to insolvency
include, but are not limited to:
Abandonment by management;
Loss of sponsor;
Serious and persistent recordkeeping problems; or
Serious and persistent operational concerns.
In an emergency merger situation, NCUA will take an active role
in finding a suitable merger partner (continuing credit union). NCUA
is primarily concerned that the continuing credit union has the
financial strength and management expertise to absorb the troubled
credit union without adversely affecting its own financial condition
and stability.
As a stipulated condition to an emergency merger, the field of
membership of the merging credit union may be transferred intact to
the continuing federal credit union without regard to any common
bond restrictions. Under this authority, therefore, a single
occupational common bond federal credit union may take into its
field of membership any dissimilar charter type.
The common bond characteristic of the continuing credit union in
an emergency merger does not change. That is, even though the
merging credit union is a multiple common bond or community, the
continuing credit union will remain a single common bond credit
union. Similarly, if the merging credit union is also an unlike
single common bond, the continuing credit union will remain a single
common bond credit union. Future common bond expansions will be
based on the continuing credit union's original single common bond.
Emergency mergers involving federally insured credit unions in
different NCUA regions must be approved by the regional director
where the continuing credit union is headquartered, with the
concurrence of the regional director of the merging credit union
and, as applicable, the state regulators.
II.D.3--Purchase and Assumption (P&A)
Another alternative for acquiring the field of membership of a
failing credit union is through a consolidation known as a P&A. A
P&A has limited application because, in most cases, the failing
credit union must be placed into involuntary liquidation. In the few
instances where a P&A may be appropriate, the assuming federal
credit union, as with emergency mergers, may acquire the entire
field of membership if the emergency merger criteria are satisfied.
However, if the P&A does not meet the emergency merger criteria, it
must be processed under the common bond requirements.
In a P&A processed under the emergency criteria, specified
loans, shares, and certain other designated assets and liabilities,
without regard to common bond restrictions, may also be acquired
without changing the character of the continuing federal credit
union for purposes of future field of membership amendments.
If the purchased and/or assumed credit union's field of
membership does not share a common bond with the purchasing and/or
assuming credit union, then the continuing credit union's original
common bond will be controlling for future common bond expansions.
P&As involving federally insured credit unions in different NCUA
regions must be approved by the regional director where the
continuing credit union is headquartered, with the concurrence of
the regional director of the purchased and/or assumed credit union
and, as applicable, the state regulators.
II.D.4--Spin-Offs
A spin-off occurs when, by agreement of the parties, a portion
of the field of membership, assets, liabilities, shares, and capital
of a credit union are transferred to a new or existing credit union.
A spin-off is unique in that usually one credit union has a field of
membership expansion and the other loses a portion of its field of
membership.
All common bond requirements apply regardless of whether the
spun-off group becomes a new credit union or goes to an existing
federal charter.
The request for approval of a spin-off must be supported with a
plan that addresses, at a minimum:
Why the spin-off is being requested;
What part of the field of membership is to be spun off;
Whether the affected credit unions have a common bond
(applies only to single occupational credit unions);
Which assets, liabilities, shares, and capital are to
be transferred;
The financial impact the spin-off will have on the
affected credit unions;
The ability of the acquiring credit union to
effectively serve the new members;
The proposed spin-off date; and
Disclosure to the members of the requirements set forth
above.
The spin-off request must also include current financial
statements from the affected credit unions and the proposed voting
ballot.
For federal credit unions spinning off a group, membership
notice and voting requirements and procedures are the same as for
mergers (see part 708 of the NCUA Rules and Regulations), except
that only the members directly affected by the spin-off--those whose
shares are to be transferred--are permitted to vote. Members whose
shares are not being transferred will not be afforded the
opportunity to vote. All members of the group to be spun off
(whether they voted in favor, against, or not at all) will be
transferred if the spin-off is approved by the voting membership.
Voting requirements for federally insured state credit unions are
governed by state law.
Spin-offs involving federally insured credit unions in different
NCUA regions must be approved by all regional directors where the
credit unions are headquartered and the state regulators, as
applicable. Spin-offs in the same region also require approval by
the state regulator, as applicable. Spin-offs involving the creation
of a new federally insured credit union require the approval of the
Office of Consumer Protection Director. The Office of Consumer
Protection also provides advice regarding field of membership
compatibility when appropriate.
II.E--Overlaps
II.E.1--General
An overlap exists when a group of persons is eligible for
membership in two or more credit unions. NCUA will permit single
occupational federal credit unions to overlap any other charter
without performing an overlap analysis.
II.E.2--Organizational Restructuring
A federal credit union's field of membership will always be
governed by the common bond descriptions contained in Section 5 of
its charter. Where a sponsor organization expands its operations
internally, by acquisition or otherwise, the credit union may serve
these new entrants to its field of membership if they are part of
the common bond described in Section 5. NCUA will permit a complete
overlap of the credit unions' fields of membership.
If a sponsor organization sells off a group, new members can no
longer be served unless they otherwise qualify for membership in the
credit union or it converts to a multiple common bond charter.
Credit unions must submit documentation explaining the
restructuring and providing information regarding the new
organizational structure.
II.E.3--Exclusionary Clauses
An exclusionary clause is a limitation precluding the credit
union from serving the primary members of a portion of a group
otherwise included in its field of membership. NCUA no longer grants
exclusionary clauses. Those granted prior to
[[Page 76763]]
the adoption of this new Chartering and Field of Membership Manual
will remain in effect unless the credit unions agree to remove them
or one of the affected credit unions submits a housekeeping
amendment to have it removed.
II.F--Charter Conversion
A single occupational common bond federal credit union may apply
to convert to a community charter provided the field of membership
requirements of the community charter are met. Groups within the
existing charter which cannot qualify in the new charter cannot be
served except for members of record, or groups or communities
obtained in an emergency merger or P&A. A credit union must notify
all groups that will be removed from the field of membership as a
result of conversion. Members of record can continue to be served.
Also, in order to support a case for a conversion, the applicant
federal credit union may be required to develop a detailed business
plan as specified in Chapter 2, Section V.A.3 of this manual.
A single occupational common bond federal credit union may apply
to convert to a multiple common bond charter by adding a non-common
bond group that is within a reasonable proximity of a service
facility. Groups within the existing charter may be retained and
continue to be served. However, future amendments, including any
expansions of the original single common bond group, must be done in
accordance with multiple common bond policy.
II.G--Removal of Groups From the Field of Membership
A credit union may request removal of a portion of the common
bond group from its field of membership for various reasons. The
most common reasons for this type of amendment are:
The group is within the field of membership of two
credit unions and one wishes to discontinue service;
The federal credit union cannot continue to provide
adequate service to the group;
The group has ceased to exist;
The group does not respond to repeated requests to
contact the credit union or refuses to provide needed support; or
The group initiates action to be removed from the field
of membership.
When a federal credit union requests an amendment to remove a
group from its field of membership, the Office of Consumer
Protection Director will determine why the credit union desires to
remove the group. If the Office of Consumer Protection Director
concurs with the request, membership will continue for those who are
already members under the ``once a member, always a member''
provision of the Federal Credit Union Act.
II.H--Other Persons Eligible for Credit Union Membership
A number of persons, by virtue of their close relationship to a
common bond group, may be included, at the charter applicant's
option, in the field of membership. These include the following:
Spouses of persons who died while within the field of
membership of this credit union;
Employees of this credit union;
Persons retired as pensioners or annuitants from the
above employment;
Volunteers;
Members of the immediate family or household;
Honorably discharged veterans who served in any of the
Armed Services of the United States listed in this charter;
Organizations of such persons; and
Corporate or other legal entities in this charter.
Immediate family is defined as spouse, child, sibling, parent,
grandparent, or grandchild. This includes stepparents, stepchildren,
stepsiblings, and adoptive relationships.
Household is defined as persons living in the same residence
maintaining a single economic unit.
