[Federal Register Volume 83, Number 219 (Tuesday, November 13, 2018)]
[Proposed Rules]
[Pages 56640-56664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24169]
[[Page 56639]]
Vol. 83
Tuesday,
No. 219
November 13, 2018
Part III
National Credit Union Administration
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12 CFR Part 701
Federal Credit Union Bylaws; Proposed Rule
Federal Register / Vol. 83 , No. 219 / Tuesday, November 13, 2018 /
Proposed Rules
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
RIN 3313-AE86
Federal Credit Union Bylaws
AGENCY: National Credit Union Administration (NCUA).
ACTION: Proposed rule.
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SUMMARY: The NCUA Board (Board) is proposing to update, clarify, and
simplify the federal credit union bylaws (FCU Bylaws). The Board also
is proposing changes that will update and conform the FCU Bylaws to
legal opinions issued by the NCUA's Office of General Counsel and/or
provide greater flexibility to FCUs. Finally, the Board is proposing
other changes that are designed to remove outdated or obsolete
provisions.
DATES: Comments must be received by January 14, 2019.
ADDRESSES: You may submit comments by any of the following methods
(Please send comments by one method only):
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
NCUA Website: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the instructions for
submitting comments.
Email: Address to [email protected]. Include ``[Your
name] Comments on FCU Bylaws'' 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: All public comments are available on the
agency's website at http://www.ncua.gov/RegulationsOpinionsLaws/comments as submitted, except as may not be possible for technical
reasons. Public comments will not be edited to remove any identifying
or contact information. Paper copies of comments may be inspected in
NCUA's law library, at 1775 Duke Street, Alexandria, Virginia 22314, by
appointment weekdays between 9:00 a.m. and 3:00 p.m. To make an
appointment, call (703) 518-6540 or send an email to [email protected].
FOR FURTHER INFORMATION CONTACT: Benjamin M. Litchfield, Staff
Attorney, Office of General Counsel, 1775 Duke Street, Alexandria,
Virginia 22314, or by telephone at (703) 518-6540.
SUPPLEMENTARY INFORMATION:
I. Background
II. Legal Authority
III. Summary of the Proposed Rule
IV. Article-by-Article Analysis
V. Regulatory Procedures
I. Background
Section 108 of the Federal Credit Union Act (FCU Act) requires the
Board to periodically prepare a form of bylaws to be used by FCU
incorporators and to provide that form to FCU incorporators upon
request.\1\ FCU incorporators must submit proposed bylaws to the NCUA
as part of the chartering process. Once the NCUA has approved an FCU's
proposed bylaws, the FCU must operate according to its approved bylaws
or seek agency approval for a bylaw amendment.\2\
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\1\ 12 U.S.C. 1758.
\2\ 12 CFR 701.2(a).
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The FCU Bylaws are set out in Appendix A to part 701 of the NCUA's
regulations.\3\ The Board incorporated the FCU Bylaws into the NCUA's
regulations to address concerns regarding bylaw enforcement.\4\ As the
Board stated in the final rule incorporating the FCU Bylaws, the FCU
Act only provides two mechanisms for correcting bylaw violations: (1)
Suspension or revocation of an FCU's charter or (2) placing an FCU into
conservatorship. Aside from these extreme remedies, when adopting the
final rule, the Board was concerned about identifying what, if any,
supervisory action the NCUA could take to protect fundamental member
rights.\5\ By incorporating the FCU Bylaws into the NCUA's regulations,
the Board believed that it could use additional regulatory tools, such
as the issuance of a cease and desist order, to address material
noncompliance with an FCU's bylaws.
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\3\ 12 CFR 701, App. A.
\4\ 72 FR 61495, 61496 (Oct. 31, 2007).
\5\ 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 72 FR
30984, 30986 (June. 5, 2007) (proposed rule).
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FCUs often express concerns that the FCU Bylaws do not provide
sufficient operational flexibility to allow an FCU to respond to
changing market practices or to address basic corporate governance
matters in a prompt and efficient manner. These arguments are well
taken. Accordingly, the NCUA has engaged in an ongoing review of the
FCU Bylaws to determine what, if any, changes may be necessary to
provide additional flexibility to FCUs.
In 2013, the NCUA's Office of General Counsel consulted with
representatives from the credit union industry regarding the FCU
Bylaws. The NCUA received many comments during the 2013 consultation,
many of which focused on relatively narrow aspects of the FCU Bylaws.
For example, FCUs recommended that the NCUA provide more staff
commentary on the meaning and interpretation of specific bylaw
provisions. They also encouraged the NCUA to make a concerted effort to
modernize the FCU Bylaws by using consistent terms throughout and
deleting inapplicable language that is no longer useful. Commenters
specifically recommended that the NCUA update the preamble to the FCU
Bylaws and ensure that the instructions are current.
On March 15, 2018, the Board issued an advance notice of proposed
rulemaking (ANPR) soliciting comments on how to update, clarify, and
simplify the FCU Bylaws.\6\ The Board solicited comment on five
specific questions related to: (1) Improving the bylaw amendment
process within the NCUA; (2) addressing ambiguities in the FCU Bylaws
allowing for an FCU to limit services to a member and expel a member;
(3) methods to facilitate recruitment and development of directors; (4)
methods to encourage member attendance at annual and special meetings;
and (5) eliminating regulatory overlaps between the FCU Bylaws and the
NCUA's regulations. The Board also invited general comments on
improvements to the FCU Bylaws.
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\6\ 83 FR 12283 (Mar. 21, 2018).
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The Board received a wide variety of comments to the ANPR from
FCUs, federally insured, state-chartered credit unions, national credit
union trade associations, state credit union trade associations, and
law firms. Commenters generally appreciated the Board's efforts to
provide an enhanced opportunity to participate in the rulemaking
process. Nearly all of the commenters raised issues with specific
aspects of the FCU Bylaws and requested that the Board provide the
greatest amount of regulatory relief permissible under the FCU Act.
Based on the comments the Board has received in response to the
ANPR and throughout its ongoing review of the FCU Bylaws, the Board is
proposing to make significant revisions to modernize the FCU Bylaws.
[[Page 56641]]
II. Legal Authority
The Board is issuing this proposed rule pursuant to its specific
authority in the FCU Act to adopt a form of bylaws to be used by FCU
incorporators when chartering an FCU,\7\ as well as its plenary
authority to adopt rules and regulations for the administration of the
FCU Act.\8\ Given the importance of proper corporate governance
procedures to the safe and sound operation of FCUs, the Board believes
this proposed rule is a necessary and proper exercise of this statutory
rulemaking authority.
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\7\ 12 U.S.C. 1753.
\8\ 12 U.S.C. 1766(a).
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III. Summary of the Proposed Rule
The proposed rule incorporates many of the suggestions the Board
received in response to the ANPR and throughout the NCUA's ongoing
review of the FCU Bylaws. In addition, the proposed rule clarifies
provisions that have created confusion in the past, as reflected by the
numerous inquiries the NCUA has received from FCUs and members. In some
instances, a proposed change offers more detail or further elaboration
to help FCU officials, employees, and members better understand a
provision.
The proposed rule also makes stylistic and grammatical changes
throughout the FCU Bylaws, which provide for a much clearer and more
readable document. For example, the proposed rule moves the entire body
of staff commentary to the end of the FCU Bylaws, with corresponding
references to the articles and section numbers that are the subject of
the commentary.
However, the proposed rule does not permit an FCU to draft its own
bylaws. The FCU Act requires the Board to develop a form of bylaws that
``shall be used'' by FCU incorporators and mandates that FCUs operate
according to their NCUA-approved bylaws.\9\ While commenters to the
ANPR and throughout the NCUA's ongoing review of the FCU Bylaws have
advocated greater flexibility to develop their own bylaws, the Board
continues to believe that having a uniform set of FCU Bylaws is more
consistent with the spirit of the FCU Act \10\ and is necessary to
protect fundamental member rights, to avoid confusion among FCUs, and
to prevent the adoption of illegal bylaw provisions.\11\
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\9\ 12 U.S.C. 1758.
\10\ See 71 FR 24551 (Apr. 26, 2006) (``NCUA's longstanding
position has been that [the FCU Act] expresses a congressional
desire for uniformity regarding FCU operations and member rights.
Accordingly, NCUA views [the FCU Act] as providing authority to
issue form bylaws that apply to all FCUs, not only newly chartered
FCUs, and to review proposed bylaw amendments.'').
\11\ See 72 FR 30984, 30985 (June 5, 2007) (proposed rule)
(uniform bylaws necessary to protect fundamental member rights,
avoid confusion, and prevent adoption of illegal bylaws).
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IV. Article-by-Article Analysis
Introduction
This proposed rule modernizes the introductory language to the FCU
Bylaws. It changes the instructions for bylaw amendments to reflect
that the NCUA's Office of Credit Union Resources and Expansion (CURE)
now is the primary office handling bylaw amendments, and consults with
the NCUA's Office of General Counsel as necessary. The proposed rule
also establishes an explicit 90 calendar day deadline for CURE to reach
a decision on a bylaw amendment.
In the ANPR, the Board specifically requested comments on improving
the bylaw amendment process. Commenters requested that the Board adopt
a deadline for CURE to process bylaw amendments, with a majority
favoring 30 calendar days. While the Board agrees that the NCUA should
process bylaw amendments as expeditiously as possible to allow the FCU
to address any pressing operational concerns, the Board remains
concerned that 30 calendar days may be an insufficient amount of time.
Accordingly, the proposed rule adopts a 90-calendar day deadline. The
Board believes that this time period will provide CURE with sufficient
time to consider the bylaw amendment without imposing an undue
operational burden on the FCU. The Board requests specific comments on
this aspect of the proposed rule including whether another time period,
such as 60 calendar days, would be more appropriate to ensure that CURE
processes proposed bylaw amendments in a timely manner.
Commenters to the ANPR also requested that the Board automatically
approve any bylaw amendment that CURE does not approve within this
deadline. The Board does not believe that it is appropriate to
automatically approve proposed bylaw amendments, as this could result
in adoption of a bylaw that has a material adverse effect on
fundamental member rights, poses a safety and soundness risk to the
FCU, or is otherwise contrary to law. Instead, the Board believes it is
appropriate to treat the failure to approve a bylaw amendment within
the prescribed deadline as a denial, which the FCU may then appeal to
the Board pursuant to the appeals procedures set out in subpart B to
part 746 of the NCUA's regulations.\12\
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\12\ 12 CFR 746, subpart B.
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Article I. Name--Purposes
Article I states the FCU's name and mission. The proposed rule
amends section 2, which outlines the FCU's purposes, by changing the
reference in the second sentence from ``consumers'' to ``members.'' The
Board is proposing to change this term because FCUs are not limited in
their mission to serving consumers. There may be small businesses and
other organizations within the field of membership that can benefit
from the FCU's services, and this change is designed to reflect this
benefit.
Article II. Qualifications for Membership
Article II outlines the requirements for obtaining and continuing
FCU membership. The proposed rule includes an expanded discussion in
the staff commentary of measures that an FCU may take to address
abusive and disruptive members. In addition, to facilitate an FCU's
implementation of any limitation of services policy, the proposed rule
adds a new section 5, describing the concept of a ``member in good
standing.'' As long as a member remains in good standing, that member
retains all of the rights and privileges associated with FCU
membership. A member not in good standing, however, may be subject to
an FCU's limitation of services policy.
In the ANPR, the Board specifically requested suggestions on ways
to clarify an FCU's right to limit services or restrict access to
credit union facilities to disruptive or abusive members. Some
commenters recommended that the Board incorporate into the FCU Bylaws
prior legal opinions by the NCUA's Office of General Counsel addressing
this matter. Those legal opinions state than an FCU may limit services
or access to credit union facilities to violent, belligerent,
disruptive, or abusive members provided that there is a logical
relationship between the objectionable conduct and the services to be
suspended. The member must also receive adequate notice of the FCU's
limitation of services policy.\13\
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\13\ See OGC Op. No. 08-0431 (Aug. 12, 2008).
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The Board agrees that incorporating these legal opinions into the
FCU Bylaws is appropriate to provide additional clarity on an FCU's
right to limit services or access to credit union facilities.
Accordingly, the proposed rule includes staff commentary to Article II,
based on these prior legal opinions, that details how an FCU may
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handle an abusive or disruptive member. The staff commentary notes that
there is a reasonably wide range within which an FCU may fashion a
limitation of services policy that is tailored to the needs of the
individual FCU. An FCU has broad discretion to deny, as it deems
appropriate, all or most credit union services such as ATM services,
credit cards, loans, share draft privileges, preauthorized transfers,
or access to credit union facilities to a member that has engaged in
conduct that has caused a loss to the FCU or that threatens the safety
of credit union staff, facilities, or other members in the FCU or its
surrounding property. Accordingly, an FCU may take immediate action to
address situations in which a member is violent, belligerent,
disruptive, or poses a threat to the credit union, or other members, or
its employees even if the FCU Act prohibits the FCU from immediately
expelling the member.
The staff commentary also notes that the policy need not be
identical or applied uniformly in all cases, provided that the FCU has
a legitimate purpose for any disparate treatment of members. For
additional clarity, the staff commentary contains cross references to
procedures that FCUs must use to expel a member, and it refers to
Article XVI, Sec. 1 of the FCU Bylaws, which contains language
reiterating that no member may access or utilize an FCU's services in
furtherance of an illegal objective.
To facilitate an FCU's implementation of its limitation of services
policy, the proposed rule amends Article II to distinguish between a
member that retains all of the rights and privileges associated with
FCU membership and a member that is subject to a limitation on services
or a restriction on access to credit union facilities. As noted, the
proposed rule adds a new section 5, describing the concept of a
``member in good standing.'' A member in good standing retains all the
rights of FCU membership. To remain in good standing, a member must be
current on credit union loans, avoid engaging in any violent,
belligerent, disruptive, or abusive behavior towards credit union staff
or other credit union members in the FCU or its surrounding property,
and not cause a financial loss to the credit union. A member that fails
to observe any of these basic requirements may be subject to reasonable
limitations of service or access to credit union facilities pursuant to
the FCU's limitation of services policy.
The Board recognizes that terms such as ``violent,''
``belligerent,'' ``disruptive,'' and ``abusive'' are subjective and,
therefore, may not provide FCUs with absolute clarity regarding the
circumstances under which a limitation of services or access to credit
union facilities may be appropriate. The Board believes that, without
question, certain actions warrant immediate limitations of service or
access to credit union facilities, such as violence against other
credit union members or credit union staff in the credit union facility
or the surrounding property. In fact, the Board believes that an FCU
has an obligation to take immediate action against such individuals.
