Federal Credit Union Bylaws, 12283-12286 [2018-05625]
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12283
Proposed Rules
Federal Register
Vol. 83, No. 55
Wednesday, March 21, 2018
This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
FEDERAL ELECTION COMMISSION
11 CFR Part 113
[NOTICE 2018–05]
Rulemaking Petition: Former
Candidates’ Personal Use
Federal Election Commission.
Rulemaking petition;
notification of availability.
AGENCY:
ACTION:
On February 5, 2018, the
Federal Election Commission received a
Petition for Rulemaking, which asks the
Commission to revise and amend the
existing rules concerning the personal
use of campaign funds, specifically to
clarify the application of those rules to
former candidates and officeholders.
The Commission seeks comments on the
petition.
DATES: Comments must be submitted on
or before May 21, 2018.
ADDRESSES: All comments must be in
writing. Commenters are encouraged to
submit comments electronically via the
Commission’s website at https://
www.fec.gov/fosers, reference REG
2015–04. Alternatively, commenters
may submit comments in paper form,
addressed to the Federal Election
Commission, Attn.: Robert M. Knop,
Assistant General Counsel, 1050 First
Street NE, Washington, DC 20463.
Each commenter must provide, at a
minimum, his or her first name, last
name, city, and state. All properly
submitted comments, including
attachments, will become part of the
public record, and the Commission will
make comments available for public
viewing on the Commission’s website
and in the Commission’s Public Records
Office. Accordingly, commenters should
not provide in their comments any
information that they do not wish to
make public, such as a home street
address, personal email address, date of
birth, phone number, social security
number, or driver’s license number, or
any information that is restricted from
disclosure, such as trade secrets or
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SUMMARY:
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commercial or financial information
that is privileged or confidential.
FOR FURTHER INFORMATION CONTACT: Mr.
Robert M. Knop, Assistant General
Counsel, or Mr. Sean J. Wright,
Attorney, Office of General Counsel,
1050 First Street NE, Washington, DC
20463, (202) 694–1650 or (800) 424–
9530.
SUPPLEMENTARY INFORMATION: On
February 5, 2018, the Commission
received a Petition for Rulemaking from
the Campaign Legal Center, asking the
Commission to revise and amend 11
CFR 113.1(g) and 11 CFR 113.2, the
regulations pertaining to the personal
use of campaign funds, specifically to
clarify the application of those rules to
former candidates and officeholders.
The Federal Election Campaign Act,
52 U.S.C. 30101–46 (the ‘‘Act’’), and
Commission regulations provide that a
candidate’s authorized committee may
use its funds for several specific
purposes, as well as for ‘‘any other
lawful purpose,’’ so long as the use does
not constitute the conversion of
campaign funds to ‘‘personal use.’’ 52
U.S.C. 30114(b); 11 CFR 113.1(g),
113.2(e).
Campaign funds ‘‘shall be considered
to be converted to personal use if [the
funds are] used to fulfill any
commitment, obligation or expense of a
person that would exist irrespective of
the candidate’s election campaign or
individual’s duties as a holder of
[f]ederal office.’’ 52 U.S.C. 30114(b)(2);
see also 11 CFR 113.1(g). The Act and
Commission regulations provide a nonexhaustive list of uses of campaign
funds that are per se personal use. 52
U.S.C. 30114(b)(2); 11 CFR
113.1(g)(1)(i). For uses of campaign
funds not on this list, the Commission
determines, on a case-by-case basis,
whether they constitute personal use. 11
CFR 113.1(g)(1)(ii).
The petition asks the Commission to
open a rulemaking to clarify the
permissible use of campaign funds for
former candidates and officeholders.
The petition raises two discrete
questions for the Commission to resolve
during its proposed rulemaking. The
first question asks the Commission to
identify the ‘‘permissible and
impermissible uses of campaign funds
for an individual who is no longer a
candidate or officeholder.’’ The second
question asks the Commission to
determine whether there is ‘‘a point at
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which a former candidate or
officeholder’s continued spending of
leftover campaign funds becomes so
attenuated from his or her candidate or
officeholder status that the spending is
presumptively personal use.’’
The Commission seeks comments on
the petition. The public may inspect the
petition on the Commission’s website at
https://www.fec.gov/fosers, or in the
Commission’s Public Records Office,
1050 First Street NE, 12th Floor,
Washington, DC 20463, Monday
through Friday, from 9 a.m. to 5 p.m.
Interested persons may also obtain
copies of the petitions by dialing the
Commission’s Faxline service at (202)
501–3413 and following its instructions.
Request document #280.
The Commission will not consider the
petition’s merits until after the comment
period closes. If the Commission
decides that the petition has merit, it
may begin a rulemaking proceeding.
The Commission will announce any
action that it takes in the Federal
Register.
On behalf of the Commission,
Dated: March 14, 2018.
Caroline C. Hunter,
Chair, Federal Election Commission.
[FR Doc. 2018–05644 Filed 3–20–18; 8:45 am]
BILLING CODE 6715–01–P
NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Part 701
RIN 3133–AE86
Federal Credit Union Bylaws
National Credit Union
Administration (NCUA).
ACTION: Advance notice of proposed
rulemaking.