Membership eligibility is extended only to individuals who are
members of an ``immediate family or household'' of a credit union
member. It is not necessary for the primary member to join the
credit union in order for the immediate family or household member
of the primary member to join, provided the immediate family or
household clause is included in the field of membership. However, it
is necessary for the immediate family member or household member to
first join in order for that person's immediate family member or
household member to join the credit union. A credit union can adopt
a more restrictive definition of immediate family or household.
Volunteers, by virtue of their close relationship with a sponsor
group, may be included. Examples include volunteers working at a
hospital or school.
Under the Federal Credit Union Act, once a person becomes a
member of the credit union, such person may remain a member of the
credit union until the person chooses to withdraw or is expelled
from the membership of the credit union. This is commonly referred
to as ``once a member, always a member.'' The ``once a member,
always a member'' provision does not prevent a credit union from
restricting services to members who are no longer within the field
of membership.
III--Associational Common Bond
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
[[Page 76764]]
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. Specifically, this
means the federal credit union's and the group's respective business
transactions, accounts, and corporate records are not intermingled.
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 of this section.
III.A.1.b--Pre-Approved Groups
NCUA automatically approves the below groups as satisfying the
associational common bond provisions. 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;
(7) Parent teacher associations (PTAs) organized at the local
level to serve a single school district;
(8) Chamber of commerce groups (members only and not employees
of members);
(9) Athletic booster clubs whose members have voting rights;
(10) Fraternal organizations or civic groups with a mission of
community service whose members have voting rights;
(11) Organizations having a mission based on preserving or
furthering the culture of a particular national or ethnic origin;
and
(12) Organizations promoting social interaction or educational
initiatives among persons sharing a common occupational profession.
III.A.1.c--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.
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 membership, may qualify as a valid associational
common bond.
III.A.2--Subsequent Changes to Association's Bylaws
If the association's membership or geographical definitions in
its charter and bylaws are changed subsequent to the effective date
stated in the field of membership, the credit union must submit the
revised charter or bylaws for NCUA's consideration and approval
prior to serving members of the association added as a result of the
change.
III.A.3--Sample Single Associational Common Bonds
Some examples of associational common bonds are:
Regular members of Locals 10 and 13, IBEW, in Florida,
who qualify for membership in accordance with their charter and
bylaws in effect on May 20, 2001;
Members of the Hoosier Farm Bureau in Grant, Logan, or
Lee Counties of Indiana, who qualify for membership in accordance
with its charter and bylaws in effect on March 7, 1997;
Members of the Shalom Congregation in Chevy Chase,
Maryland;
Regular members of the Corporate Executives
Association, located in Westchester, New York, who qualify for
membership in accordance with its charter and bylaws in effect on
December 1, 1997;
Members of the University of Wisconsin Alumni
Association, located in Green Bay, Wisconsin;
Members of the Marine Corps Reserve Officers
Association; or
Members of St. John's Methodist Church and St. Luke's
Methodist Church, located in Toledo, Ohio.
Some examples of insufficiently defined single associational
common bonds are:
All Lutherans in the United States (too broadly
defined); or
Veterans of U.S. military service (group is too broadly
defined; no formal association of all members of the group).
Some examples of unacceptable single associational common bonds
are:
Alumni of Amos University (no formal association);
Customers of Fleetwood Insurance Company (policyholders
or primarily customer/client relationships do not meet associational
standards);
Employees of members of the Reston, Virginia, Chamber
of Commerce (not a sufficiently close tie to the associational
common bond); or
Members of St. John's Lutheran Church and St. Mary's
Catholic Church located in Anniston, Alabama (churches are not of
the same denomination).
III.B--Associational Common Bond Amendments
III.B.1--General
Section 5 of every associational federal credit union's charter
defines the field of membership the credit union can legally serve.
Only those persons who, or legal entities that, join the credit
union and are specified in the field of membership can be served.
There are three instances in which Section 5 must be amended by
NCUA.
First, a group that shares the credit union's common bond is
added to the field of membership. This may occur through various
ways including agreement between the group and the credit union
directly, or through a merger, purchase and assumption (P&A), or
spin-off.
Second, a federal credit union qualifies to change its common
bond from:
A single associational common bond to a single
occupational common bond;
A single associational common bond to a community
charter; or
A single associational common bond to a multiple common
bond.
Third, a federal credit union removes a portion of the group
from its field of membership through agreement with the group, a
spin-off, or a portion of the group that is no longer in existence.
An existing single associational federal credit union that
submits a request to amend its charter must provide documentation to
establish that the associational common bond requirement has been
met. The Office of Consumer Protection Director must approve all
amendments to an associational common bond credit union's field of
membership.
III.B.2--Organizational Restructuring
If the single common bond group that comprises a federal credit
union's field of membership undergoes a substantial restructuring,
the result is often that portions of the group are sold or spun off.
This is an event requiring a change to the credit union's field of
membership. NCUA may not permit a single associational credit union
to maintain in its field of membership a sold or spun-off group to
which it has been providing service unless the group otherwise
qualifies for membership in the credit union or the credit union
converts to a multiple common bond credit union.
If the group comprising the single common bond of the credit
union merges with, or is acquired by, another group, the credit
union can serve the new group resulting from the merger or
acquisition after receiving a housekeeping amendment.
III.B.3--Economic Advisability
Prior to granting a common bond expansion, NCUA will examine the
amendment's likely impact on the credit union's operations and
financial condition. In most cases, the information needed for
analyzing the effect of adding a particular group will be available
to NCUA through the examination and financial and statistical
reports; however, in particular cases, the Office of Consumer
Protection Director may
[[Page 76765]]
require additional information prior to making a decision.
III.B.4--Documentation Requirements
A federal credit union requesting a common bond expansion must
submit an Application for Field of Membership Amendment (NCUA 4015-
EZ) to the Office of Consumer Protection Director. An authorized
credit union representative must sign the request.
III.C--NCUA Procedures for Amending the Field of Membership
III.C.1--General
All requests for approval to amend a federal credit union's
charter must be submitted to the Office of Consumer Protection
Director.
III.C.2--Office of Consumer Protection Director Decision
NCUA staff will review all amendment requests in order to ensure
conformance to NCUA policy.
Before acting on a proposed amendment, the Office of Consumer
Protection Director may require an on-site review. In addition, the
Office of Consumer Protection Director may, after taking into
account the significance of the proposed field of membership
amendment, require the applicant to submit a business plan
addressing specific issues.
The financial and operational condition of the requesting credit
union will be considered in every instance. The economic
advisability of expanding the field of membership of a credit union
with financial or operational problems must be carefully considered.
In most cases, field of membership amendments will only be
approved for credit unions that are operating satisfactorily.
Generally, if a federal credit union is having difficulty providing
service to its current membership, or is experiencing financial or
other operational problems, it may have more difficulty serving an
expanded field of membership.
Occasionally, however, an expanded field of membership may
provide the basis for reversing current financial problems. In such
cases, an amendment to expand the field of membership may be granted
notwithstanding the credit union's financial or operational
problems. The applicant credit union must clearly establish that the
expanded field of membership is in the best interest of the members
and will not increase the risk to the NCUSIF.
III.C.3--Office of Consumer Protection Director Approval
If the Office of Consumer Protection Director approves the
requested amendment, the credit union will be issued an amendment to
Section 5 of its charter.
III.C.4--Office of Consumer Protection Director Disapproval
When the Office of Consumer Protection Director disapproves any
application, in whole or in part, to amend the field of membership
under this chapter, the applicant will be informed in writing of
the:
Specific reasons for the action;
Options to consider, if appropriate, for gaining
approval; and
Appeal procedures.
III.C.5--Appeal of Office of Consumer Protection Director Decision
If a field of membership expansion request, merger, or spin-off
is denied by staff, the federal credit union may appeal the decision
to the NCUA Board. An appeal must be sent to the NCUA Board
Secretary within 60 days of the date of denial and must be clearly
identified as such and address the reason(s) the federal credit
union disagrees with the denial. A copy of the appeal must be sent
to the Office of Consumer Protection, or as applicable, the
appropriate regional office. NCUA central office staff will make an
independent review of the facts and present the appeal to the NCUA
Board with a recommendation.