Other actions, such as rude behavior or potential threats of violence,
may warrant limitations of service or restrictions of access to credit
union facilities based on the specific facts and circumstances of that
case. Accordingly, the Board requests comments on ways to clarify these
terms, including specific examples of conduct that FCUs believe to be
``disruptive,'' ``abusive,'' and ``belligerent.'' Based on the
persuasiveness of the comments, the Board may incorporate examples of
``violent,'' ``belligerent,'' ``disruptive,'' and ``abusive'' conduct
into staff commentary to provide additional clarity for FCUs.
The Board notes that, in addition to the rights granted under
Article II, an FCU may immediately take actions such as contacting
local law enforcement, seeking a restraining order, or pursuing other
lawful means, to protect the credit union, credit union members, and
staff. Nothing in the FCU Act or the FCU Bylaws prevents an FCU from
using whatever lawful means it deems necessary to address circumstances
where a member poses a risk of harm to the FCU, its members, or its
staff.
Article III. Shares of Members
Article III provides basic information about issues related to
members' share accounts, including the par value of the membership
share, trust accounts, and membership status of joint account holders.
The proposed rule adds new language under Section 1 providing
representative examples for FCUs to choose in establishing varying par
values for different classes of membership (such as students, minors,
or non-natural persons), provided that such differences conform to
applicable legal requirements established by federal, state, or
municipal anti-discrimination laws. The new language also clarifies
that FCUs have options regarding whether to require all members to
maintain a regular share account, or whether to permit members to base
their qualification for membership on some other type of account.
Additional staff commentary elaborates more fully on this option. The
proposed rule revises the text of Article III to incorporate plain
English writing principles and delete unnecessary provisions.
Commenters to the ANPR requested that the Board provide additional
guidance on trust accounts. New staff commentary addresses some of the
considerations that apply in the context of trust accounts, including a
discussion of the pertinent differences between revocable and
irrevocable trusts. It also clarifies that, in the case of a revocable
trust, the individual who establishes the trust (also known as the
settlor) maintains ownership and control of the funds during that
person's lifetime. Thus, the NCUA requires the settlor to join the FCU
in order to establish a revocable trust account for that individual,
thus requiring the settlor to be within the FCU's field of membership.
The staff commentary notes that there is no requirement that the
settlor first establish a regular share account to become a member.
Rather, the settlor may satisfy the membership through the opening of
the revocable trust account itself.
In contrast, the staff commentary clarifies that membership
requirements for an irrevocable trust account may be met through the
settlor, who is the original owner of the funds, or the beneficiary,
who obtains an equitable, beneficial interest in the funds once the
trust is established. So long as one or the other is eligible for
membership and actually joins the FCU, then the FCU may accept the
account. As with revocable trusts, the membership obligation can be
satisfied through the opening of the trust account itself, so it is not
necessary for the beneficiary or the settlor, as applicable, to
establish a regular share account as a condition precedent to
membership. Furthermore, the trustee need not actually be a member of
the FCU. Many irrevocable trusts have a trustee and the NCUA often
receives questions on whether membership requirements for an
irrevocable trust may be met through the trustee. While the trustee has
administrative responsibility for the account, the trustee has no
ownership interest in the account and is, therefore, irrelevant for
purposes of establishing membership.
The staff commentary also notes that a trust itself, whether
revocable or irrevocable, may be a member of an FCU in its own right if
all parties to the trust, including the settlors, beneficiaries and
trustees, are within the field of membership and actually join the FCU.
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Article IV. Meetings of Members
Article IV addresses procedures related to annual and special
meetings of an FCU's membership. In the ANPR, the Board specifically
requested comments on methods to encourage member attendance at annual
and special meetings. The proposed rule makes several changes to
Article IV to encourage greater member participation, including
enhanced notice requirements and adjustments to quorum requirements.
To ensure that members receive adequate notice of an annual or
special meeting, the proposed rule requires that the notice for the
annual meeting be posted in a conspicuous place in the FCU's physical
office of the FCU, such as at the teller windows or on the front door
of the FCU's office, at least 30 calendar days before the meeting. The
notice must also be prominently displayed on the FCU's website if the
credit union then maintains a website. An FCU is not required to
establish and maintain a website solely for this purpose, however. The
proposed rule also deletes the option to waive prior notice if all
members entitled to vote waived the notice requirement. The Board
believes that these changes are appropriate because members are more
likely to participate in annual and special meetings if the notice is
widely announced.
In the staff commentary, the proposed rule encourages FCUs to
provide a live webcast of annual and special meetings for interested
members, as well as post a video of the annual meeting on the FCU's
website. The NCUA encourages this policy only for FCUs with a website
at the time of any such meeting; nothing requires FCUs to establish or
maintain a website solely for this purpose. This policy encourages
members to participate in the annual meeting, while also providing
access to members who cannot attend meetings in person.
The proposed rule also adjusts the quorum requirement for meetings.
It requires 12 members, excluding the board, credit union staff, and
officials, for a quorum. The Board is proposing this adjustment to
encourage FCUs to have wider participation from members, rather than
allowing credit union staff and board members to control all corporate
decision making within the credit union.
The proposed rule, however, does not change the total number of
member signatures required to call a special meeting. During the 2013
consultation process with members of the credit union industry,
commenters favored increasing the total number of member signatures
required to call a special meeting. They posited that special meetings
are expensive and time-consuming to conduct and, thus, should be
reserved only for matters of interest to a broad group of members.
These comments are well taken. The Board does not believe that adopting
a blanket increase is appropriate, however, given its potential to
disenfranchise members of smaller FCUs. Accordingly, the Board is not
proposing to make any changes to the provisions in Article IV that
impose a limit on the total number of member signatures required to
call a special meeting. Instead, the Board believes that a preferable
approach is to continue the NCUA's current practice of considering
requests from individual FCUs to increase this signature requirement on
a case-by-case basis.
Furthermore, the proposed rule does not generally allow an FCU to
conduct a virtual or hybrid (combined virtual and in-person) annual or
special meeting. Commenters to the ANPR noted that at least 22 states
currently permit corporations to host virtual or hybrid meetings, with
several of those states extending the same flexibility to state-
chartered financial institutions. The commenters argued that FCUs with
the appropriate size, complexity, and sophistication should be allowed
to take advantage of these solutions to provide greater flexibility for
their members to attend annual or special meetings. The Board is
sympathetic to the commenters' arguments. Due to its concerns about
member disenfranchisement, however, the Board does not currently
support adopting this position in a rulemaking that affects all FCUs.
The Board is particularly concerned with the rights of members that do
not have access to electronic devices or that may live in areas without
access to broadband internet.
The NCUA will, however, consider bylaw amendment requests allowing
for hybrid meetings on a case-by-case basis depending on, among other
things, the FCU's size, nature, and field of membership. For example,
the NCUA may grant such a bylaw amendment for an FCU that offers a
majority of its financial services online or an FCU with a
geographically dispersed field of membership. To avoid the possibility
of member disenfranchisement, however, the Board does not believe it is
appropriate to allow a virtual meeting to completely supplant a member
meeting. Therefore, FCUs holding hybrid meetings must always offer an
option for in-person attendance as well as online.
The FCU Bylaws already grant an FCU considerable discretion to hold
meetings in a location that is convenient for most of its members.
Article IV allows an FCU to hold an annual or special meeting in the
county in which any office of the FCU is located or within a radius of
100 miles of such an office, provided that the FCU does not pick a
location designed to limit member participation or that has such an
effect. Accordingly, the Board believes that an FCU has sufficient
flexibility to ensure broad participation from members without the need
for entirely virtual meetings and would be reluctant to approve any
bylaw amendment allowing for entirely electronic voting. The Board
encourages FCUs to be mindful when selecting a location for a member
meeting to choose a location that maximizes member participation.
Article V. Elections
Article V addresses procedures for electing FCU Board members, and
allows FCUs to select one of four options for conducting nominations
and elections. During the 2013 consultation process with members of the
credit union industry, the NCUA received comments that focused on
several discrete aspects of this Article. Commenters suggested that, in
regulating the voting process, the NCUA should take modern technology
into consideration, including an option for electronic-only voting.
Some commenters requested clarification on the appropriate procedures
in cases of uncontested elections. Other commenters asked about the
procedures for, and permissibility of, imposing additional director
qualifications, and how to permit board-established qualifications.
The proposed rule provides staff commentary clarifying electronic
voting. The staff commentary states that an FCU may use as many forms
of electronic voting (e.g., mobile phone or internet) as it wishes for
those members who choose to vote electronically. However, the proposed
rule does not allow an FCU to adopt an entirely electronic voting
process. While modern technological innovations have changed the way
that corporations and other businesses conduct meetings and hold
elections, the Board remains concerned that allowing electronic-only
voting could disenfranchise those members that do not have access to
electronic devices or that may live in areas without access to reliable
internet. The NCUA will, however, consider bylaw amendment requests
allowing for electronic-only voting on a case-by-case basis.
The proposed rule also provides staff commentary clarifying
procedures for
[[Page 56644]]
uncontested elections. The staff commentary notes that three of the
options for conducting nominations and elections provide for elections
by acclamation or consensus when the number of nominees for board
positions equals the number of positions to be filled. These options do
not permit nominations from the floor at the meeting because members
must be provided a ballot in advance of the member vote, so a petition
is the only way to nominate a candidate not on the nominating
committee's slate. The staff commentary also highlights that section
(1)(c) in each of these options requires the notice to members to
include the fact that there are no nominations from the floor at the
meeting, as well as a notice that the FCU will not conduct a vote by
ballot if the number of nominees equals the number of positions to be
filled.
Lastly, the proposed rule amends the staff commentary to encourage
FCUs to take steps to increase the number of members who vote in FCU
elections by increasing the range of voting options. The NCUA recently
has approved several bylaw amendments that essentially combine the
election options, for example, by adding a provision for mail or
electronic ballots to one of the in-person voting options. The Board
believes that, where possible, FCUs using one of the in-person voting
options should consider offering mail or electronic ballots in addition
to in-person voting. Similarly, FCUs conducting elections by mail and
electronic means should consider also offering in-person voting. These
changes currently require interested FCUs to pursue bylaw amendments
individually. Accordingly, the Board seeks comment on whether the FCU
Bylaws should include an additional option for conducting elections
that would allow FCUs to use a combination of voting methods without
needing to make individual requests to do so.
The Board seeks specific comments on whether the FCU Bylaws should
require that the nominating committee widely publicize to all FCU
members the call for nominations by any medium the FCU determines and
interview every member who volunteers to serve. In addition, the Board
asks whether the secretary should post the nominations by petition
along with those of the nominating committee on the credit union's
website (if the credit union maintains a website). The Board believes
that widely publicizing the nomination process and posting the
nominations by petition on the credit union's website will provide more
opportunities for member participation and is considering adopting such
requirements in the final rule.
Article VI. Board of Directors
This Article provides the requirements related to the board of
directors, such as the number of members, the composition of the board,
the terms of office, and the responsibilities of the board. It also
describes the regular and special meetings of the board. In addition,
this Article provides the requirements for quorums, attendance and
removal of board or credit committee members, and the suspension of
supervisory committee members.
As part of the 2013 consultation process with members of the credit
union industry, the NCUA received comments suggesting that the FCU
Bylaws be revised to provide specific guidance to FCUs interested in
establishing director emeritus and associate director positions.
Commenters suggested that greater flexibility in regard to these types
of arrangements will enable an FCU to better plan for vacancies in
board positions and retirements among current directors. They also
recommended enhanced flexibility regarding the composition of the board
and reorganization of board duties. Moreover, commenters requested
greater flexibility with regard to options concerning attendance by
directors at meetings, and criteria and procedures by which incumbent
directors may be removed. Commenters to the ANPR reiterated the need
for additional guidance on associate director positions.
The Board agrees that an FCU should have the ability to establish,
as a matter of FCU board policy, the position of director emeritus for
former directors who faithfully fulfilled their responsibilities as
members of the board for at least a specified minimum number of years.
Accordingly, the proposed rule includes a new section 10 that an FCU
may adopt to create such positions. It also includes specific staff
commentary to this section that states that the decision to establish a
director emeritus position, as well as any selection of individuals to
become directors emeriti, is solely within the discretion of the FCU's
board. The staff commentary clarifies that a director emeritus may
attend and participate in board meetings, but may not vote on any
matter before the board or exercise any official duties of a director.
To provide additional guidance to FCUs on associate director
positions, the proposed rule clarifies, through staff commentary, that
an FCU may establish associate director positions through board policy.
The staff commentary notes that the purpose of these positions is to
provide qualified individuals with an opportunity to gain exposure to
board meetings and discussions, but without formal director
responsibility or the right to vote. As with the director emeritus
position, the decision to establish an associate director position, as
well as the selection of the individual(s) to become associate
directors, is solely within the discretion of the FCU's board.
To provide FCUs with greater flexibility to address concerns
regarding director and credit committee member attendance at monthly
meetings, the proposed rule amends the option for FCUs to remove a
director or a credit committee member for failure to attend regular
meetings. The current bylaw language allows FCUs to remove a director
or credit committee member that has missed 3 consecutive months, or 4
meetings in a calendar year. Under the proposed rule, an FCU may remove
a director or credit committee member for missing 3 consecutive months
or for missing 4 meetings within any 12 consecutive months. The Board
believes this change provides FCUs with greater flexibility to address
situations where a director or credit committee member misses a
substantial number of consecutive meetings but would otherwise not
qualify for removal because the missed meetings do not all occur within
the same calendar year. In addition, the proposed rule adds language to
allow FCUs to choose whether directors or credit committee members may
be paid employees after such positions end.
The proposed rule also adds language that clarifies the existing
restriction on the number of employees and family members of employees
who may simultaneously serve on the board. The NCUA has received
numerous questions regarding this issue since the FCU Bylaws were first
incorporated into the NCUA's regulations in 2007. The current bylaw
language prohibits FCU employees, their family members, or a
combination of FCU employees and their family members from constituting
a majority of the board. The purpose of this restriction is to prevent
conflicts of interest that may arise when a majority of the board has a
personal or pecuniary interest in a matter currently being reviewed by
the board.