AGENCY:
The NCUA Board (Board) is
issuing this advance notice of proposed
rulemaking to solicit stakeholder
comments on ways to streamline,
clarify, and improve the standard
Federal Credit Union (FCU) bylaws. The
standard FCU bylaws provide a
comprehensive set of corporate
governance procedures that are
mandatory for any FCU that had not
adopted bylaws as of November 30,
2007. The Board is considering a
number of significant changes to the
FCU bylaws to provide enhanced
SUMMARY:
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operational flexibility to FCUs and to
reduce regulatory compliance burdens
on all FCUs.
DATES: Comments must be received on
or before May 21, 2018.
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 Website: https://
www.ncua.gov/Legal/Regs/Pages/
PropRegs.aspx. Follow the instructions
for submitting comments.
• Email: Address to regcomments@
ncua.gov. Include ‘‘[Your name]—
Comments on Federal Credit Union
Bylaws ANPR’’ in the email subject line.
• Fax: (703) 518–6319. Use the
subject line described above for email.
• Mail: Address to Gerard 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 can view all
public comments on NCUA’s website 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
22314–3428, 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:
Benjamin M. Litchfield, Staff Attorney,
National Credit Union Administration,
1775 Duke Street, Alexandria, Virginia
22314–3428 or telephone: (703) 518–
6540.
SUPPLEMENTARY INFORMATION:
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I. Background
FCU incorporators must present
proposed FCU bylaws along with an
organization certificate to the Board for
its approval prior to commencing
business as an FCU.1 To simplify the
organization of FCUs, the Federal Credit
Union Act (FCU Act) requires the Board
to prepare ‘‘from time to time’’ a form
of FCU bylaws to be used by FCU
incorporators and to make that form
available upon request.2 The FCU Act
grants the Board considerable discretion
in drafting this form ‘‘from time to
1 12
2 12
U.S.C. 1754, 1758.
U.S.C. 1758.
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time,’’ provided that the FCU bylaws are
consistent with basic corporate
governance procedures set out in the
FCU Act. Those corporate governance
procedures are designed to protect
fundamental FCU member rights that
underpin the cooperative principles that
serve as the cornerstone of the credit
union movement.3
The FCU bylaws and accompanying
guidance were not part of the NCUA’s
regulations for almost 25 years.4 During
that time, in consultation with the
NCUA, FCUs had considerable
discretion to adopt reasonable FCU
bylaws provisions provided that they
did not conflict with the FCU Act, the
NCUA’s regulations, established federal
policy, or otherwise pose a safety and
soundness risk to the FCU.5
Accordingly, the Board did not view
FCU bylaws disputes predominantly as
a federal regulatory matter. Instead, the
Board believed that state corporate law
and state courts were the appropriate
vehicles through which FCU officials
and members could settle FCU bylaws
disputes where state corporate law was
not preempted by federal law.
However, the Board observed a
number of troubling cases in which
members were unable to enforce
fundamental FCU member rights in state
courts.6 Moreover, the Board began to
see troubling precedents developing in
federal courts holding that FCUs do not
have fiduciary duties to their members
despite the clear status conferred by the
FCU Act on a credit union member as
a partial owner of the FCU.7 Treating
FCU bylaw disputes as largely matters
of state corporate law also diminished
the NCUA’s ability to take proactive
enforcement measures in this area.
Accordingly, the Board incorporated the
standard FCU bylaws as part of the
NCUA’s regulations and required all
FCUs that had not adopted bylaws prior
to November 30, 2007 to adopt the
3 Specifically, these rights include the right to: (1)
Maintain a share account; (2) maintain FCU
membership; (3) have access to credit union
facilities; (4) participate in the director election
process; (5) attend annual and special meetings; and
(6) petition for removal of directors and committee
members. See Federal Credit Union Bylaws, 72 FR
30984, 30986 (Aug. 6, 2007) (proposed rule).
4 Federal Credit Union Bylaws, 72 FR 61495,
61496 (Oct. 31, 2007) (final rule) (codified at 12
CFR 701, App. A).
5 Id.
6 See 72 FR at 30985 (Aug. 6, 2007) (observing
member difficulties obtaining redress in state
courts); see also Bruns v. Nat’l Credit Union
Admin., 122 F.3d 1251, 1257 (9th Cir. 1997) (citing
Montford v. Robins Fed’l Credit Union, 691 F. Supp.
347, 351–52 (M.D. Ga. 1988)) (NCUA appropriate
body to hear FCU bylaw complaints).
7 Id.; see also. Miur v. Navy Fed’l Credit Union,
529 F.3d 1100, 1107–8 (D.C. Cir. 2008) (applying
the Virginia Commercial Code).
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standard FCU bylaws.8 FCUs that had
adopted bylaws prior to that date were
allowed to retain their then current
bylaws. However, the Board strongly
encouraged those FCUs to adopt the
standard FCU bylaws.