Before appealing, the credit union may, within 30 days of the
denial, provide supplemental information to the office rendering the
initial decision for reconsideration. A reconsideration will contain
new and material evidence addressing the reasons for the initial
denial. The office rendering the initial decision will have 30 days
from the date of the receipt of the request for reconsideration to
make a final decision. If the request is again denied, the applicant
may proceed with the appeal process within 60 days of the date of
the last denial. A second request for reconsideration will be
treated as an appeal to the NCUA Board.
III.D--Mergers, Purchase and Assumptions, and Spin-Offs
In general, other than the addition of common bond groups, there
are three additional ways a federal credit union with a single
associational common bond can expand its field of membership:
By taking in the field of membership of another credit
union through a common bond or emergency merger;
By taking in the field of membership of another credit
union through a common bond or emergency purchase and assumption
(P&A); or
By taking a portion of another credit union's field of
membership through a common bond spin-off.
III.D.1--Mergers
Generally, the requirements applicable to field of membership
expansions found in this section apply to mergers where the
continuing credit union is a federal charter. That is, the two
credit unions must share a common bond.
Where the merging credit union is state-chartered, the common
bond rules applicable to a federal credit union apply.
Mergers must be approved by the NCUA regional director where the
continuing credit union is headquartered, with the concurrence of
the regional director of the merging credit union, and, as
applicable, the state regulators.
If a single associational credit union wants to merge into a
multiple common bond or community credit union, Section IV.D or
Section V.D of this chapter, respectively, should be reviewed.
III.D.2--Emergency Mergers
An emergency merger may be approved by NCUA without regard to
common bond or other legal constraints. An emergency merger involves
NCUA's direct intervention and approval. The credit union to be
merged must either be insolvent or in danger of insolvency, as
defined in the Glossary, and NCUA must determine that:
An emergency requiring expeditious action exists;
Other alternatives are not reasonably available; and
The public interest would best be served by approving
the merger.
If not corrected, conditions that could lead to insolvency
include, but are not limited to:
Abandonment by management;
Loss of sponsor;
Serious and persistent record-keeping problems; or
Serious and persistent operational concerns.
In an emergency merger situation, NCUA will take an active role
in finding a suitable merger partner (continuing credit union). NCUA
is primarily concerned that the continuing credit union has the
financial strength and management expertise to absorb the troubled
credit union without adversely affecting its own financial condition
and stability.
As a stipulated condition to an emergency merger, the field of
membership of the merging credit union may be transferred intact to
the continuing federal credit union without regard to any common
bond restrictions. Under this authority, therefore, a single
associational common bond federal credit union may take into its
field of membership any dissimilar charter type.
The common bond characteristic of the continuing credit union in
an emergency merger does not change. That is, even though the
merging credit union is a multiple common bond or community, the
continuing credit union will remain a single common bond credit
union. Similarly, if the merging credit union is an unlike single
common bond, the continuing credit union will remain a single common
bond credit union. Future common bond expansions will be based on
the continuing credit union's single common bond.
Emergency mergers involving federally insured credit unions in
different NCUA regions must be approved by the regional director
where the continuing credit union is headquartered, with the
concurrence of the regional director of the merging credit union
and, as applicable, the state regulators.
III.D.3--Purchase and Assumption (P&A)
Another alternative for acquiring the field of membership of a
failing credit union is through a consolidation known as a P&A. A
P&A has limited application because, in most cases, the failing
credit union must be placed into involuntary liquidation. In the few
instances where a P&A may be appropriate, the assuming federal
credit union, as with emergency mergers, may acquire the entire
field of membership if the emergency merger
[[Page 76766]]
criteria are satisfied. However, if the P&A does not meet the
emergency merger criteria, it must be processed under the common
bond requirements.
In a P&A processed under the emergency criteria, specified
loans, shares, and certain other designated assets and liabilities,
without regard to common bond restrictions, may also be acquired
without changing the character of the continuing federal credit
union for purposes of future field of membership amendments.
If the purchased and/or assumed credit union's field of
membership does not share a common bond with the purchasing and/or
assuming credit union, then the continuing credit union's original
common bond will be controlling for future common bond expansions.
P&As involving federally insured credit unions in different NCUA
regions must be approved by the regional director where the
continuing credit union is headquartered, with the concurrence of
the regional director of the purchased and/or assumed credit union
and, as applicable, the state regulators.
III.D.4--Spin-Offs
A spin-off occurs when, by agreement of the parties, a portion
of the field of membership, assets, liabilities, shares, and capital
of a credit union are transferred to a new or existing credit union.
A spin-off is unique in that usually one credit union has a field of
membership expansion and the other loses a portion of its field of
membership.
All common bond requirements apply regardless of whether the
spun-off group becomes a new credit union or goes to an existing
federal charter.
The request for approval of a spin-off must be supported with a
plan that addresses, at a minimum:
Why the spin-off is being requested;
What part of the field of membership is to be spun off;
Whether the affected credit unions have the same common
bond (applies only to single associational credit unions);
Which assets, liabilities, shares, and capital are to
be transferred;
The financial impact the spin-off will have on the
affected credit unions;
The ability of the acquiring credit union to
effectively serve the new members;
The proposed spin-off date; and
Disclosure to the members of the requirements set forth
above.
The spin-off request must also include current financial
statements from the affected credit unions and the proposed voting
ballot.
For federal credit unions spinning off a group, membership
notice and voting requirements and procedures are the same as for
mergers (see part 708 of the NCUA Rules and Regulations), except
that only the members directly affected by the spin-off--those whose
shares are to be transferred--are permitted to vote. Members whose
shares are not being transferred will not be afforded the
opportunity to vote. All members of the group to be spun off
(whether they voted in favor, against, or not at all) will be
transferred if the spin-off is approved by the voting membership.
Voting requirements for federally insured state credit unions are
governed by state law.
Spin-offs involving federally insured credit unions in different
NCUA regions must be approved by all regional directors where the
credit unions are headquartered and the state regulators, as
applicable. Spin-offs in the same region also require approval by
the state regulator, as applicable. Spin-offs involving the creation
of a new federally insured credit union require the approval of the
Office of Consumer Protection Director. The Office of Consumer
Protection also provides advice regarding field of membership
compatibility when appropriate.
III.E--Overlaps
III.E.1--General
An overlap exists when a group of persons is eligible for
membership in two or more credit unions. NCUA will permit single
associational federal credit unions to overlap any other charters
without performing an overlap analysis.
III.E.2--Organizational Restructuring
A federal credit union's field of membership will always be
governed by the common bond descriptions contained in Section 5 of
its charter. Where a sponsor organization expands its operations
internally, by acquisition or otherwise, the credit union may serve
these new entrants to its field of membership if they are part of
the common bond described in Section 5. NCUA will permit a complete
overlap of the credit unions' fields of membership. If a sponsor
organization sells off a group, new members can no longer be served
unless they otherwise qualify for membership in the credit union or
it converts to a multiple common bond.
Credit unions must submit documentation explaining the
restructuring and providing information regarding the new
organizational structure.
III.E.3--Exclusionary Clauses
An exclusionary clause is a limitation precluding the credit
union from serving the primary members of a portion of a group
otherwise included in its field of membership. NCUA no longer grants
exclusionary clauses. Those granted prior to the adoption of this
new Chartering and Field of Membership Manual will remain in effect
unless the credit unions agree to remove them or one of the affected
credit unions submits a housekeeping amendment to have it removed.