The Board has historically interpreted this provision of the FCU
Bylaws to prohibit any combination of FCU employees, their family
members, or FCU employees and their family members from constituting a
majority of the board. To provide FCUs with
[[Page 56645]]
additional clarity, the proposed rule states that the total number of
current voting directors serving who fall into the following categories
must not constitute a majority of the board: (1) Management officials
plus assistant management officials plus other employees; (2) immediate
family members or persons in the same household as the management
officials, assistant management officials, and other employees; or (3)
management officials plus assistant management officials plus other
employees, plus immediate family members or persons in the same
household as management officials, assistant management officials, and
other employees. The Board believes that this clarification will
provide additional guidance to FCUs on this restriction.
For FCUs that elect not to have a specifically appointed credit
committee, the proposed rule adds two new options to provide additional
flexibility in addressing an applicant's request for review of a denied
loan application. The FCU Act requires a board, at the request of the
applicant, to review any application that has been denied by a loan
officer.\14\ The FCU Bylaws allow the board, in its discretion, to
establish subcommittees for the purpose of reviewing, at the request of
an applicant, loan applications that have been rejected. These
subcommittees are comprised of three members that serve a regular term
of two years and function as mid-level appeal committees for the review
of denials. The board itself must, at the request of an applicant,
continue to review all applications denied by any such subcommittee.
These two new options allow for FCUs to choose different ways to form
the committee and select terms for the committee members.
---------------------------------------------------------------------------
\14\ See 12 U.S.C. 1761c(b) (``If there is not a credit
committee, a member shall have the right upon written request of
review by the board of directors of a loan application which has
been denied.'').
---------------------------------------------------------------------------
Under the first new option, the board may elect to establish a
subcommittee of three members and two alternates. The term of office of
the subcommittee members may be for up to 3 years. Any number of
lending professionals within the credit union may serve on the
subcommittee, provided that no loan officer reviews any loan that the
loan officer denied. At least 3 members of the subcommittee must review
loan denials, none of whom have been a party to denying the loan. Under
the second new option, the board may, by resolution, change the number
of committee members to an odd number no less than 3 and no more than
7. The board has the discretion to set the length of each subcommittee
member's term upon appointment and stagger terms to prevent a complete
turnover of subcommittee members. This option requires the board to
file a copy of the resolution covering any increase or decrease in the
number of subcommittee members with the official copy of the FCU's
bylaws.
The proposed rule also adds staff commentary that encourages FCUs
to form a board of directors that reflects the FCU's field of
membership. This policy encourages FCUs to consider all members in its
leadership. While the Board does not have specific concerns regarding
board diversity or representativeness at this time, it believes in the
importance of including such statements in the FCU Bylaws to remind
stakeholders that credit unions are fundamentally different than many
other depository financial institutions. Accordingly, the Board
believes that credit unions should strive to have a board that reflects
their membership to the greatest extent possible.
Finally, the proposed rule adds staff commentary that encourages
FCUs to notify members, through a website posting (if the credit union
then maintains a website), whenever the FCU's board adopts a resolution
that changes the size of the FCU's board of directors. An FCU that does
not then maintain a website can post such a notice in a conspicuous
place in the FCU's offices, such as at the teller windows or on the
FCU's front doors.
Article VII. Board Officers, Management Officials and Executive
Committee
Article VII provides the requirements related to board officers,
such as their election and their terms of office. It lists the duties
of the chair, vice chair, financial officer, management officials, and
secretary of the board. Article VII also explains the board powers
regarding employees and the provisions for an executive committee and
an investment committee.
The proposed rule makes certain clarifications and improvements to
the readability of the language in this Article. For example, this
Article utilizes the term ``financial officer,'' and the NCUA has
received comments that this term is confusing. The proposed rule,
therefore, modifies the definition of ``financial officer'' in Article
XVIII to mean ``treasurer.'' The proposed rule also updates the
language in section 8 to allow different options for addressing when
directors or committee members may serve as paid employees of the
credit union after their terms as directors and/or committee members
have ended.
The proposed rule adds more staff commentary under this Article,
addressing procedural questions that arise in connection with specified
board officer positions that may be held by directors, such as the
president, vice president, and secretary of the board. The staff
commentary clarifies that officers hold their respective board officer
positions for a term of one year, until the first board meeting
following the next annual meeting of the members. At that board
meeting, board officer positions are again filled. Each board officer
holds his or her position until the election and qualification of his
or her successors. Thus, a board officer who is re-elected to the
position the officer is currently holding serves for another year.
Where another director is chosen to fill the position, the director
takes office effective as of the date of the election, assuming the
director is qualified.
The proposed rule adds additional staff commentary to address
questions relating to temporary appointments of board officers,
succession, replacement of director positions that may have become
vacant between election cycles, and notifying members about membership
on FCU committees. The staff commentary notes that, in the absence of
both the chair and vice chair, those directors who are present at a
meeting may select from among themselves an individual director to act
as temporary chair for that particular meeting. Actions taken by the
board under the direction of the temporary chair have the same validity
and effect as if taken under the direction of the chair or the vice
chair, provided a quorum of the board, including the temporary chair,
is present. There is no requirement for the board to ratify actions
taken under the temporary chair at a subsequent meeting of the board
where either the chair or vice chair are present.
Article VIII. Credit Committee or Loan Officers
This Article provides the requirements for the credit committee, if
an FCU elects to have one. This Article also lists the requirements for
loan officers if an FCU does not have a credit committee. The proposed
rule modernizes the language of this Article and incorporates plain
English writing principles. In addition, the proposed rule incorporates
into the FCU Bylaws several NCUA Office of General Counsel opinion
letters permitting FCUs to use automated systems to process,
[[Page 56646]]
underwrite, and fund loans under certain conditions.
Article IX. Supervisory Committee
Article IX provides the requirements for the supervisory committee,
such as the appointment and membership of the committee, its duties,
and the required officers. This Article also lists the powers of the
supervisory committee. The FCU Act requires each FCU to have a
supervisory committee. The supervisory committee must conduct or
arrange for annual audits and verify members' deposits at least once
every two years.\15\ The NCUA has assigned additional duties to FCUs'
supervisory committees, including having them serve as an initial forum
for hearing FCU members' complaints.\16\
---------------------------------------------------------------------------
\15\ 12 U.S.C. 1761d.
\16\ See 12 CFR 715.3.
---------------------------------------------------------------------------
The proposed rule modernizes the language of this Article. In
addition, the proposed rule deletes paragraph (c) of section 3, as it
is duplicative of paragraph (b). During the 2013 consultation process,
commenters requested a number of changes to this Article to allow for
greater flexibility. For example, one commenter requested that the
Board amend section 3 to allow an FCU to call a special meeting 30
calendar days after all director positions become vacant, rather than
the 7-14 calendar days currently set out in the FCU Bylaws. Another
commenter requested that the Board amend section 6 to limit the actions
members could take at a special meeting called to consider allegations
of unsafe or illegal activity by a credit union director or credit
committee member. These requested changes require statutory amendments
to the FCU Act, so the proposed rule does not include any other
substantive changes to this Article.
Article X. Organization Meeting
Some commenters have noted that the provisions in Article X, which
govern the initial organizational meeting by which the FCU is
established, effectively become obsolete and irrelevant after that
initial organizational meeting. Although the Board acknowledges that
this Article serves a limited purpose, it does not agree that the
Article is necessarily irrelevant after the FCU has been established.
Nevertheless, the proposed rule includes an option whereby FCUs may
eliminate the Article after five years of operation. For FCUs electing
this option, Article X will become ``reserved'' and its language
inoperative.
Article XI. Loans and Lines of Credit to Members
Article XI lists loan purposes for members and addresses member
delinquencies on loans. The proposed rule slightly edits the language
of this Article for readability, but there are no other substantive
changes.
Article XII. Dividends
Article XII establishes the power of the board to declare
dividends. The proposed rule slightly edits the language of this
Article for readability. There are no other substantive changes.
Article XIII. Reserved
The proposed rule makes no changes to this Article.
Article XIV. Expulsion and Withdrawal
Article XIV addresses the expulsion and withdrawal procedures for
members. The Board notes that expulsion from membership is a very
serious remedy that may only be accomplished in accordance with the
procedures set forth in the FCU Act. An FCU may only expel a member
upon a two-thirds majority vote of the membership at a special meeting
called for that purpose or by operation of a board-approved
nonparticipation policy.\17\ The FCU Act allows an FCU's board to
adopt, by majority vote of a quorum of directors, and enforce a
nonparticipation policy. If the FCU's board adopts such a policy, the
FCU must provide written notice of the policy and its effective date to
each member at least 30 calendar days prior to the policy's effective
date. Each new member also must be provided a written notice of the
policy prior to, or upon applying for, membership.
---------------------------------------------------------------------------
\17\ 12 U.S.C. 1764.
---------------------------------------------------------------------------
New staff commentary to this Article reiterates that the FCU Act
provides only two methods for an FCU to expel a member and clarifies
that only in-person voting is permitted in conjunction with a special
meeting held for that purpose. This gives the affected member an
opportunity to present his or her case against expulsion and an
opportunity to respond to the FCU's concerns. The staff commentary
clarifies that, short of expulsion, an FCU has a wide range of measures
available to address abusive or disruptive members, and it specifically
references Article XVI, Section 1 of the FCU Bylaws, which addresses
situations when members use their accounts for unlawful purposes.
During the 2013 consultation process with representatives of the
credit union industry, commenters pressed for ways to make the
expulsion of a disruptive member easier to accomplish. Commenters to
the ANPR reiterated many of the same concerns. Many commenters
requested that the Board either amend the FCU Bylaws or include staff
commentary interpreting the FCU Act to allow an FCU to expel a member
for actions such as filing for bankruptcy, habitual default, or
misconduct under the FCU's board-approved nonparticipation policy. The
FCU Act does not permit such an interpretation. A word used in a
statute is given its ordinary or plain meaning unless context indicates
otherwise.\18\ The term ``nonparticipation'' generally refers to a
person not being involved with or participating in something.
Accordingly, the Board believes that the term ``nonparticipation'' is
best understood in a more limited sense to mean a failure to
participate, or a lack of involvement, in credit union affairs. It does
not refer to an act of malfeasance.
---------------------------------------------------------------------------
\18\ Sebelius v. Cloer, 569 U.S. 369 (May 20, 2013) (absent
evidence to the contrary, words must receive their ordinary
meaning).
---------------------------------------------------------------------------
As the Board notes in the discussion of changes to Article II
above, FCUs have the option to address violent, belligerent,
disruptive, and abusive members by limiting their access to products
and services provided that there is a logical relationship between the
objectionable conduct and the services to be suspended and the member
has received adequate notice of the FCU's limitation of services
policy.\19\ Neither the FCU Act nor the NCUA's regulations prohibit an
FCU, as it deems appropriate, from denying all or most credit union
services such as ATM services, credit cards, loans, share draft
privileges, preauthorized transfers, or access to credit union
facilities to a member that has engaged in some objectionable conduct
that has caused a loss to the FCU or that threatens the safety of
credit union staff, facilities, or members. In fact, the Board believes
that, without question, certain actions warrant immediate limitations
of service or access to credit union facilities, such as violence
against other credit union members or credit union staff in the credit
union facility or the surrounding property. Consequently, even though
the FCU Act does not permit an FCU to immediately expel a member under
these circumstances, an FCU may still take immediate action to address
situations in which a member is disruptive or poses a threat to the
credit
[[Page 56647]]
union, its employees, or other members in the FCU or its surrounding
property.
---------------------------------------------------------------------------
\19\ See OGC Op. No. 08-0431 (Aug. 12, 2008).
---------------------------------------------------------------------------
Furthermore, as noted in the discussion of changes to Article II
above, neither the FCU Act nor the NCUA's regulations prohibit an FCU
from using lawful means to immediately protect the credit union, credit
union members, and staff such as contacting local law enforcement,
seeking a restraining order, or pursuing other forms of legal redress.
The Board fully expects that an FCU would use these lawful means in
addition to its limitation of services policy to proactively limit
security threats or financial harm caused by violent, belligerent,
disruptive, or abusive credit union members.
Article XV. Minors
This Article provides that minors are permitted to own shares and
that the rights of minors to transact business with the FCU are
governed by state law. The proposed rule slightly edits the language of
this Article for readability, but there are no other substantive
changes.
Article XVI. General
Article XVI addresses other general requirements, such as complying
with other laws and regulations, confidentiality, and conflicts of
interest. It also provides requirements related to records,
indemnification, and the removal of directors and committee members.
During the 2013 consultation process with representatives of the
credit union industry, the NCUA received comments regarding section 3,
requesting a simplified procedure for confirmation by the membership of
the suspension of a director or committee member by the supervisory
committee. Commenters suggested that the confirmation of suspension be
accomplished through balloting rather than a special meeting at which
members must vote in person to accomplish the removal. The Board notes,
in this respect, that these procedures are mandated by statute. The FCU
Act requires that membership confirmation of supervisory committee
suspension be accomplished only by majority vote of the members at a
special meeting called for that purpose.\20\ The proposed rule adds
staff commentary explaining these requirements.
---------------------------------------------------------------------------
\20\ 12 U.S.C. 1761d.
---------------------------------------------------------------------------
The staff commentary also adds new language regarding section 1 of
this Article, which specifies that the credit union, its powers and
duties, as well as the functions of its members, officers, and
directors, are all strictly circumscribed by law and regulation. It
notes that, insofar as section 1 is included in the FCU Bylaws, an FCU
need not adopt a specific policy or requirement that members use credit
union products or services for lawful purposes. Furthermore, it
confirms that this bylaw provision supports an FCU's decision to impose
limits on products and services available to any individual who is
found to be using the FCU in furtherance of unlawful purposes.
The proposed rule also amends section 6 to require FCUs with
websites to post their bylaws on the website. The Board believes that
adding this new requirement will ensure that members without access to
an FCU's physical location where they can request a copy of the bylaws,
can still have access to the FCU's corporate governance documents. Some
FCUs operate over a wide geographic area, employing shared branch
networks and/or online banking as a way to provide fast and reliable
services to their members. It may be difficult for members of these
FCUs, particularly in rural areas, to travel to the nearest branch
office to request a copy of the FCU's bylaws. Accordingly, the Board
believes that, to the extent an FCU maintains a website, an FCU should
post its current bylaws on that website to provide these members with
immediate access.