Since incorporating standard FCU
bylaws into the NCUA’s regulations, the
NCUA has periodically solicited
comment from stakeholders on ways to
streamline, clarify, and improve the
standard FCU bylaws to provide FCUs
with greater operational flexibility. For
example, the NCUA’s Office of General
Counsel met with stakeholders in 2013
to discuss possible revisions to the
standard FCU bylaws. Those
stakeholders provided valuable input on
particular provisions of the standard
FCU bylaws. Their comments and
recommended changes included: (1)
Adding flexibility where consistent with
law, regulation, and the protection of
fundamental member rights; (2)
removing outdated or obsolete
provisions and terms; (3) conforming
the standard FCU bylaws to plain
English writing principles; (4)
expanding the commentary section to
provide additional information and
guidance; (5) adding provisions related
to member rights and responsibilities
and clarifying the permissible actions
FCUs can take to address members who
are abusive or disruptive; and (6)
addressing provisions pertaining to
meeting procedures, quorums, and
notice requirements. The Office of
General Counsel has a record of these
comments and continues to take them
into account.
Recently, the NCUA’s Regulatory
Reform Task Force (Task Force), a group
created by the NCUA Chairman to
implement the NCUA’s regulatory
reform agenda, has suggested that more
wholesale changes to the standard FCU
bylaws may be necessary because they
have not been significantly updated in
nearly 10 years.9 To ensure that the
standard FCU bylaws are amended in a
transparent manner that affords
stakeholders enhanced opportunity to
participate in the rulemaking process,
the Task Force recommended that the
Board issue an advance notice of
proposed rulemaking to request
comments on ways in which the FCU
bylaws may be streamlined, clarified,
and improved.
8 12
CFR 701, App. A, Instruction A.
Reform Agenda, 82 FR 39702, 39705
(Aug. 22, 2017). The Task Force’s report was
adopted by the Board and issued for public
comment with a comment period ending on
November 20, 2017.
9 Regulatory
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II. Request for Comments on Specific
Topics
In accordance with the Task Force’s
recommendation, the Board is issuing
this advance notice of proposed
rulemaking to solicit stakeholder
comments on the standard FCU bylaws.
In particular, the Board requests specific
comments on the following questions:
1. How can the Board improve the FCU
bylaws amendment process?
A perennial concern among
stakeholders is that the process to
amend the standard FCU bylaws is
complicated and time consuming. An
FCU’s decision to amend its bylaws
often results from a pressing operational
concern. The FCU’s ability to respond to
that concern in a timely manner is not
just a matter of convenience, but also an
important safety and soundness issue.
An FCU that wishes to amend its bylaws
must request approval from the NCUA’s
Office of Credit Union Resources and
Expansion (CURE) for many
amendments to the standard FCU
bylaws. While CURE processes bylaws
amendment requests as expeditiously as
possible, the standard FCU bylaws do
not provide for any timeline by which
CURE must arrive at its determination,
except in the case of previously
approved bylaws amendments.10
Accordingly, the Board seeks specific
stakeholder comments on ways to
improve this process to provide a
requesting FCU with a more timely
response, greater transparency, and
enhanced accountability.
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2. How can the Board clarify the FCU
bylaws provisions addressing limitation
of service and expulsion of members?
In the past, stakeholders have asked
for clarification on the FCU bylaws
provisions addressing limitation of
service policies. Article II, § 4 of the
standard FCU bylaws permits an FCU to
limit services or access to credit union
facilities to ‘‘a member who is
disruptive to credit union
operations.’’ 11 The Office of General
Counsel’s longstanding interpretation of
the phrase ‘‘disruptive to credit union
operations’’ is that an FCU may limit
services to an FCU member in a number
of cases, including situations where a
member is abusive to FCU staff or has
caused a loss to the FCU. This is the
case provided that members have
received adequate notice of the
limitation of service policy and there is
some ‘‘logical relationship between the
10 12
CFR 701, App. A, Instruction C.4.
11 12 CFR 701, App. A, Art. II, § 4.
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objectionable conduct and the services
to be suspended.’’ 12
However, the Office of General
Counsel has also stated that contract
provisions in account and other member
service agreements, as well as federal
and state laws, may affect an FCU’s
ability to implement a limitation of
service policy.13 For example, an FCU
may not implement a limitation of
service policy that has a disparate
impact on a protected class, such as may
be the case regarding defaults on
consumer loans.14 The ambiguity
surrounding the use of limitation of
service policies has led to some
justifiable stakeholder confusion and
enforcement issues.
Accordingly, the Board is particularly
interested in specific stakeholder
comments on ways to improve Article
II, § 4 of the standard FCU bylaws to
provide FCUs with the greatest possible
clarity regarding the use and misuse of
limitation of service policies. The Board
is also interested in specific stakeholder
comments on whether this regulatory
text should be removed in its entirety
and addressed as a separate regulation.
3. How can the Board improve the FCU
bylaws to facilitate the recruitment and
development of directors?
As the credit union movement
continues to undergo significant
changes, the Board is interested in ways
that it can improve the FCU bylaws to
facilitate the recruitment of FCU
directors. Article V of the standard FCU
bylaws sets out four distinct procedures
that an FCU may choose to follow in
order to select directors.15 In each case,
a nominating committee must appoint at
least one member to each vacancy,
including any unexpired term vacancy,
for which elections are being held.
However, these procedures do not
provide guidance on how the
nominating committee should proceed
with identifying prospective candidates
nor do they clarify the criteria that the
nominating committee may use when
selecting candidates.