III.F--Charter Conversions
A single associational common bond federal credit union may
apply to convert to a community charter provided the field of
membership requirements of the community charter are met. Groups
within the existing charter which cannot qualify in the new charter
cannot be served except for members of record, or groups or
communities obtained in an emergency merger or P&A. A credit union
must notify all groups that will be removed from the field of
membership as a result of conversion. Members of record can continue
to be served. Also, in order to support a case for a conversion, the
applicant federal credit union may be required to develop a detailed
business plan as specified in Chapter 2, Section V.A.3 of this
manual.
A single associational common bond federal credit union may
apply to convert to a multiple common bond charter by adding a non-
common bond group that is within a reasonable proximity of a service
facility. Groups within the existing charter may be retained and
continue to be served. However, future amendments, including any
expansions of the original single common bond group, must be done in
accordance with multiple common bond policy.
III.G--Removal of Groups From the Field of Membership
A credit union may request removal of a portion of the common
bond group from its field of membership for various reasons. The
most common reasons for this type of amendment are:
The group is within the field of membership of two
credit unions and one wishes to discontinue service;
The federal credit union cannot continue to provide
adequate service to the group;
The group has ceased to exist;
The group does not respond to repeated requests to
contact the credit union or refuses to provide needed support; or
The group initiates action to be removed from the field
of membership.
When a federal credit union requests an amendment to remove a
group from its field of membership, the Office of Consumer
Protection Director will determine why the credit union desires to
remove the group. If the Office of Consumer Protection Director
concurs with the request, membership will continue for those who are
already members under the ``once a member, always a member''
provision of the Federal Credit Union Act.
III.H--Other Persons Eligible for Credit Union Membership
A number of persons by virtue of their close relationship to a
common bond group may be included, at the charter applicant's
option, in the field of membership. These include the following:
Spouses of persons who died while within the field of
membership of this credit union;
Employees of this credit union;
Volunteers;
Members of the immediate family or household;
Honorably discharged veterans who served in any of the
Armed Services of the United States in this charter;
Organizations of such persons; and
Corporate or other legal entities in this charter.
Immediate family is defined as spouse, child, sibling, parent,
grandparent, or grandchild. This includes stepparents, stepchildren,
stepsiblings, and adoptive relationships.
Household is defined as persons living in the same residence
maintaining a single economic unit.
Membership eligibility is extended only to individuals who are
members of an ``immediate family or household'' of a credit
[[Page 76767]]
union member. It is not necessary for the primary member to join the
credit union in order for the immediate family or household member
of the primary member to join, provided the immediate family or
household clause is included in the field of membership. However, it
is necessary for the immediate family member or household member to
first join in order for that person's immediate family member or
household member to join the credit union. A credit union can adopt
a more restrictive definition of immediate family or household.
Volunteers, by virtue of their close relationship with a sponsor
group, may be included. One example is volunteers working at a
church.
Under the Federal Credit Union Act, once a person becomes a
member of the credit union, such person may remain a member of the
credit union until the person chooses to withdraw or is expelled
from the membership of the credit union. This is commonly referred
to as ``once a member, always a member.'' The ``once a member,
always a member'' provision does not prevent a credit union from
restricting services to members who are no longer within the field
of membership.
IV--Multiple Occupational/Associational Common Bonds
IV.A.1--General
A federal credit union may be chartered to serve a combination
of distinct, definable single occupational and/or associational
common bonds. This type of credit union is called a multiple common
bond credit union. Each group in the field of membership must have
its own occupational or associational common bond. For example, a
multiple common bond credit union may include two unrelated
employers, or two unrelated associations, or a combination of two or
more employers or associations. Additionally, these groups must be
within reasonable geographic proximity of the credit union. That is,
the groups must be within the service area of one of the credit
union's service facilities. These groups are referred to as select
groups. A multiple common bond credit union cannot include a TIP or
expand using single common bond criteria.
Employment in a corporation or other legal entity which is
related to another legal entity (such as a company under contract
and possessing a strong dependency relationship with another
company) makes that person part of the occupational common bond of a
select employee group within a multiple common bond.
A multiple common bond credit union is also able to serve the
employees of tenants who work in an industrial park, such as a
shopping mall or office park, without listing each occupational
group, provided that each tenant employee group has fewer than 3,000
employees at the location. In addition, only employees who work at
the facility during the tenancy are eligible for membership. New
tenants would be eligible for membership subject to the above
requirements.
A federal credit union's service area is the area that can
reasonably be served by the service facilities accessible to the
groups within the field of membership. The service area will most
often coincide with that geographic area primarily served by the
service facility. Additionally, the groups served by the credit
union must have access to the service facility. The non-availability
of other credit union service is a factor to be considered in
determining whether the group is within reasonable proximity of a
credit union wishing to add the group to its field of membership.
A service facility includes the means for a multiple common bond
credit union to accept shares for members' accounts, accept loan
applications from them or disburse loans to them. This definition
includes a credit union owned branch, a mobile branch, an office
operated on a regularly scheduled weekly basis, a credit union owned
ATM, a credit union owned electronic facility, or a credit union's
transactional Web site that meets the above listed transactional
requirements (a ``transactional Web site''). A credit union's
transactional Web site that meets these requirements may be accessed
by a computer, smart phone, tablet, or similar technological device.
This definition of service facility does not meet the requirement
that a credit union establish and maintain an office or facility in
an underserved area.
The select group as a whole will be considered to be within a
credit union's service area when:
A majority of the persons in a 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.
IV.A.2--Sample Multiple Common Bond Field of Membership
An example of a multiple common bond field of membership is:
``The field of membership of this federal credit union shall be
limited to the following:
1. Employees of Teltex Corporation who work in Wilmington,
Delaware;
2. Partners and employees of Smith & Jones, Attorneys at Law,
who work in Wilmington, Delaware;
3. Members of the M&L Association in Wilmington, Delaware, who
qualify for membership in accordance with its charter and bylaws in
effect on December 31, 1997;
4. Employees of tenants with fewer than 3,000 employees of MJB
Office Park who work in MJB Office Park's Wilmington, Delaware
location.''
IV.B--Multiple Common Bond Amendments
IV.B.1--General
Section 5 of every multiple common bond federal credit union's
charter defines the field of membership and select groups the credit
union can legally serve. Only those persons or legal entities
specified in the field of membership can be served. There are a
number of instances in which Section 5 must be amended by NCUA.
First, a new select group is added to the field of membership.
This may occur through agreement between the group and the credit
union directly, or through a merger, corporate acquisition, purchase
and assumption (P&A), or spin-off.
Second, a federal credit union qualifies to change its charter
from:
A single occupational or associational charter to a
multiple common bond charter;
A multiple common bond to a single occupational or
associational charter;
A multiple common bond to a community charter; or
A community to a multiple common bond charter.
Third, a federal credit union removes a group from its field of
membership through agreement with the group, a spin-off, or because
the group no longer exists.
IV.B.2--Numerical Limitation of Select Groups
An existing multiple common bond federal credit union that
submits a request to amend its charter must provide documentation to
establish that the multiple common bond requirements have been met.
The Office of Consumer Protection Director must approve all
amendments to a multiple common bond credit union's field of
membership.
NCUA will approve groups to a credit union's field of membership
if the agency determines in writing that the following criteria are
met:
The credit union has not engaged in any unsafe or
unsound practice, as determined by the Office of Consumer Protection
Director, with input from the appropriate regional director, which
is material during the one year period preceding the filing to add
the group;
The credit union is ``adequately capitalized'' pursuant
to part 702 of NCUA's Rules and Regulations. For low-income credit
unions or credit unions chartered less than ten years, the Office of
Consumer Protection Director, with input from the appropriate
regional director, may determine that a less than ``adequately
capitalized'' credit union can qualify for an expansion if it is
making reasonable progress toward becoming ``adequately
capitalized.'' For any other credit union, the Office of Consumer
Protection Director, with input from the appropriate regional
director, may determine that a less than ``adequately capitalized''
credit union can qualify for an expansion if it is making reasonable
progress toward becoming ``adequately capitalized,'' and the
addition of the group would not adversely affect the credit union's
capitalization level;
The credit union has the administrative capability to
serve the proposed group and the financial resources to meet the
need for additional staff and assets to serve the new group;
Any potential harm the expansion may have on any other
credit union and its members is clearly outweighed by the probable
beneficial effect of the expansion. With respect to a proposed
expansion's effect on other credit unions, the requirements on
overlapping fields of membership set forth in Section IV.E of this
chapter are also applicable; and
If the formation of a separate credit union by such
group is not practical and consistent with reasonable standards for
the safe and sound operation of a credit union.