Finally, the proposed rule adds a new section 9 which clarifies the
use of singular and plural terms as well as pronouns in the bylaws. The
NCUA has received questions in the past in this regard. New section 9
clarifies that, unless the context requires otherwise, words denoting
the singular may be construed as denoting the plural, words of the
plural may be construed as denoting the singular, and words of one
gender may be construed as denoting another gender as appropriate.
Article XVII. Amendments of Bylaws and Charter
Article XVII provides the requirements for amending an FCU's bylaws
or charter. The proposed rule modernizes the language of this Article
and incorporates plain English writing principles. In addition, in
conjunction with the proposed rule's requirement for an FCU to post its
current bylaws on its website (if the FCU maintains a website), the
proposed rule requires an FCU to update the posting if it amends its
bylaws.
Article XVIII. Definitions
Article XVIII lists the definitions applicable to all of the FCU
Bylaws. The proposed rule makes a few technical changes to this Article
and adds several new definitions, which the Board believes are useful
for purposes of clarification. These include new definitions for
``Agency,'' ``Charter,'' ``Field of Membership,'' ``Loans,'' and
``Membership Officer.'' In addition, the definitions include a listing
of approved board officers. This article also includes the term
``Member,'' the definition of which identifies the characteristics and
actions an individual must take to become a qualified member. Finally,
the definitions include the term ``Management,'' which is defined to
include the Board, Financial Officer, and Management Official.
V. Regulatory Procedures
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) \21\ requires the NCUA to
provide an initial regulatory flexibility analysis with a proposed rule
to certify that the rule will not have a significant economic impact on
a substantial number of small entities (defined for the purpose of the
RFA to include credit unions with assets less than or equal to $100
million) and to publish its certification and a short explanatory
statement in the Federal Register along with the proposed rule. The
proposed new bylaw amendments are simply a resource that is available
to all FCUs, regardless of size. Except for newly chartered FCUs, there
is nothing prescriptive or mandatory about this proposed rule. All FCUs
are free to adopt the proposed new bylaws, retain their current bylaws,
or adopt some combination of the proposed bylaws and their current
bylaws. If an FCU elects to adopt the new proposed version that FCU
only needs to adopt a board resolution to that effect. Accordingly, the
NCUA hereby certifies this proposed rule will not have a significant
economic impact on a substantial number of small credit unions.
---------------------------------------------------------------------------
\21\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) applies to rulemaking in
which an agency by rule creates a new paperwork burden on regulated
entities or modifies an existing burden.\22\ For purposes of the PRA, a
paperwork burden may take the form of a reporting, disclosure, or
recordkeeping requirement, both referred to as information collection.
The NCUA may not conduct or sponsor, and the respondent is not required
to respond
[[Page 56648]]
to, an information collection unless it displays a currently valid
Office of Management and Budget (OMB) control number.
---------------------------------------------------------------------------
\22\ 44 U.S.C. 3507(d); 5 CFR part 1320.
---------------------------------------------------------------------------
The current proposal clarifies many bylaws provisions and adds a
few substantive changes.
The amendments under this proposal would affect newly chartered
FCUs or FCUs that choose to adopt these provisions. These provisions
are:
Article IV, Sec. 2--The proposed rule would require FCUs
to post annual meeting notices in a conspicuous place in the office of
the credit union at least 30 days before the annual meeting, and to
post the notice on the credit union's website, if the FCU has a
website.
Article V--The nominating committee must widely publicize
the call for nominations to all members by any medium and interview
each member who volunteers. The secretary must post the nominations by
petition along with those of the nominating committee on the credit
union's website, if the FCU has a website.
Article XVI, Sec. 6--If an FCU has a website, the FCU
must post the bylaws on the website.
Article XVII--After adopting amendments, a FCU must update
the bylaws posted on its website, if the FCU has a website.
The information collection requirements under OMB control number
3133-0052 will be revised as follows due to the following program
changes:
Article IV. Meetings of Members
The current information collection requirements under Article IV is
related to notices related to member meetings. The NCUA estimated the
current burden hours at 3,721. NCUA has determined that the new changes
from the proposed rule would only increase the burden for each FCU by
15 minutes.
Each FCU is estimated to spend 10 minutes posting notices for an
increase of 620 hours, and each FCU with a website is estimated to
spend 5 minutes posting notices to their website for an increase of 301
hours. NCUA estimates that 3,617 of the total number of FCUs have
websites. This new disclosure requirement will increase the burden
hours associated with the information collection under Article IV by
921 hours; for a total of 4,642 hours.
Article V. Elections
The current information collection requirements under Article V
covers the burden associated with the recordkeeping requirements for
FCU elections. NCUA estimated the current burden hours to be 29,768.
The NCUA has determined that the new changes from the proposed rule
would increase the burden for each FCU by 40 minutes. Each FCU is
estimated to spend 30 minutes publicizing the call for nominations for
an increase of 1,851 burden hours; and each FCU with a website is
estimated to spend 10 minutes posting nominations to their website for
an increase of 603 hours. The NCUA estimates that 3,617 of the total
number of FCUs have websites. This new disclosure requirement will
increase the burden hours associated with the information collection
under Article V by 2,464 hours; for a total of 32,232 hours.
The information collection requirement associated with section 6 of
Article V, Report of Officials, is cleared under OMB control number
3133-0004.
Article XVI. General
The current information collection requirements under Article XVI
is FCU recordkeeping requirements specified in sections 5 and 6. The
proposed rule does not affect the current recordkeeping requirements;
however, under section 6 of Article XVI, a one-time burden of 1 hour
will be reported for FCU's with a website to post their bylaws. This
new disclosure requirements will increase the burden associated with
Article XVI by 3,617 hours; for a total of 92,921 hours.
Article XVII. Amendments of Bylaws and Charter
A new information collection requirement proposed under Article
XVII is that FCU, who maintains a website, would be required to update
its bylaws on its website after adopting any amendments. The NCUA
estimates that it would take an FCU 30 minutes to update its bylaws on
its website annually; for a total of 1,809 burden hours.
The total increase in burden hours due to these proposed program
changes is 8,810 and action will be taken to amend OMB control number
3133-0052 to reflect this increase.
Title of Information Collection: Federal Credit Union Bylaws,
Appendix A to Part 701.
OMB Control Number: 3133-0052.
Estimated number of respondents: 3,721.
Estimated total annual responses: 1,276,965.
Estimated total annual burden: 445,424.
Affected Public: Private Sector: Not-for-profit institutions.
The Board invites comment on (a) whether the collections of
information are necessary for the proper performance of the agency's
function, including whether the information has practical utility; (b)
the accuracy of estimates of the burden of the information collections,
including the validity of the methodology and assumptions used; (c)
ways to enhance the quality, utility, and clarity of the information
being collected; (d) ways to minimize the burden of the information
collection on respondents, including through the use of automated
collection techniques or other forms of information technology; and (e)
estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
All comments are a matter of public record. Comments regarding the
information collection requirements of this rule should be sent to (1)
Dawn Wolfgang, NCUA PRA Clearance Officer, National Credit Union
Administration, 1775 Duke Street, Suite 5080, Alexandria, Virginia
22314, or Fax No. 703-519-8572, or Email at [email protected] and
the (2) Office of Information and Regulatory Affairs, Office of
Management and Budget, Attention: Desk Officer for NCUA, New Executive
Office Building, Room 10235, Washington, DC 20503, or email at
[email protected].
C. Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests. The
NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5),
voluntarily complies with the executive order to adhere to fundamental
federalism principles. This rule will not have a direct effect on the
states, on the relationship between the national government and the
states, or on the distribution of power and responsibilities among the
various levels of government. This proposed rule will only apply to
FCUs. Accordingly, the NCUA has determined this proposed rule does not
constitute a policy that has federalism implications for purposes of
the executive order.
D. Assessment of Federal Regulations and Policies on Families
The 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, Public Law 105-277, 112
Stat. 2681 (1998).
[[Page 56649]]
List of Subjects in 12 CFR Part 701
Credit, Credit unions, Federal credit union bylaws.
By the National Credit Union Administration Board on October 18,
2018.
Gerard S. Poliquin,
Secretary of the Board.
For the reasons stated above, NCUA proposes to amend 12 CFR part
701, Appendix A 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, 1785, 1786, 1787, 1788, 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 A to Part 701 is revised to read as follows:
Appendix A to Part 701--Federal Credit Union Bylaws
Introduction
1. Effective date. The National Credit Union Administration
(NCUA) Board first incorporated the Federal Credit Union (FCU)
Bylaws as Appendix A to Part 701 of the NCUA's regulations on
November 30, 2007. FCUs may retain previously adopted versions of
the FCU Bylaws including the November 30, 2007 version. Unless an
FCU has adopted bylaws before [insert effective date of final rule],
it must adopt these revised bylaws.
2. Adoption of all or part of these bylaws. Although FCUs may
retain any previously approved version of the FCU Bylaws, the NCUA
Board encourages FCUs to adopt the revised bylaws because it
believes they provide greater clarity and flexibility for credit
unions and their officials and members. FCUs may also adopt portions
of the revised bylaws and retain the remainder of previously
approved bylaws, but the NCUA Board cautions FCUs to be extremely
careful in making the decision. FCUs must be careful because they
run the risk of having inconsistent or conflicting provisions
because of the various options the revised bylaws provide, as well
as other revisions in the text.
3. Bylaw amendments. a. The FCU Bylaws contain provisions
allowing FCU boards to select from an option or range of options or
to fill in a blank. The ``fill-in-the-blank'' provisions are changes
to the FCU's bylaws. Thus, they require a two-thirds vote of the
FCU's board of directors. As long as the board selects from the
permissible options, the FCU does not need to submit the change to
the NCUA for its approval.
b. FCUs continue to have the flexibility to request bylaw
amendments. The NCUA must approve all bylaw amendments except for
the provisions noted above. In the past, the NCUA has published a
``Standard Bylaw Amendments'' booklet containing a list of
``standard'' preapproved and optional amendments not included in the
FCU Bylaws. That document remains on the NCUA's website for
historical purposes. However, FCUs may not adopt amendments from the
``Standard Bylaw Amendments'' booklet, as the FCU Bylaws include
sufficient flexibility to make a separate list of standard bylaw
amendments unnecessary. Thus, the NCUA no longer makes a distinction
between ``standard'' and ``nonstandard'' bylaw amendments.
Consequently, the NCUA considers any change to the FCU Bylaws that
is not a ``fill-in-the-blank'' provision or part of a range of
options to be a bylaw amendment that requires the NCUA approval.
c. The procedure for approval of a bylaw amendment is as
follows:
i. The FCU must submit its request to the Office of Credit Union
Resources and Expansion (CURE).
ii. The request must include:
1. The section of the FCU Bylaws to be amended;
2. The reason for, or purpose of, the amendment;
3. An explanation of why the amendment is desirable and what it
will accomplish for the federal credit union; and
4. The specific wording of the proposed amendment.
iii. CURE will advise the credit union within 90 days if it
approved the proposed amendment after its review and, if necessary,
consultation with the NCUA's Office of General Counsel. If CURE
denies a proposed amendment, the credit union may appeal that
decision to the NCUA Board in accordance with the procedures set out
in subpart B to part 746 of this chapter. For purposes of this
provision, if CURE does not reach a decision within 90 days, the
proposed amendment is considered to be denied.
d. Federal credit unions considering an amendment may find it
useful to review the bylaws section of the agency website, which
includes the NCUA's Office of General Counsel opinions on proposed
bylaw amendments.\23\ Opinions issued after April 2006 include the
language of the approved amendment.
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\23\ http://www.ncua.gov/Legal/Pages/BylawByYear.aspx.
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e. Because each decision by CURE is made on a case-by-case basis
that depends on the unique facts and circumstances applicable to
each FCU, the credit union must submit a proposed amendment to the
NCUA for review under the procedure listed above, even if the NCUA
previously approved an identical or similar amendment for another
credit union.
4. The nature of the FCU Bylaws. a. The Federal Credit Union Act
requires the NCUA Board to prepare bylaws for federal credit
unions.\24\ The FCU Bylaws address a broad range of matters
concerning a credit union's organization and governance, the
relationship of the credit union to its members, and the procedures
and rules a credit union follows.
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\24\ 12 U.S.C. 1758.
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b. The FCU Bylaws supplement the broad provisions of:
A federal credit union's charter, which establishes the
existence of a federal credit union;
The Federal Credit Union Act, which establishes the
powers of federal credit unions; and
The NCUA's regulations, which implement the Federal
Credit Union Act.
As a legal matter, a federal credit union's bylaws must conform
to, and cannot be inconsistent with, any provision of its charter,
the Federal Credit Union Act, the NCUA's regulations, or other laws
or regulations applicable to the credit union's operations.
c. The NCUA expects federal credit unions and their members will
make every effort to resolve bylaw disputes using the credit union's
internal member complaint resolution process. If a bylaw dispute
cannot be resolved internally, credit union officials or members
should contact the regional office with oversight over the credit
union for assistance in resolving the dispute.
d. The NCUA has discretion to take administrative actions when a
credit union is not in compliance with its bylaws. If a potential
violation is identified, the NCUA will carefully consider all of the
facts and circumstances in deciding whether to take enforcement
action. The NCUA will not generally take action against minor or
technical violations, but emphasizes that it retains discretion to
enforce the FCU Bylaws in appropriate cases, such as safety and
soundness concerns or threats to fundamental, material credit union
member rights.
Table of Contents
Article I. Name--Purposes
Article II. Qualifications for Membership
Article III. Shares of Members
Article IV. Meetings of Members
Article V. Elections
Article VI. Board of Directors
Article VII. Board Officers, Management Officials and Executive
Committee
Article VIII. Credit Committee or Loan Officers
Article IX. Supervisory Committee
Article X. Organization Meeting
Article XI. Loans and Lines of Credit to Members
Article XII. Dividends
Article XIII. Reserved
Article XIV. Expulsion and Withdrawal
Article XV. Minors
Article XVI. General
Article XVII. Amendments of Bylaws and Charter
Article XVIII. Definitions
Bylaws
Federal Credit Union, Charter No. __
(A corporation chartered under the laws of the United States)
Article I. Name--Purposes
Section 1. Name. The name of this credit union is as stated in
Section 1 of
[[Page 56650]]
its charter (approved organization certificate).
Section 2. Purposes. This credit union is a member owned,
democratically operated, not-for-profit organization managed by a
volunteer board of directors. Its stated mission is to meet the credit
and savings needs of members, especially individuals of modest means.