While the Board believes that these
matters fall squarely within the sound
business judgment of each individual
FCU, the Board is interested in ways
that it can amend the standard FCU
bylaws to facilitate effective business
continuity planning. For example,
12 Suspension of Service Policy, OGC Op. Letter
08–0431 (Aug. 12, 2008); Request for Interpretation
of Section 118 of the Federal Credit Union Act,
OGC Op. Letter 96–0530 (June 10, 1996).
13 Id.
14 Regulation B, which implements the Equal
Credit Opportunity Act, prohibits discrimination on
the basis of a protected class. See 12 CFR 1002.
15 12 CFR 701, App. A, Art. V.
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should the Board include commentary
to Article V of the standard FCU bylaws
recommending certain non-binding
factors that the nominating committee
may consider when selecting a
candidate to fill a particular vacancy? If
so, what factors should the Board
highlight? In addition, should the Board
include commentary authorizing FCUs
to establish standing advisory
committees designed to recruit potential
candidates to fill board vacancies? If so,
which individuals within the FCU
should be part of this advisory
committee? What safeguards should be
put in place to prevent conflicts of
interest?
4. How can the Board improve the FCU
bylaws to encourage member
attendance at annual and special
meetings?
A key difference ‘‘between credit
unions and other federally chartered
financial institutions lies in the
democratic control and management of
credit unions.’’ 16 Accordingly, the
Board is interested in ways that it can
improve the standard FCU bylaws to
encourage active member participation
in annual and special meetings. Article
IV of the standard FCU bylaws sets out
the procedures that must be followed
when an FCU holds a meeting of
members.17 For an annual meeting, the
secretary of the FCU must provide
members with at least 30 but not more
than 75 days written notice before the
date of any annual meeting. For a
special meeting, the written notice must
be at least 7 days before the date of the
special meeting. The Board seeks
stakeholder input on whether these time
periods are adequate to ensure that
members have sufficient advanced
notice to afford an actual opportunity to
attend annual and special meetings.
In addition, with the rise of ecommerce and mobile banking, the
Board is interested in stakeholder
comments on ways that it may improve
Article IV of the standard FCU bylaws
to allow FCUs to harness new
technologies, particularly social media
and web-based conferencing solutions,
to allow more members to attend annual
and special meetings. For example,
should the Board allow an FCU to
conduct an annual or special meeting
through teleconference? If so, what
market solutions exist to allow members
to debate issues brought to the floor or
to securely vote on director
nominations? Would the use of such a
market solution be considered an
16 La Caisse Populaire Ste-Marie (St. Mary’s Bank)
v. U.S., 425 F. Supp. 512, 517 (D.N.H. 1976).
17 12 CFR 701, App. A, Art. IV.
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impermissible proxy vote? What risks
are associated with the use of these
products? Would the use of these kinds
of solutions encourage greater member
participation from those individuals
who largely rely on mobile financial
services and avoid traditional brick-andmortar branches? Could this technology
be provided through a mobile
application?
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5. Should the Board eliminate overlaps
between the NCUA’s regulations and the
FCU bylaws?
In reviewing the standard FCU
bylaws, NCUA staff identified a number
of the NCUA’s regulations that overlap,
to some extent, with the standard FCU
bylaws. Many of the overlapping
standard FCU bylaws provisions are
located in Article XVI and address
issues such as FCU member
confidentiality, conflicts of interest,
record retention, and the availability of
books and records to FCU members. Do
these duplicative regulatory and bylaws
requirements increase compliance
burden in a manner that outweighs any
measurable member benefit? If so, the
Board requests specific stakeholder
comments on how to address these
provisions.
If such overlap is problematic, a
solution the Board could consider is to
remove the overlapping provisions from
the standard FCU bylaws to the greatest
extent possible and make appropriate
adjustments to the NCUA’s regulations
to maintain their substantive
protections. For example, should the
Board remove Article XVI, § 4 of the
standard FCU bylaws, which governs
conflicts of interests for institutionalaffiliated parties? 18 If so, the Board
could make appropriate amendments to
its conflicts of interest rule, § 701.4,19 to
expand the scope of that rule to cover
all institution-affiliated parties of an
FCU rather than just FCU directors.
Similarly, should the Board remove
Article XVI, §§ 5 and 6 and make
appropriate changes to the NCUA’s rule
governing FCU member access to FCU
records, § 701.3,20 and the rule
governing record retention, part 749? 21
III. Request for General Comments
In addition to requesting specific
comments addressing the issues
identified above, the Board also requests
stakeholder comments on any aspect of
the standard FCU bylaws that
commenters wish to bring to the Board’s
attention to improve the standard FCU
18 12
CFR 701, App. A, Art. XVI, § 4.
CFR 701.4.
20 12 CFR 701.3.
21 12 CFR 749.
19 12
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bylaws’ usefulness and ease of use.
Further, the Board invites stakeholders
that have previously commented on
proposed changes to the standard FCU
bylaws to offer additional comments
based on recent experiences.
The Board asks stakeholders, who are
requesting a specific change to a
provision of the standard FCU bylaws,
to please provide a brief statement
regarding whether the FCU Act would
permit such a change. Some provisions
of the standard FCU bylaws are drawn
directly from the FCU Act and,
therefore, may not be legally amended.