Additional information is required for groups of 3,000 or more
primary potential
[[Page 76768]]
members requesting to be added to a multiple common bond credit
union. For groups between 3,000 and 4,999 potential members, NCUA
requires documentation indicating the group has a lack of available
subsidies, interest among the group's members, and sufficient
resources. For such cases the NCUA will accept a written statement
indicating these conditions exist as sufficient documentation the
group cannot form its own credit union. Groups with 5,000 or more
members will be subject to the standard application process as
discussed later in this chapter, requiring a group to fully describe
its inability to establish a new single common bond credit union.
IV.B.3--Documentation Requirements
A multiple common bond credit union requesting a select group
expansion must submit a formal written request, using the
Application for Field of Membership Amendment (NCUA 4015 or NCUA
4015-EZ) to the Office of Consumer Protection Director. An
authorized credit union representative must sign the request.
The NCUA 4015-EZ (for groups less than 3,000 potential members)
must be accompanied by the following:
A letter, or equivalent documentation, from the group
requesting credit union service. This letter must indicate:
That the group wants to be added to the applicant
federal credit union's field of membership;
The number of persons currently included within the
group to be added and their locations; and
The group's proximity to credit union's nearest service
facility.
The most recent copy of the group's charter and bylaws
or equivalent documentation (for associational groups).
The NCUA 4015 (for groups between 3,000 and 4,999 primary
potential members) must be accompanied by the following:
A letter, or equivalent documentation, from the group
requesting credit union service. This letter must indicate:
That the group wants to be added to the federal credit
union's field of membership;
Whether the group presently has other credit union
service available;
The number of persons currently included within the
group to be added and their locations;
The group's proximity to credit union's nearest service
facility, and
Why the formation of a separate credit union for the
group is not practical or consistent with safety and soundness
standards because of a lack of available subsidies, interest among
the group's members, and sufficient resources.
The NCUA 4015 (for groups of 5,000 or more primary potential
members) must be accompanied by the following:
A letter, or equivalent documentation, from the group
requesting credit union service. This letter must indicate:
That the group wants to be added to the federal credit
union's field of membership;
Whether the group presently has other credit union
service available;
The number of persons currently included within the
group to be added and their locations;
The group's proximity to credit union's nearest service
facility, and
Why the formation of a separate credit union for the
group is not practical or consistent with safety and soundness
standards. A credit union need not address every item on the list,
simply those issues that are relevant to its particular request:
Member location--whether the membership is widely dispersed or
concentrated in a central location.
Demographics--the employee turnover rate, economic status of the
group's members, and whether the group is more apt to consist of
savers and/or borrowers.
Market competition--the availability of other financial
services.
Desired services and products--the type of services the group
desires in comparison to the type of services a new credit union
could offer.
Sponsor subsidies--the availability of operating subsidies.
The desire of the sponsor--the extent of the sponsor's interest
in supporting a credit union charter.
Employee interest--the extent of the employees' interest in
obtaining a credit union charter.
Evidence of past failure--whether the group previously had its
own credit union or previously filed for a credit union charter.
Administrative capacity to provide services--will the group have
the management expertise to provide the services requested.
If the group is eligible for membership in any other
credit union, documentation must be provided to support inclusion of
the group under the overlap standards set forth in Section IV.E of
this chapter; and
The most recent copy of the group's charter and bylaws
or equivalent documentation (for associational groups).
IV.B.4--Corporate Restructuring
If a select group within a federal credit union's field of
membership undergoes a substantial restructuring, a change to the
credit union's field of membership may be required if the credit
union is to continue to provide service to the select group. NCUA
permits a multiple common bond credit union to maintain in its field
of membership a sold, spun-off, or merged select group to which it
has been providing service. This type of amendment to the credit
union's charter is not considered an expansion; therefore, the
criteria relating to adding new groups are not applicable.
When two groups merge and each is in the field of membership of
a credit union, then both (or all affected) credit unions can serve
the resulting merged group, subject to any existing geographic
limitation and without regard to any overlap provisions. However,
the credit unions cannot serve the other multiple groups that may be
in the field of membership of the other credit union.
IV.C--NCUA's Procedures for Amending the Field of Membership
IV.C.1--General
All requests for approval to amend a federal credit union's
charter must be submitted to the Office of Consumer Protection
Director.
IV.C.2--Office of Consumer Protection Director Decision
NCUA staff will review all amendment requests in order to ensure
conformance to NCUA policy.
Before acting on a proposed amendment, the Office of Consumer
Protection Director may require an on-site review. In addition, the
Office of Consumer Protection Director may, after taking into
account the significance of the proposed field of membership
amendment, require the applicant to submit a business plan
addressing specific issues.
The financial and operational condition of the requesting credit
union will be considered in every instance. An expanded field of
membership may provide the basis for reversing adverse trends. In
such cases, an amendment to expand the field of membership may be
granted notwithstanding the credit union's adverse trends. The
applicant credit union must clearly establish that the approval of
the expanded field of membership meets the requirements of Section
IV.B.2 of this chapter and will not increase the risk to the NCUSIF.
IV.C.3--Office of Consumer Protection Director Approval
If the Office of Consumer Protection Director approves the
requested amendment, the credit union will be issued an amendment to
Section 5 of its charter.
IV.C.4--Office of Consumer Protection Director Disapproval
When the Office of Consumer Protection Director disapproves any
application, in whole or in part, to amend the field of membership
under this chapter, the applicant will be informed in writing of
the:
Specific reasons for the action;
Options to consider, if appropriate, for gaining
approval; and
Appeal procedure.
IV.C.5--Appeal of Office of Consumer Protection Director Decision
If a field of membership expansion request, merger, or spin-off
is denied by staff, the federal credit union may appeal the decision
to the NCUA Board. An appeal must be sent to the NCUA Board
Secretary within 60 days of the date of denial and must be clearly
identified as such and address the reason(s) the federal credit
union disagrees with the denial. A copy of the appeal must be sent
to the Office of Consumer Protection or, as applicable, the
appropriate regional office. NCUA central office staff will make an
independent review of the facts and present the appeal to the NCUA
Board with a recommendation.
Before appealing, the credit union may, within 30 days of the
denial, provide supplemental information to the office rendering the
initial decision for reconsideration. A reconsideration will contain
new and material evidence addressing the reasons for the initial
denial. The office rendering the initial decision will have 30 days
from the date of the receipt of the request for reconsideration to
make a final decision. If the request is again denied, the applicant
may proceed with the appeal
[[Page 76769]]
process within 60 days of the date of the last denial. A second
request for reconsideration will be treated as an appeal to the NCUA
Board.
IV.D--Mergers, Purchase and Assumptions, and Spin-Offs
In general, other than the addition of select groups, there are
three additional ways a multiple common bond federal credit union
can expand its field of membership:
By taking in the field of membership of another credit
union through a merger;
By taking in the field of membership of another credit
union through a purchase and assumption (P&A); or
By taking a portion of another credit union's field of
membership through a spin-off.