The purpose of this credit union is to promote thrift among its members
by affording them an opportunity to accumulate their savings and to
create a source of credit for provident or productive purposes. The
credit union may add business as one of its purposes by placing a comma
after ``provident'' and inserting ``business.''
Article II. Qualifications for Membership
Section 1. Field of membership. The field of membership of this
credit union is limited to that stated in Section 5 of its charter.
Section 2. Membership application procedures. Persons eligible for
membership under Section 5 of the charter must sign a membership
application on approved forms. The applicant becomes a member upon
approval of the application by a membership officer, after subscription
to at least one share, payment of the initial installment, and payment
of a uniform entrance fee if required by the board. If the membership
officer denies a person's membership application, the credit union must
explain the reasons for the denial in writing upon written request.
Section 3. Maintenance of membership share required. A member who
withdraws all shareholdings or fails to comply with the time
requirements for restoring his or her account balance to par value in
Article III, Section 3, ceases to be a member. By resolution, the board
may require persons readmitted to membership to pay another entrance
fee.
Section 4. Continuation of membership. Once a member, always a
member until the person or organization chooses to withdraw its
membership or is expelled under the Act and Article XIV of these
bylaws. The credit union may limit services and access to its
facilities to a member who is disruptive to credit union operations.
Section 5. Member in good standing. A member in good standing
retains all their rights and privileges in the credit union. A member
in good standing is a member who maintains at least the minimum share
set forth in Article III, Section 1 of these bylaws; who is not
delinquent on any credit union loan; who has not had any account with
this credit union closed due to abuse or negligent behavior; who has
not been belligerent or abusive to any duly elected or appointed
official or employee when that official or employee is carrying out
their duties as set in the Act, the rules and regulations, the charter,
and bylaws of this credit union; and who has not caused a financial
loss to this credit union. Subject to Article XIV of these bylaws and
any applicable limitation of services policy approved by the board,
members not in good standing retain their right to attend, participate,
and vote at the annual and special meetings of the members and maintain
a share account.
Article III. Shares of Members
Section 1. Par value. The par value of each share is $__.
Subscriptions to shares are payable at the time of subscription, or in
installments of at least $__ per month. FCUs may establish differing
par values for different classes of members or types of accounts (such
as students, minors, or non-natural persons), provided this action does
not violate any federal, state or local antidiscrimination laws. Below
are some options an FCU can choose. The FCU may also establish
differing par values for other classes of members not listed below.
List all established par values in Section 1.
__ Option. Par value for minors. The par value of each share for
members ____ years of age or younger is $__. Subscriptions to shares
are payable at the time of subscription, or in installments of at least
$__ per month.
__ Option. Par value for students. The par value of each share for
students is $__. Subscriptions to shares are payable at the time of
subscription, or in installments of at least $__ per month. A student
is defined as anyone enrolled [ballot] [ballot] full-time or [ballot]
[ballot] part-time in ____.
__ Option. Par value for non-natural persons. The par value of each
share for non-natural persons is $__. Subscriptions to shares are
payable at the time of subscription, or in installments of at least $__
per month.
Section 2. Establishing membership. To establish membership, the
member must subscribe to one par value of share. The share does not
have to be in a regular share account. The board may choose the best
account for the characteristics of its membership. Below are some
options an FCU can choose. Select one option and check the box
corresponding to that option.
__ Option A--Regular Share account required to establish membership. To
establish membership in the credit union, the member must subscribe to
one share in a regular share account.
__ Option B--____ account required to establish membership. To
establish membership in the credit union, the member must subscribe to
one share in the stated account or accounts (note the account(s) in the
blank above).
Section 3. Cap on shares held by one person. The board may
establish, by resolution, the maximum amount of shares that any one
member may hold.
Section 4. Time periods for payment and maintenance of membership
share. The credit union will terminate from membership a member who:
Fails to complete payment of one share within ____ of
admission to membership, or
Fails to complete payment of one share within ____ from
the increase in the par value of shares, or
Reduces the share balance below the par value of one share
and does not increase the balance to at least the par value of one
share within ____ of the reduction.
Section 5. Transferability. Members may transfer shares to another
member in any form approved by the board. Shares that accrue credits
for unpaid dividends retain those credits when transferred.
Section 6. Withdrawals. Members may withdraw money paid in on
shares provided that:
(a) The board has the right, at any time, to require members, or a
subset of members, to give up to 60 days written notice of intention to
withdraw all or part of the amounts they paid in.
(b) Reserved.
(c) A member delinquent on any loan or obligation to the credit
union may not withdraw their shares below the delinquent amount without
the written approval of the credit committee or loan officer. This
withdrawal restriction also applies if the member is a comaker,
endorser, or guarantor of a delinquent loan. Coverage of overdrafts
under an overdraft protection policy does not constitute delinquency
for purposes of this paragraph. Shares issued in an irrevocable trust
as provided in Section 6 of this article are not subject to withdrawal
restrictions except as stated in the trust agreement.
(d) The share account of a deceased member (other than one held in
joint tenancy with another member) may be continued until the close of
the dividend period in which the administration of the deceased's
estate is completed.
(e) The board can impose a fee for excessive share withdrawals from
[[Page 56651]]
regular share accounts. By resolution, the board can set the number of
withdrawals not subject to a fee and the amount of the fee subject to
regulations relevant to the advertising and disclosure of terms and
conditions on member accounts.
Section 7. Trusts. Shares may be issued in a revocable or
irrevocable trust, subject to the following:
(a) Shares issued in a revocable trust--the settlor must be a
member of this credit union in his or her own right.
(b) Shares issued in an irrevocable trust--either the settlor or
the beneficiary must be a member of this credit union.
(c) Both a revocable and irrevocable trust must state the name of
the beneficiary.
A trust may be a member of the credit union as an entity if all
parties to the trust, including all settlors, beneficiaries and
trustees, are within the credit union's field of membership.
(d) Shares issued through a pension plan authorized by the rules
and regulations will be treated as an irrevocable trust unless
otherwise indicated in the rules and regulations.
Section 8. Joint accounts and membership requirements. Select one
option and check the box corresponding to that option.
__ Option A--Separate account not required to establish membership
Owners of a joint account may both be members of the credit union
without opening separate accounts. For joint membership, both owners
are required to fulfill all of the membership requirements including
each member purchasing and maintaining at least one share in the
account and filling out the membership card.
__ Option B--Separate account required to establish membership
Each member must purchase and maintain at least one share in a
share account that names the member as the sole or primary owner. Being
named as a joint owner of a joint account is not sufficient to
establish membership.
Article IV. Meetings of Members
Section 1. Annual meeting. The board must hold the annual meeting
of the members [insert time for annual meeting, for example, ``during
the month of March/on the third Saturday of April/no later than March
31''], in the county in which any office of the credit union is located
or within a radius of 100 miles of an office, at the time and place as
the board determines and announces in the notice of the annual meeting.
Section 2. Notice of meetings required. a. The secretary must give
written notice to each member at least 30 but no more than 75 days
before the date of any annual meeting. The secretary must give written
notice to each member at least 7 days before the date of any special
meeting of the members and at least 45 but no more than 90 days before
the date of any meeting to vote on a merger with another credit union.
The secretary may deliver the notice in person, by mail to the member's
address, or, for members who have opted to receive statements and
notices electronically, by electronic mail. The secretary must give
notice of the annual meeting by posting the notice in a conspicuous
place in the office of this credit union where members may read it at
least 30 days before the meeting. The secretary must also prominently
display the notice on the credit union's website if such credit union
maintains a website.
b. All special meeting notices must state the purpose of the
meeting. The officials and members may only transact business related
to the stated purpose at the meeting.
Section 3. Special meetings. a. The board chair, the board of
directors by majority vote, or the supervisory committee as provided in
these bylaws may call a special meeting of the members. The chair must
call and hold a special meeting within 30 days of the receipt of a
written request from 25 members or 5% of the members as of the date of
the request, whichever number is larger. However, a request of no more
than 750 members may be required to call a special meeting.
b. The credit union may hold a special meeting at any location
permitted for the annual meeting.
Section 4. Items of business for annual meeting and rules of order
for annual and special meetings. The suggested order of business at
annual meetings of members is--
(a) Ascertain that a quorum is present.
(b) Reading and approval or correction of the minutes of the last
meeting.
(c) Report of directors, if there is one. For credit unions
participating in the Community Development Revolving Loan Program, the
directors must report on the credit union's progress on providing
needed community services, if required by NCUA Regulations.
(d) Report of the financial officer or the chief management
official.
(e) Report of the credit committee, if there is one.
(f) Report of the supervisory committee, as required by Section 115
of the Act.
(g) Unfinished business.
(h) New business other than elections.
(i) Elections, as required by Section 111 of the Act.
(j) Adjournment.
(k) To the extent consistent with these bylaws, the board will
conduct all meetings of the members according to ____. The order of
business for the annual meeting may vary from the suggested order,
provided it includes all required items and complies with the rules of
procedure adopted by the credit union.
The credit union must fill in the blank with one of the following
authorities, noting the edition to be used: Democratic Rules of Order,
The Modern Rules of Order, Robert's Rules of Order, or Sturgis'
Standard Code of Parliamentary Procedure.
Section 5. Quorum. Except as otherwise provided, 12 members
excluding the board, credit union staff, and officials, constitute a
quorum at annual or special meetings. If a quorum is not present, the
board may adjourn to a date at least 7 but not more than 14 days
thereafter. The members present at any adjourned meeting will
constitute a quorum, regardless of the number of members present. The
board must give the same notice for the adjourned meeting as prescribed
in Section 2 of this article for the original meeting, except that they
must give notice at least 5 days before the date of the meeting fixed
in the adjournment.
Article V. Elections
The Credit Union must select one of the four voting options. The
board may print the credit union's bylaws with the option selected or
retain this copy and check the box of the option selected. All options
continue with Section 3 of this article.
Option A1--In-Person Elections; Nominating Committee and Nominations
From Floor
Section 1. Nomination procedures. At least 30 days before each
annual meeting, the chair will appoint a nominating committee of three
or more members. The nominating committee will nominate at least one
member for each vacancy, including any unexpired term vacancy, for
which elections are being held, and determine that the members
nominated are agreeable to the placing of their names in nomination and
will accept office if elected. The nominating committee must widely
publicize the call for nominations to all members by any medium and
interview each member who volunteers.
Section 2. Election procedures. After placing the nominations of
the nominating committee before the members, the chair calls for
[[Page 56652]]
nominations from the floor. When nominations are closed, the chair
appoints election tellers. The election tellers distribute the ballots,
collect the ballots and tally the votes, and the chair announces the
results. Except when there is only one nominee for each open office,
all elections are by ballot and determined by the plurality of vote. If
there is only one nominee for each open office, the chair may take a
voice vote or declare the election of each nominee by general consent
or acclamation.
Option A2--In-Person Elections; Nominating Committee and Nominations by
Petition
Section 1. Nomination procedures. a. At least 120 days before each
annual meeting the chair will appoint a nominating committee of three
or more members. The nominating committee will nominate at least one
member for each vacancy, including any unexpired term vacancy, for
which elections are being held, and determine that the members
nominated are agreeable to the placing of their names in nomination and
will accept office if elected. The nominating committee must widely
publicize the call for nominations to all members by any medium and
interview each member who volunteers.
b. At least 90 days before the annual meeting, the nominating
committee files its nominations with the secretary of the credit union.
At least 75 days before the annual meeting, the secretary notifies, in
writing, all members eligible to vote that they may make nominations
for vacancies by petition signed by 1% of the members with a minimum of
20 and a maximum of 500. The secretary may use electronic mail to
notify members who have opted to receive notices or statements
electronically.
c. The written notice must specify that the credit union will not
conduct the election by ballot and there will be no nominations from
the floor when the number of nominees equals the number of open
positions.
d. The notice will include, in a form approved by the board of
directors, a brief statement of qualifications and biographical data
for each nominee submitted by the nominating committee. Each nominee by
petition must submit a similar statement of qualifications and
biographical data with the petition.
e. The written notice must state the closing date for receiving
nominations by petition. At least 40 days before the annual meeting,
nominee(s) must file the nomination petition with the secretary of the
credit union. To be effective, nominee(s) must include a signed
certificate with the nomination petition stating that they are
agreeable to nomination and will serve if elected to office.
f. At least 35 days before the annual meeting, the secretary will
post the nominations by petition along with those of the nominating
committee in a conspicuous place in each credit union office and on the
credit union's website.
Section 2. Election procedures. a. The secretary must place all
persons nominated by either the nominating committee or by petition
before the members. When nominations are closed, the chair appoints the
election tellers. The election tellers distribute the ballots, collect
the ballots, and tally the votes, and the chair announces the results.
Except when there is only one nominee for each open office, all
elections are by ballot and determined by the plurality of vote.
b. There are no nominations from the floor if there are sufficient
nominations by the nominating committee or by petition to provide at
least one nominee for each open position. If there are nominations from
the floor and they result in more nominees than open positions, the
chair will close nominations, and appoint election tellers. The
election tellers distribute the ballots, collect the ballots and tally
the votes, and the chair announces the results. If there is only one
nominee for each open office, the chair may take a voice vote or
declare the election of each nominee by general consent or acclamation.
Option A3--Election by Ballot Boxes or Voting Machine; Nominating
Committee and Nomination by Petition
Section 1. Nomination procedures. a. At least 120 days before each
annual meeting, the chair will appoint a nominating committee of three
or more members. The nominating committee will nominate at least one
member for each vacancy, including any unexpired term vacancy, for
which elections are being held, and determine that the members
nominated are agreeable to the placing of their names in nomination and
will accept office if elected. The nominating committee must widely
publicize the call for nominations to all members by any medium and
interview each member who volunteers.
b. At least 90 days before the annual meeting, the nominating
committee files its nominations with the secretary of the credit union.
At least 75 days before the annual meeting, the secretary notifies, in
writing, all members eligible to vote that they may make nominations
for vacancies by petition signed by 1% of the members with a minimum of
20 and a maximum of 500. The secretary may use electronic mail to
notify members who have opted to receive notices or statements
electronically.
c. The written notice must specify that the credit union will not
conduct the election by ballot and there will be no nominations from
the floor when the number of nominees equals the number of open
positions.
d. The notice will include, in a form approved by the board of
directors, a brief statement of qualifications and biographical data
for each nominee submitted by the nominating committee. Each nominee by
petition must submit a similar statement of qualifications and
biographical data with the petition.
e. The written notice must state the closing date for receiving
nominations by petition. At least 40 days before the annual meeting,
nominee(s) must file the nomination petition with the secretary of the
credit union. To be effective, nominee(s) must include a signed
certificate with the nomination petition stating that they are
agreeable to nomination and will serve if elected to office.
f. At least 35 days before the annual meeting, the secretary will
post the nominations by petition along with those of the nominating
committee in a conspicuous place in each credit union office and on the
credit union's website.