For example, § 109 of the FCU Act
provides that an FCU may not charge
any other fee for FCU membership other
than a ‘‘uniform entrance fee if required
by the board of directors.’’ 22 This
provision of the FCU Act prohibits
FCUs from imposing monthly
membership fees and other similar
charges 23 and was codified in the
standard FCU bylaws to simplify
compliance obligations for FCUs.24
Accordingly, any request to change this
provision or any similar provisions that
correspond to a statutory requirement
set out in the FCU Act, regardless of
how compelling the stakeholder’s
arguments, would be impermissible. In
providing this brief supporting
statement, the Board asks that
stakeholders not only consider whether
the statutory text would permit such a
change but also whether the change fits
within the spirit and intent of the FCU
Act.25
By the National Credit Union
Administration Board on March 15, 2018.
Gerard Poliquin,
Secretary of the Board.
[FR Doc. 2018–05625 Filed 3–20–18; 8:45 am]
BILLING CODE 7535–01–P
22 12
U.S.C. 1759.
Monthly Membership Fees, OGC Op. Letter
15–0902 (May 1, 2015).
24 See 12 CFR 701, App. A, Art. II, § 2.
25 It is a ‘‘familiar rule that a thing may be within
the letter of a statute and yet not within the statute,
because not within its spirit nor within the
intention of its makers.’’ Mova Pharmaceutical
Corp. v. Shalala, 140 F.3d 1060, 1068 (D.C. Cir.
1998) (citing Holy Trinity Church v. U.S., 143 U.S.
457, 459–60 (1892)).
23 See
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BUREAU OF CONSUMER FINANCIAL
PROTECTION
[Docket No. CFPB–2018–0011]
12 CFR Chapter X
Request for Information Regarding the
Bureau’s Adopted Regulations and
New Rulemaking Authorities
Bureau of Consumer Financial
Protection.
ACTION: Request for information.
AGENCY:
The Bureau of Consumer
Financial Protection (Bureau) is seeking
comments and information from
interested parties to assist the Bureau in
considering whether, consistent with its
statutory authority to prescribe rules
pursuant to the Federal consumer
financial laws, the Bureau should
amend those rules it has promulgated
since its creation or issue certain new
rules.
DATES: Comments must be received by
June 19, 2018.
ADDRESSES: You may submit responsive
information and other comments,
identified by Docket No. CFPB–2018–
0011, by any of the following methods:
• Electronic: Go to https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Email: FederalRegisterComments@
cfpb.gov. Include Docket No. CFPB–
2018–0011 in the subject line of the
message.
• Mail: Comment Intake, Consumer
Financial Protection Bureau, 1700 G
Street NW, Washington, DC 20552.
• Hand Delivery/Courier: Comment
Intake, Consumer Financial Protection
Bureau, 1700 G Street NW, Washington,
DC 20552.
Instructions: The Bureau encourages
the early submission of comments. All
submissions must include the document
title and docket number. Please note the
number of the topic on which you are
commenting at the top of each response
(you do not need to address all topics).
Because paper mail in the Washington,
DC area and at the Bureau is subject to
delay, commenters are encouraged to
submit comments electronically. In
general, all comments received will be
posted without change to https://
www.regulations.gov. In addition,
comments will be available for public
inspection and copying at 1700 G Street
NW, Washington, DC 20552, on official
business days between the hours of 10
a.m. and 5 p.m. eastern time. You can
make an appointment to inspect the
documents by telephoning 202–435–
7275.
All submissions in response to this
request for information, including
SUMMARY:
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[Federal Register Volume 83, Number 55 (Wednesday, March 21, 2018)]
[Proposed Rules]
[Pages 12283-12286]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05625]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
RIN 3133-AE86
Federal Credit Union Bylaws
AGENCY: National Credit Union Administration (NCUA).
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The NCUA Board (Board) is issuing this advance notice of
proposed rulemaking to solicit stakeholder comments on ways to
streamline, clarify, and improve the standard Federal Credit Union
(FCU) bylaws. The standard FCU bylaws provide a comprehensive set of
corporate governance procedures that are mandatory for any FCU that had
not adopted bylaws as of November 30, 2007. The Board is considering a
number of significant changes to the FCU bylaws to provide enhanced
[[Page 12284]]
operational flexibility to FCUs and to reduce regulatory compliance
burdens on all FCUs.
DATES: Comments must be received on or before May 21, 2018.
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 Website: https://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx. Follow the instructions for submitting comments.
Email: Address to [email protected]. Include ``[Your
name]--Comments on Federal Credit Union Bylaws ANPR'' in the email
subject line.
Fax: (703) 518-6319. Use the subject line described above
for email.
Mail: Address to Gerard 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 can view all public comments on NCUA's
website 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-
3428, by appointment weekdays between 9 a.m. and 3 p.m. To make an
appointment, call (703) 518-6546 or send an email to [email protected].
FOR FURTHER INFORMATION CONTACT: Benjamin M. Litchfield, Staff
Attorney, National Credit Union Administration, 1775 Duke Street,
Alexandria, Virginia 22314-3428 or telephone: (703) 518-6540.