IV.D.1--Voluntary Mergers
a. All Select Groups in the Merging Credit Union's Field of Membership
Have Less Than 3,000 Primary Potential Members
A voluntary merger of two or more federal credit unions is
permissible as long as each select group in the merging credit
union's field of membership has less than 3,000 primary potential
members. While the merger requirements outlined in Section 205 of
the Federal Credit Union Act must still be met, the requirements of
Chapter 2, Section IV.B.2 of this manual are not applicable.
b. One or More Select Groups in the Merging Credit Union's Field of
Membership Has 3,000 or More Primary Potential Members
If the merging credit unions serve the same group, and the group
consists of 3,000 or more primary potential members, then the
ability to form a separate credit union analysis is not required for
that group. If the merging credit union has any other groups
consisting of 3,000 or more primary potential members, special
requirements apply. NCUA will analyze each group of 3,000 or more
primary potential members, except as noted above, to determine
whether the formation of a separate credit union by such a group is
practical. If the formation of a separate credit union by such a
group is not practical because the group lacks sufficient volunteer
and other resources to support the efficient and effective
operations of a credit union or does not meet the economic advisable
criteria outlined in Chapter 1 of this manual, the group may be
merged into a multiple common bond credit union. If the formation of
a separate credit union is practical, the group must be spun-off
before the merger can be approved.
c. Merger of a Single Common Bond Credit Union Into a Multiple Common
Bond Credit Union
A financially healthy single common bond credit union with a
primary potential membership of 3,000 or more cannot merge into a
multiple common bond credit union, absent supervisory reasons,
unless the continuing credit union already serves the same group.
d. Merger Approval
If the merger is approved, the qualifying groups within the
merging credit union's field of membership will be transferred
intact to the continuing credit union and can continue to be served.
Where the merging credit union is state-chartered, the field of
membership rules applicable to a federal credit union apply.
Mergers must be approved by the NCUA regional director where the
continuing credit union is headquartered, with the concurrence of
the regional director of the merging credit union, and, as
applicable, the state regulators.
IV.D.2--Supervisory Mergers
The NCUA may approve the merger of any federally insured credit
union when safety and soundness concerns are present without regard
to the 3,000 numerical limitation. The credit union need not be
insolvent or in danger of insolvency for NCUA to use this statutory
authority. Examples constituting appropriate reasons for using this
authority are: Abandonment of the management and/or officials and an
inability to find replacements, loss of sponsor support, serious and
persistent record-keeping problems, sustained material decline in
financial condition, or other serious or persistent circumstances.
IV.D.3--Emergency Mergers
An emergency merger may be approved by NCUA without regard to
common bond or other legal constraints. An emergency merger involves
NCUA's direct intervention and approval. The credit union to be
merged must either be insolvent or in danger of insolvency, as
defined in the Glossary, and NCUA must determine that:
An emergency requiring expeditious action exists;
Other alternatives are not reasonably available; and
The public interest would best be served by approving
the merger.
If not corrected, conditions that could lead to insolvency
include, but are not limited to:
Abandonment by management;
Loss of sponsor;
Serious and persistent record-keeping problems; or
Serious and persistent operational concerns.
In an emergency merger situation, NCUA will take an active role
in finding a suitable merger partner (continuing credit union). NCUA
is primarily concerned that the continuing credit union has the
financial strength and management expertise to absorb the troubled
credit union without adversely affecting its own financial condition
and stability.
As a stipulated condition to an emergency merger, the field of
membership of the merging credit union may be transferred intact to
the continuing federal credit union without regard to any field of
membership restrictions including numerical limitation requirements.
Under this authority, any single occupational or associational
common bond, multiple common bond, or community charter may merger
into a multiple common bond credit union and that credit union can
continue to serve the merging credit union's field of membership.
Subsequent field of membership expansions of the continuing multiple
common bond credit union must be consistent with multiple common
bond policies.
Emergency mergers involving federally insured credit unions in
different NCUA regions must be approved by the regional director
where the continuing credit union is headquartered, with the
concurrence of the regional director of the merging credit union
and, as applicable, the state regulators.
IV.D.4--Purchase and Assumption (P&A)
Another alternative for acquiring the field of membership of a
failing credit union is through a consolidation known as a P&A.
Generally, the requirements applicable to field of membership
expansions found in this chapter apply to purchase and assumptions
where the purchasing credit union is a federal charter.
A P&A has limited application because, in most cases, the
failing credit union must be placed into involuntary liquidation.
However, in the few instances where a P&A may occur, the assuming
federal credit union, as with emergency mergers, may acquire the
entire field of membership if the emergency criteria are satisfied.
Specified loans, shares, and certain other designated assets and
liabilities, without regard to field of membership restrictions, may
also be acquired without changing the character of the continuing
federal credit union for purposes of future field of membership
amendments. Subsequent field of membership expansions must be
consistent with multiple common bond policies.
P&As involving federally insured credit unions in different NCUA
regions must be approved by the regional director where the
continuing credit union is headquartered, with the concurrence of
the regional director of the purchased and/or assumed credit union
and, as applicable, the state regulators.
IV.D.5--Spin-Offs
A spin-off occurs when, by agreement of the parties, a portion
of the field of membership, assets, liabilities, shares, and capital
of a credit union are transferred to a new or existing credit union.
A spin-off is unique in that usually one credit union has a field of
membership expansion and the other loses a portion of its field of
membership.
All common bond requirements apply regardless of whether the
spun-off group becomes a new charter or goes to an existing federal
charter.
The request for approval of a spun-off group must be supported
with a plan that addresses, at a minimum:
Why the spin-off is being requested;
What part of the field of membership is to be spun off;
Which assets, liabilities, shares, and capital are to
be transferred;
The financial impact the spin-off will have on the
affected credit unions;
The ability of the acquiring credit union to
effectively serve the new members;
The proposed spin-off date; and
Disclosure to the members of the requirements set forth
above.
The spin-off request must also include current financial
statements from the affected credit unions and the proposed voting
ballot.
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For federal credit unions spinning off a group, membership
notice and voting requirements and procedures are the same as for
mergers (see part 708 of the NCUA Rules and Regulations), except
that only the members directly affected by the spin-off--those whose
shares are to be transferred--are permitted to vote. Members whose
shares are not being transferred will not be afforded the
opportunity to vote. All members of the group to be spun off
(whether they voted in favor, against, or not at all) will be
transferred if the spin-off is approved by the voting membership.
Voting requirements for federally insured state credit unions are
governed by state law.
Spin-offs involving federally insured credit unions in different
NCUA regions must be approved by all regional directors where the
credit unions are headquartered and the state regulators, as
applicable. Spin-offs in the same region also require approval by
the state regulator, as applicable.
IV.E--Overlaps
IV.E.1--General
An overlap exists when a group of persons is eligible for
membership in two or more credit unions, including state charters.
An overlap is permitted when the expansion's beneficial effect in
meeting the convenience and needs of the members of the group
proposed to be included in the field of membership outweighs any
adverse effect on the overlapped credit union.
Credit unions must investigate the possibility of an overlap
with federally insured credit unions prior to submitting an
expansion request if the group has 5,000 or more primary potential
members. If cases arise where the assurance given to the Office of
Consumer Protection Director concerning the unavailability of credit
union service is inaccurate, the misinformation may be grounds for
removal of the group from the federal credit union's charter.
When an overlap situation requiring analysis does arise,
officials of the expanding credit union must ascertain the views of
the overlapped credit union. If the overlapped credit union does not
object, the applicant must submit a letter or other documentation to
that effect. If the overlapped credit union does not respond, the
expanding credit union must notify NCUA in writing of its attempt to
obtain the overlapped credit union's comments.
NCUA will approve an overlap if the expansion's beneficial
effect in meeting the convenience and needs of the members of the
group outweighs any adverse effect on the overlapped credit union.
In reviewing the overlap, the Office of Consumer Protection
Director will consider:
The view of the overlapped credit union(s);
Whether the overlap is incidental in nature--the group
of persons in question is so small as to have no material effect on
the original credit union;
Whether there is limited participation by members or
employees of the group in the original credit union after the
expiration of a reasonable period of time;
Whether the original credit union fails to provide
requested service;
Financial effect on the overlapped credit union;
The desires of the group(s);
The desire of the sponsor organization; and
The best interests of the affected group and the credit
union members involved.