Section 2. Election procedures. The plurality of the vote
determines all elections. The election is conducted by ballot boxes or
voting machines, subject to the following conditions:
(a) The board of directors will appoint the election tellers;
(b) At least 10 days before the annual meeting, the secretary will
direct the preparation and placement of ballot boxes, printed ballots,
or voting machines if there are sufficient nominations made by the
nominating committee or by petition to provide more nominees than open
positions. The secretary will place the boxes or voting machines in
conspicuous locations as determined by the board of directors. The
secretary will post the names of the candidates near the boxes or
voting machines. The posting will include a brief statement of the
candidates' qualifications and biographical data in a form approved by
the board of directors;
(c) The members have 24 hours to vote at conspicuous locations as
the board determines. After 24 hours, election tellers will open the
ballot boxes or voting machines, tally the vote, place the tally in the
ballot boxes, and reseal the ballot boxes. The election tellers are
responsible at all times for the ballot boxes or voting machines and
the integrity of the vote. The election tellers will keep a record of
all persons voting
[[Page 56653]]
and must assure themselves that each person voting is entitled to vote;
and
(d) The election tellers will take the ballot boxes to the annual
meeting and place them in conspicuous locations with the names of the
candidates posted near them. At the annual meeting, the election
tellers will distribute printed ballots to those in attendance who have
not voted. Members will deposit their votes in the ballot boxes placed
by the election tellers. After giving the members an opportunity to
vote at the annual meeting, the chair will close balloting. The
election tellers will open the ballot boxes, tally the vote, and add
the vote to the previous count. The chair will then announce the result
of the vote.
Option A4--Election by Electronic Device (Including But Not Limited to
Telephone and Electronic Mail) or Mail Ballot; Nominating Committee and
Nominations by Petition
Section 1. Nomination procedures. a. At least 120 days before each
annual meeting, the chair will appoint a nominating committee of three
or more members. The nominating committee will nominate at least one
member for each vacancy, including any unexpired term vacancy, for
which elections are being held, and determine that the members
nominated are agreeable to the placing of their names in nomination and
will accept office if elected. The nominating committee must widely
publicize the call for nominations to all members by any medium and
interview each member who volunteers.
b. At least 90 days before the annual meeting, the nominating
committee files its nominations with the secretary of the credit union.
At least 75 days before the annual meeting, the secretary notifies, in
writing, all members eligible to vote that they may make nominations
for vacancies by petition signed by 1% of the members with a minimum of
20 and a maximum of 500. The secretary may use electronic mail to
notify members who have opted to receive notices or statements
electronically.
c. The written notice must specify that the credit union will not
conduct the election by ballot and there will be no nominations from
the floor when the number of nominees equals the number of open
positions.
d. The notice will include, in a form approved by the board of
directors, a brief statement of qualifications and biographical data
for each nominee submitted by the nominating committee. Each nominee by
petition must submit a similar statement of qualifications and
biographical data with the petition.
e. The written notice must state the closing date for receiving
nominations by petition. At least 40 days before the annual meeting,
nominee(s) must file the nomination petition with the secretary of the
credit union. To be effective, nominee(s) must include a signed
certificate with the nomination petition stating that they are
agreeable to nomination and will serve if elected to office.
f. At least 35 days before the annual meeting, the secretary will
post the nominations by petition along with those of the nominating
committee in a conspicuous place in each credit union office and on the
credit union's website (if the credit union maintains a website).
Section 2. Election procedures. The plurality of vote determines
all elections. The election is conducted by electronic device or mail
ballot, subject to the following conditions:
(a) The board of directors will appoint the election tellers;
(b) At least 30 days before the annual meeting, the secretary will
ensure either a printed ballot or notice of ballot is mailed to all
members eligible to vote if there are sufficient nominations made by
the nominating committee or by petition to provide more nominees than
open positions. The secretary may use electronic mail to provide the
notice of ballot to members who have opted to receive notices or
statements electronically;
(c) If the credit union conducts its elections electronically, the
secretary will ensure the transmission of the following materials to
each eligible voter using the following procedures:
(1) One notice of balloting stating the names of the candidates for
the board of directors and the candidates for other separately
identified offices or committees. The notice must include a brief
statement of qualifications and biographical data for each candidate in
a form approved by the board of directors. The secretary may use
electronic mail to provide the notice of ballot to members who have
opted to receive notices or statements electronically.
(2) One mail ballot that conforms to Section 2(d) of this article,
as well as instructions for the electronic election procedure,
including how to access and use the system and the timeframe for
voting. The instructions will state that members without the requisite
electronic device necessary to vote on the system may vote by
submitting the enclosed mail ballot and specify the date the mail
ballot must be received by the credit union. For members who have opted
to receive notices or statements electronically, the mail ballot is not
required and the secretary may use electronic mail to provide the
instructions for the electronic election procedure.
(3) The election tellers verify, or cause to be verified, the name
of the voter and their credit union account number as registered in the
electronic balloting system. The election tellers will test the
integrity of the balloting system at regular intervals during the
election period.
(4) Election tellers must receive ballots no later than midnight, 5
calendar days before the annual meeting.
(5) Election tellers will tally the vote and the chair will make
the result of the vote public at the annual meeting.
(6) If the electronic balloting system malfunctions, the board of
directors may, in its discretion, hold the election by mail ballot
only. The mail ballots must conform to Section 2(d) of this article and
the secretary must mail them once more to all eligible members 30 days
before the annual meeting. The board may make reasonable adjustments to
the voting time frames above, or postpone the annual meeting when
necessary, to complete the elections before the annual meeting.
(d) If the credit union conducts its election by mail ballot, the
secretary will ensure the mailing of the following materials to each
member using the following procedures:
(1) One ballot, clearly identified as the ballot, with the names of
the candidates for the board of directors and the candidates for other
separately identified offices or committees printed in random order. A
brief statement of qualifications and biographical data for each
candidate, in a form approved by the board of directors, will accompany
the ballot;
(2) One ballot envelope, with instructions to place the completed
ballot placed in the envelope and seal the envelope;
(3) One identification form the member completes that includes
their name, address, signature and credit union account number;
(4) One mailing envelope that instructs the member to insert the
sealed ballot envelope and the identification form. The mailing
envelope must have prepaid postage and be preaddressed for return to
the election tellers;
(5) When properly designed with features that preserve the secrecy
of the ballot, the ballot, identification form, and prepaid postage and
preaddressed return envelope may be combined;
(6) The election tellers will verify, or cause to be verified, the
name and credit union account number of the voter as
[[Page 56654]]
appearing on the identification form. The tellers will retain the
verified identification form and the sealed ballot envelope until the
vote count is completed. In the event of a questionable or challenged
identification form, the tellers must retain the identification form
and sealed ballot envelope together until the verification or challenge
is resolved;
(7) Election tellers must receive ballots mailed to them no later
than midnight 5 days before the date of the annual meeting;
(8) The election tellers will tally the vote. They will verify the
result at the annual meeting and the chair will make the result of the
vote public at the annual meeting.
All Options Continue Here
Section 3. Order of nominations. Nominations may be in the
following order:
(a) Nominations for directors.
(b) Nominations for credit committee members, if applicable.
Elections may be by separate ballots following the same order as the
above nominations or, if preferred, may be by one ballot for all
offices.
Section 4. Proxy and agent voting. Members cannot vote by proxy. A
member other than a natural person may vote through an agent designated
in writing for the purpose.
Section 5. One vote per member. Irrespective of the number of
shares, no member has more than one vote.
Section 6. Submission of information regarding credit union
officials to NCUA. The secretary must forward the names and business
addresses of board members, board officers, executive committee, credit
committee members, if applicable, and supervisory committee members to
the Administration in accordance with the Act and regulations in the
manner as required by the Administration.
Section 7. Minimum age requirement. Members must be at least ____
years of age by the date of the meeting (or for appointed offices, the
date of appointment) in order to vote at meetings of the members, hold
elective or appointive office, sign nominating petitions, or sign
petitions requesting special meetings.
The credit union may select the following option:
Section 7. Members must be at least ____ years of age by the date
of the meeting in order to vote at meetings of the members, sign
nominating petitions, or sign petitions requesting special meetings.
Members must be at least ____ years of age to hold elective or
appointive office.
The Credit Union's board should adopt a resolution inserting an age
no greater than 18, or the age of majority under the state law
applicable to the credit union, in the blank space for voting, or not
greater than 21 for holding elective or appointive office.
The Credit Union may select the absentee ballot provision in
conjunction with the selected voting procedure. The board may do this
by printing the credit union's bylaws with this provision or by
retaining this copy and checking the box.
__ Section 8. Absentee ballots. The board of directors may authorize
the use of absentee ballots in conjunction with the other procedures
authorized in this article, subject to the following conditions:
(a) The board of directors will appoint the election tellers;
(b) If there are sufficient nominations made by the nominating
committee or by petition to provide more than one nominee for each open
position, at least 30 days before the annual meeting, the secretary
will ensure a printed ballot is mailed to all members of the credit
union who are eligible to vote and who have submitted a written or
electronic request for an absentee ballot;
(c) The secretary will ensure the following materials are mailed to
each eligible voter who submitted a written or electronic request for
an absentee ballot:
(1) One ballot, clearly identified as the ballot, with the names of
the candidates for the board of directors and the candidates for other
separately identified offices or committees printed in random order. A
brief statement of qualifications and biographical data for each
candidate, in a form approved by the board of directors, will accompany
the ballot;
(2) One ballot envelope clearly marked with instructions to place
the completed ballot placed in the envelope and seal the envelope;
(3) One identification form the member completes that includes
their name, address, signature and credit union account number;
(4) One mailing envelope that instructs the member to insert the
sealed ballot envelope and the identification form. The mailing
envelope must have prepaid postage and be preaddressed for return to
the election tellers;
(5) When properly designed with features that preserve the secrecy
of the ballot, the ballot, identification form, and prepaid postage and
preaddressed return envelope may be combined;
(d) The election tellers will verify, or cause to be verified, the
name and credit union account number of the voter as appearing on the
identification form. The tellers will retain the verified
identification and the sealed ballot envelope until the vote count is
completed. In the event of a questionable or challenged identification
form, the tellers must retain the identification form and the sealed
ballot envelope together until the verification or challenge is
resolved. If more than one voting procedure is used, the tellers must
verify that no eligible voter voted more than one time;
(e) Election tellers must receive ballots mailed to them no later
than midnight 5 days before the date of the annual meeting;
(f) Members or authorized personnel will deposit absentee ballots
in the ballot boxes taken to the annual meeting or included in a
precount in accordance with procedures specified in Article V, Section
2; and
(g) If a member has chosen to receive statements and notices
electronically, the credit union may provide notices required in this
section by email and provide instructions for voting via electronic
means instead of mail ballots.
Article VI. Board of Directors
Section 1. Number of members. The board consists of ____ directors,
all of whom must be members. By resolution, the board may change the
number of directors to an odd number not fewer than 5 or more than 15.
The board may not reduce the number of directors unless there is a
corresponding vacancy as a result of a death, resignation, expiration
of a term of office, or other action provided by these bylaws. The
board must file a copy of the resolution covering any increase or
decrease in the number of directors with the official copy of the
bylaws.
Section 2. Composition of board and committees. a. __ (Fill in the
number, which may be zero) director(s) may be a paid employee of the
credit union. The board may appoint a management official who ____ (may
or may not) be a member of the board and one or more assistant
management officials who ____ (may or may not) be a member of the
board. If the board permits the management official or assistant
management official(s) to serve on the board, he or she may not serve
as the chair.
b. __ (Fill in the number, which may be zero) immediate family
members, or those persons living in the same household, of a director
may be a paid employee of the credit union.
c. The total number of directors serving who fall into each of the
[[Page 56655]]
categories below must not constitute a majority of the board:
Management official plus assistant management official(s)
plus other employees;
Immediate family members or persons in the same household
as the management official, assistant management official(s), and other
employees; or
Management official plus assistant management official(s)
plus other employees, plus immediate family members or persons in the
same household as management officials, assistant management officials
and other employees.
d. __ (Fill in the number, which may be zero) committee member(s)
may be a paid employee of the credit union. __ (Fill in the number,
which may be zero) immediate family members, or those persons living in
the same household, of a committee member(s) may be a paid employee of
the credit union.
The board may also choose the option below:
__No director or committee member, who is not then a paid employee of
the credit union, may become a paid employee of this credit union for a
minimum of ____ (Fill in the number, which may be zero) years from the
date the official terminates his or her position as a director or
committee member.
You can also add ``unless the employee position to be filled
exists as a result of a death or disability'' after committee member.
For this section, you can correct the syntax by omitting the
plural(s) if applicable.
Section 3. Terms of office. Terms for directors are for periods of
2 or 3 years as decided by the board. All terms must be for the same
number of years and until the election and qualification of successors.
Terms are set and staggered at the first meeting, or when the number of
directors changes, so that approximately an equal number of terms
expire at each annual meeting.
Section 4. Vacancies. The directors, by majority vote, will fill
any vacancy on the board, credit committee, if applicable, or
supervisory committee as soon as possible. If all director positions
become vacant at once, the supervisory committee immediately becomes
the temporary board of directors and must follow the procedures in
Article IX, Section 3. Directors and credit committee members appointed
to fill a vacancy hold office only until the next annual meeting. The
FCU's members then vote to select a candidate to fill the remainder of
the original director's unexpired term. Members of the supervisory
committee appointed to fill a vacancy on the supervisory committee hold
office through the remainder of the unexpired term.
Section 5. Regular and special meetings. The board must hold a
regular meeting each month at the time and place fixed by resolution.
The board must conduct one regular meeting each calendar year in
person. If a quorum of the board is present at the in person meeting,
the remaining board members may participate by audio or video
teleconference. The board may conduct the other regular meetings by
audio or video teleconference. The chair, or in the chair's absence the
ranking vice chair, may call a special meeting of the board at any time
and must do so upon written request of a majority of the directors. The
chair, or in the chair's absence the ranking vice chair, will fix the
time and place of special meetings unless the board directs otherwise.