SUPPLEMENTARY INFORMATION:
I. Background
FCU incorporators must present proposed FCU bylaws along with an
organization certificate to the Board for its approval prior to
commencing business as an FCU.\1\ To simplify the organization of FCUs,
the Federal Credit Union Act (FCU Act) requires the Board to prepare
``from time to time'' a form of FCU bylaws to be used by FCU
incorporators and to make that form available upon request.\2\ The FCU
Act grants the Board considerable discretion in drafting this form
``from time to time,'' provided that the FCU bylaws are consistent with
basic corporate governance procedures set out in the FCU Act. Those
corporate governance procedures are designed to protect fundamental FCU
member rights that underpin the cooperative principles that serve as
the cornerstone of the credit union movement.\3\
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\1\ 12 U.S.C. 1754, 1758.
\2\ 12 U.S.C. 1758.
\3\ Specifically, these rights include the right to: (1)
Maintain a share account; (2) maintain FCU membership; (3) have
access to credit union facilities; (4) participate in the director
election process; (5) attend annual and special meetings; and (6)
petition for removal of directors and committee members. See Federal
Credit Union Bylaws, 72 FR 30984, 30986 (Aug. 6, 2007) (proposed
rule).
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The FCU bylaws and accompanying guidance were not part of the
NCUA's regulations for almost 25 years.\4\ During that time, in
consultation with the NCUA, FCUs had considerable discretion to adopt
reasonable FCU bylaws provisions provided that they did not conflict
with the FCU Act, the NCUA's regulations, established federal policy,
or otherwise pose a safety and soundness risk to the FCU.\5\
Accordingly, the Board did not view FCU bylaws disputes predominantly
as a federal regulatory matter. Instead, the Board believed that state
corporate law and state courts were the appropriate vehicles through
which FCU officials and members could settle FCU bylaws disputes where
state corporate law was not preempted by federal law.
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\4\ Federal Credit Union Bylaws, 72 FR 61495, 61496 (Oct. 31,
2007) (final rule) (codified at 12 CFR 701, App. A).
\5\ Id.
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However, the Board observed a number of troubling cases in which
members were unable to enforce fundamental FCU member rights in state
courts.\6\ Moreover, the Board began to see troubling precedents
developing in federal courts holding that FCUs do not have fiduciary
duties to their members despite the clear status conferred by the FCU
Act on a credit union member as a partial owner of the FCU.\7\ Treating
FCU bylaw disputes as largely matters of state corporate law also
diminished the NCUA's ability to take proactive enforcement measures in
this area. Accordingly, the Board incorporated the standard FCU bylaws
as part of the NCUA's regulations and required all FCUs that had not
adopted bylaws prior to November 30, 2007 to adopt the standard FCU
bylaws.\8\ FCUs that had adopted bylaws prior to that date were allowed
to retain their then current bylaws. However, the Board strongly
encouraged those FCUs to adopt the standard FCU bylaws.
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\6\ See 72 FR at 30985 (Aug. 6, 2007) (observing member
difficulties obtaining redress in state courts); see also Bruns v.
Nat'l Credit Union Admin., 122 F.3d 1251, 1257 (9th Cir. 1997)
(citing Montford v. Robins Fed'l Credit Union, 691 F. Supp. 347,
351-52 (M.D. Ga. 1988)) (NCUA appropriate body to hear FCU bylaw
complaints).
\7\ Id.; see also. Miur v. Navy Fed'l Credit Union, 529 F.3d
1100, 1107-8 (D.C. Cir. 2008) (applying the Virginia Commercial
Code).
\8\ 12 CFR 701, App. A, Instruction A.
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Since incorporating standard FCU bylaws into the NCUA's
regulations, the NCUA has periodically solicited comment from
stakeholders on ways to streamline, clarify, and improve the standard
FCU bylaws to provide FCUs with greater operational flexibility. For
example, the NCUA's Office of General Counsel met with stakeholders in
2013 to discuss possible revisions to the standard FCU bylaws. Those
stakeholders provided valuable input on particular provisions of the
standard FCU bylaws. Their comments and recommended changes included:
(1) Adding flexibility where consistent with law, regulation, and the
protection of fundamental member rights; (2) removing outdated or
obsolete provisions and terms; (3) conforming the standard FCU bylaws
to plain English writing principles; (4) expanding the commentary
section to provide additional information and guidance; (5) adding
provisions related to member rights and responsibilities and clarifying
the permissible actions FCUs can take to address members who are
abusive or disruptive; and (6) addressing provisions pertaining to
meeting procedures, quorums, and notice requirements. The Office of
General Counsel has a record of these comments and continues to take
them into account.
Recently, the NCUA's Regulatory Reform Task Force (Task Force), a
group created by the NCUA Chairman to implement the NCUA's regulatory
reform agenda, has suggested that more wholesale changes to the
standard FCU bylaws may be necessary because they have not been
significantly updated in nearly 10 years.\9\ To ensure that the
standard FCU bylaws are amended in a transparent manner that affords
stakeholders enhanced opportunity to participate in the rulemaking
process, the Task Force recommended that the Board issue an advance
notice of proposed rulemaking to request comments on ways in which the
FCU bylaws may be streamlined, clarified, and improved.