Generally, if the overlapped credit union does not object, and
NCUA determines that there is no safety and soundness problem, the
overlap will be permitted.
Potential overlaps of a federally insured state credit union's
field of membership by a federal credit union will generally be
analyzed in the same way as if two federal credit unions were
involved. Where a federally insured state credit union's field of
membership is broadly stated, NCUA will exclude its field of
membership from any overlap protection.
NCUA will permit multiple common bond federal credit unions to
overlap community charters without performing an overlap analysis.
IV.E.2--Overlap Issues as a Result of Organizational Restructuring
A federal credit union's field of membership will always be
governed by the field of membership descriptions contained in
Section 5 of its charter. Where a sponsor organization expands its
operations internally, by acquisition or otherwise, the credit union
may serve these new entrants to its field of membership if they are
part of any select group listed in Section 5. Where acquisitions are
made which add a new subsidiary, the group cannot be served until
the subsidiary is included in the field of membership through a
housekeeping amendment.
A federal credit union's field of membership will always be
governed by the field of membership descriptions contained in
Section 5 of its charter. Where a sponsor organization expands its
operations internally, by acquisition or otherwise, the credit union
may serve these new entrants to its field of membership if they are
part of any select group listed in Section 5. Where acquisitions are
made which add a new subsidiary, the group cannot be served until
the subsidiary is included in the field of membership through a
housekeeping amendment.
Overlaps may occur as a result of restructuring or merger of the
parent organization. When such overlaps occur, each credit union
must request a field of membership amendment to reflect the new
groups each wishes to serve. The credit union can continue to serve
any current group in its field of membership that is acquiring a new
group or has been acquired by a new group. The new group cannot be
served by the credit union until the field of membership amendment
is approved by NCUA.
Credit unions affected by organizational restructuring or merger
should attempt to resolve overlap issues among themselves. Unless an
agreement is reached limiting the overlap resulting from the
corporate restructuring, NCUA will permit a complete overlap of the
credit unions' fields of membership. When two groups merge, or one
group is acquired by the other, and each is in the field of
membership of a credit union, both (or all affected) credit unions
can serve the resulting merged or acquired group, subject to any
existing geographic limitation and without regard to any overlap
provisions. This is accomplished through a housekeeping amendment.
Credit unions must submit to NCUA documentation explaining the
restructuring and provide information regarding the new
organizational structure.
IV.E.3--Exclusionary Clauses
An exclusionary clause is a limitation precluding the credit
union from serving the primary members of a portion of a group
otherwise included in its field of membership. NCUA no longer grants
exclusionary clauses. Those granted prior to the adoption of this
new Chartering and Field of Membership Manual will remain in effect
unless the credit unions agree to remove them or one of the affected
credit unions submits a housekeeping amendment to have it removed.
IV.F--Charter Conversion
A multiple common bond federal credit union may apply to convert
to a community charter provided the field of membership requirements
of the community charter are met. Groups within the existing charter
which cannot qualify in the new charter cannot be served except for
members of record, or groups or communities obtained in an emergency
merger or P&A. A credit union must notify all groups that will be
removed from the field of membership as a result of conversion.
Members of record can continue to be served. Also, in order to
support a case for a conversion, the applicant federal credit union
may be required to develop a detailed business plan as specified in
Chapter 2, Section V.A.3 of this manual.
A multiple common bond federal credit union may apply to convert
to a single occupational or associational common bond charter
provided the field of membership requirements of the new charter are
met. Groups within the existing charter, which do not qualify in the
new charter, cannot be served except for members of record, or
groups or communities obtained in an emergency merger or P&A. A
credit union must notify all groups that will be removed from the
field of membership as a result of conversion.
IV.G--Credit Union Requested Removal of Groups From the Field of
Membership
A credit union may request removal of a group from its field of
membership for various reasons. The most common reasons for this
type of amendment are:
The group is within the field of membership of two
credit unions and one wishes to discontinue service;
The federal credit union cannot continue to provide
adequate service to the group;
The group has ceased to exist;
The group does not respond to repeated requests to
contact the credit union or refuses to provide needed support;
The group initiates action to be removed from the field
of membership; or
[[Page 76771]]
The federal credit union wishes to convert to a single
common bond.
When a federal credit union requests an amendment to remove a
group from its field of membership, the Office of Consumer
Protection Director will determine why the credit union desires to
remove the group. If the Office of Consumer Protection Director
concurs with the request, membership will continue for those who are
already members under the ``once a member, always a member''
provision of the Federal Credit Union Act.
IV.H--NCUA Supervisory Action To Remove Groups From the Field of
Membership
NCUA has in place quality control processes that protect the
integrity of its field of membership requirements. As part of this
obligation, NCUA's Office of Consumer Protection will randomly
select groups added through NCUA's Field of Membership Internet
Application (FOMIA) system for quality assurance reviews even if the
expansion application meets all the conditions for approval. Each
FCU is responsible for obtaining certain documentation when seeking
to add groups to its field of membership through FOMIA. In addition,
as indicated in the FOMIA User Instruction Guide, available on
NCUA's Web site, an FCU must permanently retain the documentation
from the select group requesting service and the Confirmation
Certificate generated at the time the FOMIA request is submitted to
NCUA.
As part of the quality assurance process, OCP reserves the right
to request this documentation at any time. If the FCU fails to
provide this documentation when OCP requests it, OCP may consider
removing the group from the FCU's field of membership and
restricting the FCU from using the FOMIA system for future requests.
Specifically, as part of the FOMIA quality assurance process, OCP
staff will do the following:
1. Within 10 days of receiving an application selected for a
quality assurance review, notify the FCU of the documentation OCP
requires. The FCU will have 15 days to provide the necessary
documentation. OCP staff will respond to the FCU with a
determination on the quality assurance review of the association
within 15 days of receiving the requested information;
2. After receiving the additional documentation, if any concerns
remain outstanding, OCP staff will again correspond with the FCU and
provide a 15-day time frame for correcting the concern. OCP staff
will respond to the FCU with a determination on the quality
assurance review of the association within 15 days of receiving the
requested information; and
3. If the FCU does not provide the requested documentation, or
cannot correct the concern, the OCP Director will deny the
application and notify the credit union of its appeal rights.
IV.I--NCUA Investigation of Potential Field of Membership Violations
NCUA's Office of Consumer Protection (OCP) is responsible for
investigating field of membership complaints from the public, and
matters referred to it from the field. It also pursues corrective
action as needed for FCUs with confirmed field of membership
violations. Although circumstances can vary with each case, OCP
staff will generally adhere to the following process for
investigating and addressing potential field of membership
violations:
1. Initially correspond with management to outline concerns and
request clarifying information within 60 days. OCP staff will also
provide context as to the source of OCP's concerns, such as the
discovery of new information about a particular group or an
examination finding brought to OCP's attention;
2. If OCP does not receive the requested information within 60
days, it will notify the FCU and again request the required
information be provided within 30 days;
3. After receiving the additional documentation, if any concerns
remain outstanding, OCP staff will again correspond with the FCU to
provide a 60-day time frame for addressing the concern; and
4. If the FCU is unable to correct the concern, and after
consultation with the Office of General Counsel and the appropriate
Regional Office, and in accordance with agency guidelines for
administrative actions, OCP will remove the group from the FCU's
field of membership pursuant to authority delegated by the NCUA
Board. Removal of a group is treated the same as an initial denial
under the Chartering Manual. In any adverse final determination on
removal under the above delegations, OCP will notify the FCU of its
appeal rights.
NCUA considers the removal of an association from an FCU's field
of membership as an action of last resort. If a group is removed,
the FCU can no longer add new members from the group, but can
continue serving those who are already members of the FCU under the
``once a member, always a member'' provision of the Federal Credit
Union Act. Also, if the group subsequently qualifies due to changes
to the group itself, management can submit a new application at that
time.