The board will give notice of all meetings in the manner set by
resolution. The board may conduct special meetings by audio or video
teleconference. The board may take action and vote on resolutions
without a meeting. The board must first obtain unanimous consent for
the action in writing or by electronically recorded means.
Section 6. Board responsibilities. The board has the general
direction and control of the affairs of this credit union. The board is
responsible for performing all the duties customarily done by boards of
directors. This includes but is not limited to:
(a) Directing the affairs of the credit union in accordance with
the Act, these bylaws, the rules and regulations and sound business
practices.
(b) Establishing programs to achieve the purposes of this credit
union as stated in Article I, Section 2, of these bylaws.
(c) Establishing lending policies, a loan collection program, and
authorizing the charge-off of uncollectible loans.
(d) Establishing policies to address training for directors and
volunteer officials in areas such as ethics and fiduciary
responsibility, regulatory compliance, and accounting.
(e) Ensuring that staff and volunteers who handle the receipt,
payment or custody of money or other property of this credit union; or
property in its custody as collateral or otherwise, are properly bonded
in accordance with the Act and regulations.
(f) Performing additional acts and exercising additional powers as
required or authorized by applicable law and regulation.
If the credit union has an elected credit committee, you do not
need to check a box. If the credit union has no credit committee check
Option 1, and if it has an appointed credit committee check Option 2.
__ Option 1. No Credit Committee.
(g) Reviewing denied loan applications of members who file written
requests for review.
(h) Appointing one or more loan officers and delegating to those
officers the power to approve or disapprove loans, lines of credit or
advances from lines of credit.
(i) In its discretion, appointing a loan review (the credit union
may fill in another name if desired) committee to review loan denials
and delegating to the committee the power to overturn denials of loan
applications. The committee will function as a mid-level appeal
committee for the board. The board must review all loans denied by the
committee upon written request of the member.
The credit union may select one of three options for the makeup
and term of the committee. Enter the option selected______.
__Option A. The committee must consist of three members with a term of
office of ____ (enter no more than 3) years. The committee may not have
more than one loan officer.
__Option B. The committee must consist of three members and two
alternates. The term of office of the committee members will be for
____ (enter no more than 3) years. The board may appoint any number of
lending professionals within the organization to the committee,
provided that no loan officer may review any loan that he or she
denied. At least 3 members of the committee must review loan denials,
none of whom have been a party to denying the loan.
__Option C. The board may, by resolution, change the number of
committee members to an odd number no less than three and no more than
seven. The board will determine the length of each committee member's
term upon appointment and stagger terms as necessary to prevent a
complete turnover of committee members. The board must file a copy of
the resolution covering any increase or decrease in the number of
committee members with the official copy of the bylaws of this credit
union. The committee will act by majority vote of members present at a
meeting. The committee may not have more than one loan officer.
[[Page 56656]]
__ Option 2. Appointed Credit Committee.
(g) Appointing an odd number of credit committee members as
provided in Article VIII of these bylaws.
Section 7. Quorum. A majority of directors, including any vacant
positions, constitutes a quorum for the transaction of business at any
meeting. A majority of the directors holding office constitutes a
quorum to fill any vacancies as stated in Section 4 of this article.
Less than a quorum may adjourn from time to time until a quorum is in
attendance.
Section 8. Attendance and removal. a. If a director or a credit
committee member, if applicable, fails to attend regular meetings of
the board or credit committee, respectively, for 3 consecutive months,
(choose one of the following) ____ or 4 meetings within a calendar
year, or ____ 4 meetings within any 12 consecutive meetings or
otherwise fails to perform any significant duties as a director or a
credit committee member, the board may declare the office vacant and
fill the vacancy as provided in the bylaws.
b. The board may remove any board officer from office for failure
to perform any significant duties as an officer. Prior to removal, the
board must give the officer reasonable notice and an opportunity to
respond to the issues.
c. When any board officer, membership officer, executive committee
member or investment committee member is absent, disqualified, or
otherwise unable to perform the duties of the office, the board may by
resolution designate another member of this credit union to fill the
position temporarily. The board may also, by resolution, designate
another member or members of this credit union to act on the credit
committee when necessary in order to obtain a quorum.
Section 9. Suspension of supervisory committee members. The board
may suspend any member of the supervisory committee by a majority vote.
In the event of a suspension, the board must hold a special meeting of
the members at least 7 but no more than 14 days after any suspension.
The members will decide whether to remove or to restore the suspended
committee member of the supervisory committee.
The credit union may add the optional Section 10 if desired.
Section 10. Director Emeritus. The board of directors may appoint
any former director who served on the board at least ____ (fill in the
number) years as ``Director Emeritus.'' The board my substitute
suitable volunteer service time for some of the board service time
provided the candidate has served at least ____ (fill in the number)
years on the board. The individuals appointed directors emeritus
function as an advisory committee to the board of directors. Terms for
directors emeritus are ____ (fill in the number) years. The board may
increase or decrease the number of directors emeritus, or shorten or
extend any director emeritus's term, by resolution. Unless separately
elected or appointed, directors emeritus are not members of any other
committee of the credit union. Directors emeritus are not a member or
officer of the board of directors; they may not vote on any matter
before the board or any other committee of the credit union; they may
not receive any compensation from the credit union; and they are not
required to attend any meetings or authorized to perform any duties
other than providing advice to the credit union's board, staff and
other committees as needed.
Article VII. Board Officers, Management Officials and Executive
Committee
Section 1. Board officers. The board elects the following officers
from their number: A chair, one or more vice chairs, a financial
officer, and a secretary. The board determines the title and rank of
each board officer and records them in the addendum to this article.
The board may compensate one board officer, the ____, for services as
they determine. If the board elects more than one vice chair, the board
determines their rank as first vice chair, second vice chair, and so
on. The same person may hold the offices of the financial officer and
secretary. If the board permits a management official or assistant
management official to serve on the board, he or she may not serve as
the chair. Unless removed as provided in these bylaws, the board
officers elected at the first meeting of the board hold office until
the first meeting of the board following the first annual meeting of
the members and until the election and qualification of their
respective successors.
Section 2. Election and term of office. The board must hold a
meeting not later than 7 days after the annual meeting to elect
officers. Board officers hold office for a 1-year term and until the
election and qualification of their respective successors. Any person
elected to fill a vacancy caused by the death, resignation, or removal
of an officer is elected by the board to serve only for the unexpired
term of that officer and until a successor is duly elected and
qualified.
Section 3. Duties of Chair. The chair presides at all meetings of
the members and at all meetings of the board, unless disqualified
through suspension by the supervisory committee. The chair also
performs other duties customarily assigned to the office of the chair
or duties directed to perform by resolution of the board that are not
inconsistent with the Act, regulations, and these bylaws.
Section 4. Approval required. The board must approve all
individuals authorized to sign all notes, checks, drafts, and other
orders for disbursement of credit union funds.
Section 5. Vice chair. The ranking vice chair has and may exercise
all the powers, authority, and duties of the chair during the chair's
absence or inability to act.
Section 6. Duties of financial officer. i. The financial officer
manages this credit union under the control and direction of the board
unless the board has appointed a management official to act as general
manager. Subject to limitations, controls and delegations the board may
impose, the financial officer will:
(a) Have charge over all funds, securities, valuable papers and
other assets of this credit union.
(b) Provide and maintain full and complete records of all the
assets and liabilities of this credit union in accordance with
prescribed law, regulation, and Administration guidance.
(c) Within 20 days after the close of each month, prepare and
submit to the board a financial statement showing the condition of this
credit union as of the end of the month, including a summary of
delinquent loans; and post a copy of the statement in a conspicuous
place in the office of the credit union where it will remain until
replaced by the next month's financial statement.
(d) Ensure that financial and other reports the Administration may
require are prepared and sent.
(e) Within standards and limitations set by the board, employ
sufficient staff to run the credit union, and have the power to remove
these employees.
(f) Perform other duties customarily assigned to the office of the
financial officer or duties assigned by board resolution that are not
inconsistent with the Act, regulations, and these bylaws.
ii. The board may employ one or more assistant financial officers,
none of whom may also hold office as chair or vice chair. The board may
authorize them, under the direction of the financial officer, to
perform any of the duties falling to the financial officer, including
the signing of checks. When
[[Page 56657]]
designated by the board, any assistant financial officer may also act
as financial officer during the financial officer's temporary absence
or temporary inability to act.
Section 7. Duties of management official and assistant management
official. The board may appoint a management official who is under the
direction and control of the board or of the financial officer as
determined by the board. The board may assign any or all of the
responsibilities of the financial officer described in Section 6 of
this article. The board will determine the title and rank of each
management official and record them in the addendum to this article.
The board may employ one or more assistant management officials. The
board may authorize assistant management officials under the direction
of the management official, to perform any of the duties falling to the
management official, including the signing of checks. When designated
by the board, any assistant management official may also act as
management official during the management official's temporary absence
or temporary inability to act.
Section 8. Board powers regarding employees. The board employs,
fixes the compensation, and prescribes the duties of employees as
necessary, and has the power to remove employees, unless it has
delegated these powers to the financial officer or management official.
Management does not have the power or duty to employ, prescribe the
duties of, or remove necessary clerical and auditing assistance
employed or used by the supervisory committee or remove any loan
officer appointed by the credit committee.
The credit union may select one of the following options and add
it to the end of Section 8:
__Option A. No director or committee member, who is not then a paid
employee of the credit union, may become a paid employee of this credit
union for a minimum of ____(Fill in the number, which may be zero)
years from the date the official terminates his or her position as a
director or committee member.
__Option B. No director, committee member, immediate family member of a
director or committee member, or person in the same household as a
director or committee member, who is not then a paid employee of this
credit union, may become a paid employee of the credit union for a
minimum of ____(Fill in the number, which may be zero) years from the
date the official terminates his or her position as a director or
committee member.
__Option C. No director, committee member, immediate family member of a
director or committee member, or person in the same household as a
director or committee member, who is not then a paid employee of the
credit union, may become a paid employee of this credit union for a
minimum of ____(Fill in the number, which may be zero) years from the
date the official terminates his or her position as a director or
committee member, unless the employee position to be filled exists as a
result of a death or disability.
__Option D. No official, who is not already a paid employee of this
credit union, may become a paid employee of this credit union for a
minimum of ____(Fill in the number, which may be zero) years from the
date the official terminates his or her position as a director or
committee member, unless the employee position to be filled exists as a
result of death or disability. The term ``official'' in this bylaw
means a person who is a member of the board of directors, supervisory
committee, or other volunteer committee established by the board of
directors.
Section 9. Duties of secretary. The secretary prepares and
maintains full and correct records of all meetings of the members and
of the board. The secretary will prepare a record of each respective
meeting within 7 days after its completion. The secretary must promptly
inform the Administration in writing of any change in the address of
the office of this credit union or the location of its principal
records. The secretary provides the proper notice of all meetings of
the members in the manner prescribed in these bylaws. The secretary
also performs other duties as directed by resolution of the board that
are not inconsistent with the Act, regulation, and these bylaws. The
board may employ one or more assistant secretaries, none of whom may
also hold office as chair, vice chair, or financial officer, and may
authorize them under direction of the secretary to perform any of the
duties assigned to the secretary.
Section 10. Executive committee. As authorized by the Act, the
board may appoint an executive committee of not fewer than three
directors to serve at its pleasure, to act for it with respect to the
board's specifically delegated functions. When making delegations to
the executive committee, the board must be specific with regard to the
committee's authority and limitations related to the particular
delegation. The board may also authorize any of the following to act
upon membership applications under conditions the board and these
bylaws may prescribe: An executive committee; a membership officer(s)
appointed by the board from the membership, other than a board member
paid as an officer; the financial officer; any assistant to the paid
officer of the board or to the financial officer; or any loan officer.
The board may not compensate the executive committee member or
membership officer as such.
Section 11. Investment committee. The board may appoint an
investment committee composed of not less than two, to serve at its
pleasure to have charge of making investments under rules and
procedures established by the board. The board may not compensate any
member of the investment committee as such.
Addendum: The board must list the positions of the board officers
and management officials of this credit union. They are as follows:
------------------------------------------------------------------------
Officer or
Position Credit union title Official name
------------------------------------------------------------------------
Board Chair....................
Vice Chair.....................
Treasurer......................
Secretary......................
Management Official............
Other 1........................
Other 2........................
Other 3........................
Other 4........................
------------------------------------------------------------------------
[[Page 56658]]
Select Option 1 if the credit union has a credit committee and
Option 2 if it does not have a credit committee.
Article VIII. Option 1 Credit Committee
Section 1. Credit committee members. The credit committee consists
of ____members. All the members of the credit committee must be members
of this credit union. The board determines the number of members on the
credit committee, which must be an odd number and may be fewer than 3
and no more than 7. The board may not reduce the number of members
unless there is a corresponding vacancy as a result of a death,
resignation, expiration of a term of office, or other action provided
by these bylaws. The board must file a copy of the resolution covering
any increase or decrease in the number of committee members with the
official copy of the bylaws of this credit union.
Section 2. Terms of office. Regular terms of office for elected
credit committee members are for periods of either 2 or 3 years as the
board determines. All regular terms are for the same number of years
and until the election and qualification of successors. The board will
fix the regular terms at the beginning or upon any increase or decrease
in the number of committee members so that approximately an equal
number of regular terms expire at each annual meeting. The board
determines the periods for the regular terms of office for appointed
credit committee members and records these periods in the board's
minutes.
Section 3. Officers of credit committee. The credit committee
chooses from their number a chair and a secretary. The secretary of the
committee prepares and maintains full and correct records of all
actions taken by it. They must prepare those records within 3 days
after the action. The same person may hold the offices of the chair and
secretary.
Section 4. Credit committee powers. The credit committee may, by
majority vote of its members, appoint one or more loan officers to
serve at its pleasure. The committee may delegate to them the power to
approve loan applications, share withdrawals, releases and
substitutions of security, within limits specified by the committee and
within limits of applicable law and regulations. The committee may not
appoint more than one of its members as a loan officer. Each loan
officer must furnish to the committee a record of each approved or not
approved transaction within 7 days of the date of the filing of the
application or request. This record becomes a part of the committee's
records. The committee must act on all applications or requests not
approved by a loan officer. No individual may disburse funds of this
credit union for any application or share withdrawal that the
individual has approved as a loan officer.