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\9\ Regulatory Reform Agenda, 82 FR 39702, 39705 (Aug. 22,
2017). The Task Force's report was adopted by the Board and issued
for public comment with a comment period ending on November 20,
2017.
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[[Page 12285]]
II. Request for Comments on Specific Topics
In accordance with the Task Force's recommendation, the Board is
issuing this advance notice of proposed rulemaking to solicit
stakeholder comments on the standard FCU bylaws. In particular, the
Board requests specific comments on the following questions:
1. How can the Board improve the FCU bylaws amendment process?
A perennial concern among stakeholders is that the process to amend
the standard FCU bylaws is complicated and time consuming. An FCU's
decision to amend its bylaws often results from a pressing operational
concern. The FCU's ability to respond to that concern in a timely
manner is not just a matter of convenience, but also an important
safety and soundness issue. An FCU that wishes to amend its bylaws must
request approval from the NCUA's Office of Credit Union Resources and
Expansion (CURE) for many amendments to the standard FCU bylaws. While
CURE processes bylaws amendment requests as expeditiously as possible,
the standard FCU bylaws do not provide for any timeline by which CURE
must arrive at its determination, except in the case of previously
approved bylaws amendments.\10\ Accordingly, the Board seeks specific
stakeholder comments on ways to improve this process to provide a
requesting FCU with a more timely response, greater transparency, and
enhanced accountability.
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\10\ 12 CFR 701, App. A, Instruction C.4.
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2. How can the Board clarify the FCU bylaws provisions addressing
limitation of service and expulsion of members?
In the past, stakeholders have asked for clarification on the FCU
bylaws provisions addressing limitation of service policies. Article
II, Sec. 4 of the standard FCU bylaws permits an FCU to limit services
or access to credit union facilities to ``a member who is disruptive to
credit union operations.'' \11\ The Office of General Counsel's
longstanding interpretation of the phrase ``disruptive to credit union
operations'' is that an FCU may limit services to an FCU member in a
number of cases, including situations where a member is abusive to FCU
staff or has caused a loss to the FCU. This is the case provided that
members have received adequate notice of the limitation of service
policy and there is some ``logical relationship between the
objectionable conduct and the services to be suspended.'' \12\
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\11\ 12 CFR 701, App. A, Art. II, Sec. 4.
\12\ Suspension of Service Policy, OGC Op. Letter 08-0431 (Aug.
12, 2008); Request for Interpretation of Section 118 of the Federal
Credit Union Act, OGC Op. Letter 96-0530 (June 10, 1996).
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However, the Office of General Counsel has also stated that
contract provisions in account and other member service agreements, as
well as federal and state laws, may affect an FCU's ability to
implement a limitation of service policy.\13\ For example, an FCU may
not implement a limitation of service policy that has a disparate
impact on a protected class, such as may be the case regarding defaults
on consumer loans.\14\ The ambiguity surrounding the use of limitation
of service policies has led to some justifiable stakeholder confusion
and enforcement issues.
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\13\ Id.
\14\ Regulation B, which implements the Equal Credit Opportunity
Act, prohibits discrimination on the basis of a protected class. See
12 CFR 1002.
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Accordingly, the Board is particularly interested in specific
stakeholder comments on ways to improve Article II, Sec. 4 of the
standard FCU bylaws to provide FCUs with the greatest possible clarity
regarding the use and misuse of limitation of service policies. The
Board is also interested in specific stakeholder comments on whether
this regulatory text should be removed in its entirety and addressed as
a separate regulation.
3. How can the Board improve the FCU bylaws to facilitate the
recruitment and development of directors?
As the credit union movement continues to undergo significant
changes, the Board is interested in ways that it can improve the FCU
bylaws to facilitate the recruitment of FCU directors. Article V of the
standard FCU bylaws sets out four distinct procedures that an FCU may
choose to follow in order to select directors.\15\ In each case, a
nominating committee must appoint at least one member to each vacancy,
including any unexpired term vacancy, for which elections are being
held. However, these procedures do not provide guidance on how the
nominating committee should proceed with identifying prospective
candidates nor do they clarify the criteria that the nominating
committee may use when selecting candidates.
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\15\ 12 CFR 701, App. A, Art. V.
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While the Board believes that these matters fall squarely within
the sound business judgment of each individual FCU, the Board is
interested in ways that it can amend the standard FCU bylaws to
facilitate effective business continuity planning. For example, should
the Board include commentary to Article V of the standard FCU bylaws
recommending certain non-binding factors that the nominating committee
may consider when selecting a candidate to fill a particular vacancy?
If so, what factors should the Board highlight? In addition, should the
Board include commentary authorizing FCUs to establish standing
advisory committees designed to recruit potential candidates to fill
board vacancies? If so, which individuals within the FCU should be part
of this advisory committee? What safeguards should be put in place to
prevent conflicts of interest?
4. How can the Board improve the FCU bylaws to encourage member
attendance at annual and special meetings?
A key difference ``between credit unions and other federally
chartered financial institutions lies in the democratic control and
management of credit unions.'' \16\ Accordingly, the Board is
interested in ways that it can improve the standard FCU bylaws to
encourage active member participation in annual and special meetings.