IV.J--Other Persons Eligible for Credit Union Membership
A number of persons, by virtue of their close relationship to a
common bond group, may be included, at the charter applicant's
option, in the field of membership. These include the following:
Spouses of persons who died while within the field of
membership of this credit union;
Employees of this credit union;
Persons retired as pensioners or annuitants from the
above employment;
Volunteers;
Members of the immediate family or household;
Honorably discharged veterans who served in any of the
Armed Services of the United States in this charter;
Organizations of such persons; and
Corporate or other legal entities in this charter.
Immediate family is defined as spouse, child, sibling, parent,
grandparent, or grandchild. This includes stepparents, stepchildren,
stepsiblings, and adoptive relationships.
Household is defined as persons living in the same residence
maintaining a single economic unit.
Membership eligibility is extended only to individuals who are
members of an ``immediate family or household'' of a credit union
member. It is not necessary for the primary member to join the
credit union in order for the immediate family or household member
of the primary member to join, provided the immediate family or
household clause is included in the field of membership. However, it
is necessary for the immediate family member or household member to
first join in order for that person's immediate family member or
household member to join the credit union. A credit union can adopt
a more restrictive definition of immediate family or household.
Volunteers, by virtue of their close relationship with a sponsor
group, may be included. Examples include volunteers working at a
hospital or church.
Under the Federal Credit Union Act, once a person becomes a
member of the credit union, such person may remain a member of the
credit union until the person chooses to withdraw or is expelled
from the membership of the credit union. This is commonly referred
to as ``once a member, always a member.'' The ``once a member,
always a member'' provision does not prevent a credit union from
restricting services to members who are no longer within the field
of membership.
V--Community Charter Requirements
V.A.1--General
There are two types of community charters. One is based on a
single, geographically well-defined local community or neighborhood;
the other is a rural district. More than one credit union may serve
the same community.
NCUA recognizes four types of affinity on which both a community
charter and a rural district can be based--persons who live in,
worship in, attend school in, or work in the community or rural
district. Businesses and other legal entities within the community
boundaries or rural district may also qualify for membership.
NCUA has established the following requirements for community
charters:
The geographic area's boundaries must be clearly
defined; and
The area is a well-defined local community or a rural
district.
V.A.2--Definition of Well-Defined Local Community and Rural
District
In addition to the documentation requirements in Chapter 1 of
this manual to charter a credit union, a community credit union
applicant must provide additional documentation addressing the
proposed area to be served and community service policies.
An applicant has the burden of demonstrating to NCUA that the
proposed community area meets the statutory requirements of being:
(1) Well-defined, and (2) a local community or rural district.
``Well-defined'' means the proposed area has specific geographic
boundaries. Geographic boundaries may include a city,
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township, county (single, multiple, or portions of a county) or
their political equivalent, an individual Congressional district,
school districts, or a clearly identifiable neighborhood. Although
state boundaries are well-defined areas, states themselves do not
meet the requirement that the proposed area be a local community or
rural district.
The well-defined local community requirement is met if:
Single Political Jurisdiction--The area to be served is
in a recognized Single Political Jurisdiction, i.e., a city, county,
or their political equivalent, or any contiguous portion thereof. A
Congressional district qualifies as Single Political Jurisdiction.
If redistricting were to redraw the boundaries of a Congressional
district into two or more Congressional districts, an FOM consisting
of the original Congressional district would no longer be available
to be served by any other credit union.
Statistical Area--The area is a designated Core Based
Statistical Area or allowing a portion thereof, or in the case of a
Core Based Statistical Area with Metropolitan Divisions, the area is
a Metropolitan Division or is a portion thereof; or
The area is a designated a Combined Statistical Area or
a portion thereof; AND
The Core Based Statistical Area, Metropolitan Division
or Combined Statistical Area, or the portion thereof, must have a
population of 2.5 million or less people.
Compelling Evidence of Interaction or Common
Interests--In lieu of a statistical area as defined above, this
option applies when an area is substantially a Core Based
Statistical Area or Combined Statistical Area, but also has an
additional portion falling outside, and which is immediately
adjacent to, the Core Based Statistical Area or Combined Statistical
Area, and thus may demonstrate a sufficient level of interaction to
qualify as a local community. For these situations, applicants have
the option of submitting a narrative to NCUA to discuss how the
residents meet the requirements for being a local community. NCUA
will base its decision on a consideration of the following factors
with respect to the proposed service area in its entirety:
Economic Hub: Evidence indicates residents commonly travel to a
geographically compact locale within the area for work and major
commerce needs. Traffic flows, the presence of common or related
industries, or unified economic planning demonstrate how the locales
have economic interdependence.
Population Center: Area has a dominant county or municipality
with a significant portion of the area's population and evidence
exists to support the relevance of the population center to all
residents within the area.
Quasi-Governmental Agencies: A quasi-governmental agency, such
as a regional planning commission, covers the proposed service area
in its entirety and derives its leadership from the area to advance
meaningful objectives advancing the residents' common interests in
economic development and/or improving quality of life. Success of
agency in meeting its mission depends upon collaboration from
throughout the area.
Government Designations: A division of a federal or state agency
specifically designates the proposed service area as its area of
coverage or as a target area for specific programs.
Shared Public Services/Facilities: Formal agreements exist that
provide for a common need shared by all of the residents, such as
common police or fire protection, or public utilities.
Colleges and Universities: Evidence exists to demonstrate the
common relevance of an institution or institutions to the entire
area, such as unique educational initiatives to support economic
objectives benefiting all residents and/or partnerships with local
businesses or high schools.
The rural district requirement is met if:
Rural District--
The district has well-defined, contiguous geographic
boundaries;
The total population of the district does not exceed
1,000,000.
Either more than 50% of the district's population
resides in census blocks or other geographic areas that are
designated as rural by either the Consumer Financial Protection
Bureau or the United States Census Bureau, OR the district has a
population density of 100 persons or fewer per square mile; and
The boundaries of the well-defined rural district do
not exceed the outer boundaries of the states that are immediately
contiguous to the state in which the credit union maintains its
headquarters (i.e., not to exceed the outer perimeter of the layer
of states immediately surrounding the headquarters state). The
affinities that apply to rural districts are the same as those that
apply to well-defined local communities. The OMB definitions of Core
Based Statistical Area and Metropolitan Division may be found at
https://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. Access to these definitions is available through the main
page of the Federal Register Web site at https://www.gpoaccess.gov/fr/ and on NCUA's Web site at https://www.ncua.gov.
The requirements in Chapter 2, Sections V.A.4 through V.G. of
this manual also apply to a credit union that serves a rural
district.
V.A.3--Previously Approved Communities
If prior to July 26, 2010 NCUA has determined that a specific
geographic area is a well-defined local community, then a new
applicant need not reestablish that fact as part of its application
to serve the exact area. The new applicant must, however, note
NCUA's previous determination as part of its overall application. An
applicant applying for an area after that date that is not exactly
the same as the previously approved well defined local community
must comply with the current criteria in place for determining a
well-defined local community.
V.A.4--Business Plan Requirements for a Community Credit Union
A community credit union is frequently more susceptible to
competition from other local financial institutions and generally
does not have substantial support from any single sponsoring company
or association. As a result, a community credit union will often
encounter financial and operational factors that differ from an
occupational or associational charter. Its diverse membership may
require special marketing programs targeted to different segments of
the community. For example, the lack of payroll deduction creates
special challenges in the development and promotion of savings
programs and in the collection of loans. Accordingly, to support an
application for a community charter, an applicant Federal credit
union must develop a business plan incorporating the following data:
Pro forma financial statements for a minimum of 24
months after the proposed conversion, including the underlying
assumptions and rationale for projected member, share, loan, and
asset growth;
Anticipated financial impact on the credit union,
including the need for additional employees and fixed assets, and
the associated costs;
A description of the current and proposed office/branch
structure, including a general description of the location(s);
parking availability, public transportation availability, drive-
through service, lobby capacity, or any other service feature
illustrating community access;