Article IV of the standard FCU bylaws sets out the procedures that must
be followed when an FCU holds a meeting of members.\17\ For an annual
meeting, the secretary of the FCU must provide members with at least 30
but not more than 75 days written notice before the date of any annual
meeting. For a special meeting, the written notice must be at least 7
days before the date of the special meeting. The Board seeks
stakeholder input on whether these time periods are adequate to ensure
that members have sufficient advanced notice to afford an actual
opportunity to attend annual and special meetings.
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\16\ La Caisse Populaire Ste-Marie (St. Mary's Bank) v. U.S.,
425 F. Supp. 512, 517 (D.N.H. 1976).
\17\ 12 CFR 701, App. A, Art. IV.
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In addition, with the rise of e-commerce and mobile banking, the
Board is interested in stakeholder comments on ways that it may improve
Article IV of the standard FCU bylaws to allow FCUs to harness new
technologies, particularly social media and web-based conferencing
solutions, to allow more members to attend annual and special meetings.
For example, should the Board allow an FCU to conduct an annual or
special meeting through teleconference? If so, what market solutions
exist to allow members to debate issues brought to the floor or to
securely vote on director nominations? Would the use of such a market
solution be considered an
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impermissible proxy vote? What risks are associated with the use of
these products? Would the use of these kinds of solutions encourage
greater member participation from those individuals who largely rely on
mobile financial services and avoid traditional brick-and-mortar
branches? Could this technology be provided through a mobile
application?
5. Should the Board eliminate overlaps between the NCUA's regulations
and the FCU bylaws?
In reviewing the standard FCU bylaws, NCUA staff identified a
number of the NCUA's regulations that overlap, to some extent, with the
standard FCU bylaws. Many of the overlapping standard FCU bylaws
provisions are located in Article XVI and address issues such as FCU
member confidentiality, conflicts of interest, record retention, and
the availability of books and records to FCU members. Do these
duplicative regulatory and bylaws requirements increase compliance
burden in a manner that outweighs any measurable member benefit? If so,
the Board requests specific stakeholder comments on how to address
these provisions.
If such overlap is problematic, a solution the Board could consider
is to remove the overlapping provisions from the standard FCU bylaws to
the greatest extent possible and make appropriate adjustments to the
NCUA's regulations to maintain their substantive protections. For
example, should the Board remove Article XVI, Sec. 4 of the standard
FCU bylaws, which governs conflicts of interests for institutional-
affiliated parties? \18\ If so, the Board could make appropriate
amendments to its conflicts of interest rule, Sec. 701.4,\19\ to
expand the scope of that rule to cover all institution-affiliated
parties of an FCU rather than just FCU directors. Similarly, should the
Board remove Article XVI, Sec. Sec. 5 and 6 and make appropriate
changes to the NCUA's rule governing FCU member access to FCU records,
Sec. 701.3,\20\ and the rule governing record retention, part 749?
\21\
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\18\ 12 CFR 701, App. A, Art. XVI, Sec. 4.
\19\ 12 CFR 701.4.
\20\ 12 CFR 701.3.
\21\ 12 CFR 749.
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III. Request for General Comments
In addition to requesting specific comments addressing the issues
identified above, the Board also requests stakeholder comments on any
aspect of the standard FCU bylaws that commenters wish to bring to the
Board's attention to improve the standard FCU bylaws' usefulness and
ease of use. Further, the Board invites stakeholders that have
previously commented on proposed changes to the standard FCU bylaws to
offer additional comments based on recent experiences.
The Board asks stakeholders, who are requesting a specific change
to a provision of the standard FCU bylaws, to please provide a brief
statement regarding whether the FCU Act would permit such a change.
Some provisions of the standard FCU bylaws are drawn directly from the
FCU Act and, therefore, may not be legally amended. For example, Sec.
109 of the FCU Act provides that an FCU may not charge any other fee
for FCU membership other than a ``uniform entrance fee if required by
the board of directors.'' \22\ This provision of the FCU Act prohibits
FCUs from imposing monthly membership fees and other similar charges
\23\ and was codified in the standard FCU bylaws to simplify compliance
obligations for FCUs.\24\ Accordingly, any request to change this
provision or any similar provisions that correspond to a statutory
requirement set out in the FCU Act, regardless of how compelling the
stakeholder's arguments, would be impermissible. In providing this
brief supporting statement, the Board asks that stakeholders not only
consider whether the statutory text would permit such a change but also
whether the change fits within the spirit and intent of the FCU
Act.\25\
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\22\ 12 U.S.C. 1759.
\23\ See Monthly Membership Fees, OGC Op. Letter 15-0902 (May 1,
2015).
\24\ See 12 CFR 701, App. A, Art. II, Sec. 2.
\25\ It is a ``familiar rule that a thing may be within the
letter of a statute and yet not within the statute, because not
within its spirit nor within the intention of its makers.'' Mova
Pharmaceutical Corp. v. Shalala, 140 F.3d 1060, 1068 (D.C. Cir.
1998) (citing Holy Trinity Church v. U.S., 143 U.S. 457, 459-60
(1892)).
By the National Credit Union Administration Board on March 15,
2018.
Gerard Poliquin,
Secretary of the Board.
[FR Doc. 2018-05625 Filed 3-20-18; 8:45 am]
BILLING CODE 7535-01-P