Section 5. Credit committee meetings. The credit committee must
hold at least one meeting a month and as frequently as required to
complete the business of this credit union. The committee will give
notice of meetings to its members in the manner it prescribes by
resolution.
Section 6. Credit committee duties. For each loan, the credit
committee or loan officer must review the character and financial
condition of the applicant and their surety, if any. The credit
committee or loan officer will ascertain the applicant's ability to
fully and promptly repay the loan. The credit union may use an
automated loan processing system to conduct this review, subject to the
conditions set forth in Section 7, below. Where appropriate, the credit
committee or loan officers should provide, or refer applicants to,
financial counseling assistance.
Section 7. Unapproved loans prohibited. The credit committee must
approve all loans. If the credit union uses an automated lending
system, the credit committee must review all loan applications the
system has denied and review at least a sample of approved loans to
screen for fraud and ensure the automated system is functioning within
the lending policies the board has established.
Section 8. Lending procedures. The credit committee, loan officer,
or automated system determines the required security, if any, and the
terms of repayment for each application. All lending decisions and loan
terms must comply with applicable law and regulations, these bylaws,
and board policy. The security furnished must be adequate in quality
and character as well as consistent with sound lending practices. When
the credit union does not have the funds available to make all the
loans requested, the credit committee should give preference, in all
cases, to the smaller applications if the need and credit factors are
nearly equal.
Article VIII. Option 2 Loan Officers (No Credit Committee)
Section 1. Records of loan officer; prohibition on loan officer
disbursing funds. Each loan officer must maintain a record of each
approved or not approved transaction within 7 days of the filing of the
application or request. This record then becomes a part of the records
of the credit union. No individual may disburse funds of this credit
union for any application or share withdrawal that the individual has
approved as a loan officer.
Section 2. Loan officer duties. For each loan, the loan officer
must review the character and financial condition of the applicant and
their surety, if any. The loan officer will ascertain the applicant's
ability to fully and promptly repay the loan. The credit union may use
an automated loan processing system to conduct this review, subject to
the conditions set forth in Section 3, below. Where appropriate, the
loan officer should provide, or refer applicants to, financial
counseling assistance.
Section 3. Unapproved loans prohibited. The loan officer must
approve all loans. Loan terms and rates must comply with applicable law
and regulations. If the credit union uses an automated lending system,
the loan officer must review all loan applications the system has
denied, and review at least a sample of approved loans to screen for
fraud and ensure the automated system is functioning within the lending
policies the board has established.
Section 4. Lending procedures. The loan officer or automated
lending system determine the required security, if any, and the terms
of repayment for each application. All lending decisions and loan terms
must comply with applicable law and regulation, these bylaws, and board
policy. The security furnished must be adequate in quality and
character as well as consistent with sound lending practices. When the
credit union does not have the funds available to make all the loans
requested, the loan officer should give preference, in all cases, to
the smaller applications if the need and credit factors are nearly
equal.
Article IX. Supervisory Committee
Section 1. Appointment and membership. The board appoints the
supervisory committee from members of this credit union. One of the
committee members may be a director other than the financial officer or
the paid officer of the board. The board determines the number of
members on the committee, which may not be fewer than 3 or more than 5.
No member of the credit committee, if applicable, or employee of this
credit union may be appointed to the committee. Terms of committee
members are for periods of 1, 2, or 3 years as decided by the board.
However, all terms are for the same number of years and until the
appointment and qualification of successors. Terms are
[[Page 56659]]
set and staggered at the beginning, or on the increase or decrease in
the number of committee members so that approximately an equal number
of terms expire at each annual meeting.
Section 2. Officers of supervisory committee. The supervisory
committee members choose from their number a chair and a secretary. The
secretary prepares, maintains, and has custody of all records of the
committee's actions. The same person may hold the offices of chair and
secretary.
Section 3. Duties of supervisory committee.
a. The supervisory committee makes, or arranges for, the audits,
and prepares and submits the written reports required by the Act and
regulations. The committee may employ and use the clerical and auditing
assistance required to carry out its responsibilities. The committee
may request the board to provide compensation for this assistance. It
will prepare and forward to the Administration required reports.
b. If all director positions become vacant at once, the supervisory
committee immediately assumes the role of the board of directors. The
supervisory committee acting as the board must generally call and hold
a special meeting to elect a board. That board will serve until the
next annual meeting. They must hold the special meeting at least 7 but
no more than 14 days after all director positions became vacant.
Nominations for the board at the special meeting are by petition or
from the floor. However, the supervisory committee may forego the
special meeting if the next annual meeting will occur within 45 days
after all the director positions become vacant.
c. The supervisory committee acting as the board may not act on
policy matters. However, directors elected at a special meeting have
the same powers as directors elected at the annual meeting.
Section 4. Verification of accounts. The supervisory committee will
cause the verification of the accounts of members with the records of
the financial officer from time to time and not less frequently than as
required by the Act and regulations. The committee must maintain a
record of this verification.
Section 5. Powers of supervisory committee--removal of directors
and credit committee members. By unanimous vote, the supervisory
committee may suspend any director, board officer, or member of the
credit committee. In the event of a suspension, the supervisory
committee must call a special meeting of the members to act on the
suspension. They must hold the meeting at least 7 but no more than 14
days after the suspension. The chair of the committee acts as chair of
the meeting unless the members select another person to act as chair.
Section 6. Powers of supervisory committee--special meetings. By
majority vote, the supervisory committee may call a special meeting of
the members to: Consider any violation of the provisions of the Act,
the regulations, the credit union's charter or bylaws; or to consider
any practice of this credit union the committee deems to be unsafe or
unauthorized.
Article X. Organization Meeting
Section 1. Initial meeting. When making an application for a
federal credit union charter, the subscribers to the organization
certificate must meet to elect a board of directors and a credit
committee, if applicable. The Agency may revoke the charter for failure
to start operations within 60 days after receipt of the approved
organization certificate unless the Agency approves an extension of
time.
Section 2. Election of directors and credit committee. The
subscribers elect a chair and a secretary for the meeting. The
subscribers then elect a board of directors and a credit committee, if
applicable. The elected directors or committee members will hold office
until the first annual meeting of the members and until the election of
their respective successors. Every person elected under this section or
appointed under Section 3 of this article, must become a member within
30 days if they are not already. If any person elected as a director or
committee member or appointed as a supervisory committee member does
not become a member within 30 days of election or appointment, the
office will automatically become vacant and be filled by the board.
Section 3. Election of board officers. Promptly after the elections
held under the provisions of Section 2 of this article, the board must
meet to elect the board officers. The officers will hold office until
the first meeting of the board of directors after the first annual
meeting of the members and until the election of their respective
successors. The board also appoints a supervisory committee at this
meeting as provided in Article IX, Section 1, of these bylaws and a
credit committee, if applicable. The appointed members hold office
until the first regular meeting of the board after the first annual
meeting of the members and until the appointment of their respective
successors.
After five years of operation, the credit union may select the
following:
Article X of the bylaws shall be amended to read as follows:
Reserved
Article XI. Loans and Lines of Credit to Members
Section 1. Loan purposes. The credit union may make loans to
members for provident or productive purposes in accordance with
applicable law and regulations.
The credit union may add business as one of its purposes by placing
a comma after ``provident'' and inserting ``business.''.
Section 2. Delinquency. Any member whose loan is delinquent may be
required to pay a late charge as determined by the board of directors.
Article XII. Dividends
Section 1. Power of board to declare dividends. The board sets
dividend periods and declares dividends as permitted by the Act and
applicable law and regulation.
Article XIII. Reserved
Article XIV. Expulsion and Withdrawal
Section 1. Expulsion procedure; expulsion or withdrawal does not
affect members' liability or shares. To expel a member, the credit
union must:
Call a special meeting of the members;
Provide the member the opportunity to be heard; and
Obtain a two-thirds vote of the members present at the
special meeting.
The credit union may also expel a member under a nonparticipation
policy given to each member that follows the requirements found in the
Act. Expulsion or withdrawal does not relieve a member of any liability
to this credit union. The credit union will pay all of their shares
upon their expulsion or withdrawal less any amounts due to this credit
union.
Article XV. Minors
Section 1. Minors permitted to own shares. The credit union may
issue shares in the name of a minor. State law governs the rights of
minors to transact business with this credit union.
Article XVI. General
Section 1. Compliance with law and regulation. The members,
directors, officers, and employees of this credit union must exercise
all power, authority, duties, and functions according to the provisions
of these bylaws in strict conformity with the provisions of applicable
law and regulations, and the credit union's charter and bylaws.
[[Page 56660]]
Section 2. Confidentiality. The officers, directors, members of
committees and employees of this credit union must keep all member
transactions and all information respecting their personal affairs in
confidence, unless otherwise directed by state or federal law.
Section 3. Removal of directors and committee members.
Notwithstanding any other provisions in these bylaws, any director or
committee member of this credit union may be removed from office by the
affirmative vote of a majority of the members present at a special
meeting called for the purpose, but only after an opportunity has been
given to be heard. If member votes at a special meeting result in the
removal of all directors, the supervisory committee immediately becomes
the temporary board of directors and must follow the procedures in
Article IX, Section 3.
Section 4. Conflicts of interest prohibited. a. No director,
committee member, officer, agent, or employee of this credit union may
participate in any manner, directly or indirectly, in the consideration
or determination of any question affecting his or her pecuniary or
personal interest or the pecuniary interest of any corporation,
partnership, or association (other than this credit union) in which he
or she is directly or indirectly interested.
b. If the board receives a matter affecting any director's
interest, the director must withdraw from the consideration or
determination of that matter. If the remaining qualified directors
present at the meeting plus the disqualified director or directors
constitute a quorum, the remaining qualified directors, by majority
vote, may exercise with respect to this matter all the powers of the
board. In the event of the disqualification of any member of the credit
committee, if applicable, or the supervisory committee, that committee
member must withdraw from the deliberation or determination.
Section 5. Records. The board must preserve copies of the
organization certificate of this credit union, its bylaws, any
amendments to the bylaws, and any special authorizations by the
Administration. The board must attach copies of the organization
certificate and field of membership amendments as an appendix to these
bylaws. The board must record all returns of nominations, elections,
and proceedings of all regular and special meetings of the members and
directors in the minutes of this credit union. The respective chair or
presiding officer and the person serving as secretary of the meeting
must sign all minutes of the meetings of the members, the board, and
the committees. All copies and records maintained under this section
may be stored physically or electronically provided that the
information is readily accessible to the directors, committee members
of this credit union, members, and the Administration. Moreover,
signatures may be provided electronically where permissible under
federal or state law.
Section 6. Availability of credit union records. All books of
account and other records of this credit union must be available upon
request at all times to the directors, committee members of this credit
union, and members provided they have a proper purpose for obtaining
the records. If this credit union maintains a website currently or in
the future, the board must post the bylaws of this credit union on the
website. The board must also make the charter and bylaws of this credit
union available for inspection by any member, upon request. If the
member requests a copy of the charter or bylaws, the board will provide
a copy to the member. The board may provide this copy to the member in
physical or electronic copy. If the member requests a physical copy,
the board may charge a reasonable fee for the physical copy.
Section 7. Member contact information. Members must keep the credit
union informed of their current mailing address or, if the member has
elected to receive electronic communications, their current email
address.
Section 8. Indemnification. (a) Subject to the limitations in Sec.
701.33(c)(5) through (c)(7) of the regulations, the credit union may
elect to indemnify to the extent authorized by (check one):
[ ] Law of the State of __:
[ ] Model Business Corporation Act:
The following individuals from any liability asserted against them
and expenses reasonably incurred by them in connection with judicial or
administrative proceedings to which they are or may become parties by
reason of the performance of their official duties (check as
appropriate).
[ ] Current officials.
[ ] Former officials.
[ ] Current employees.
[ ] Former employees.
(b) The credit union may purchase and maintain insurance on behalf
of the individuals indicated in (a) above against any liability
asserted against them and expenses reasonably incurred by them in their
official capacities and arising out of the performance of their
official duties to the extent such insurance is permitted by the
applicable State law or the Model Business Corporation Act.
(c) The term ``official'' in this bylaw means a person who is a
member of the board of directors, credit committee, supervisory
committee, other volunteer committee (including elected or appointed
loan officers or membership officers), established by the board of
directors.
Section 9. Pronouns, Singular and Plural. Unless the context
requires otherwise, words denoting the singular may be construed as
denoting the plural, words of the plural may be construed as denoting
the singular, and words of one gender may be construed as denoting such
other gender as is appropriate.
Article XVII. Amendments of Bylaws and Charter
Section 1. Amendment procedures. The board may adopt amendments of
these bylaws by an affirmative two-thirds vote of the directors.
Written NCUA approval is required for the amendment of the bylaws to
become effective. After adopting amendments, the credit union will
update the bylaws posted on its website (if such credit union maintains
a website) and ensure that members seeking to inspect the bylaws
receive the most current version of the bylaws. To adopt amendments to
the credit union's charter, members must vote at a duly held meeting
after receiving prior written notice of the meeting and a copy of the
proposed amendment or amendments with the notice. Written NCUA approval
is required for the amendment to the charter to become effective.
Article XVIII. Definitions
Section 1. General definitions. When used in these bylaws the
terms:
``Act'' means the Federal Credit Union Act, as amended.
``Administration'' means the National Credit Union Administration.
``Agency'' means the Regional Director, the Director of the Office
of National Examinations and Supervision, or the Director of the Office
of Credit Union Resources and Expansion.
``Applicable law and regulations'' means the Federal Credit Union
Act and rules and regulations issued thereunder or other applicable
federal and state statutes and rules and regulations issued thereunder
as the context indicates.
``Board'' means board of directors of the federal credit union.
``Board officers'' means:
1. ``Chair'' means Presiding Board officer, President of the Board,
Presiding Board Officer, or Chairperson.
2. ``Vice Chair'' means Vice President.
3. ``Financial Officer'' means Treasurer.
[[Page 56661]]
4. ``Secretary'' means Recording Officer.
5. ``Management Official'' means General Manager, Manager,
President, or Chief Executive Officer.
``Charter'' means the approved organization certificate and field
of membership issued by the National Credit Union Administration or one
of its predecessors. It is the document that authorizes a group to
operate as a credit union, defines the fundamental limits of its
operating authority, and includes the persons the credit union is
permitted to accept for membership.
``Field of membership'' means the persons (including organizations
and other legal entities) a credit union is permitted to accept for
membership.
``Immediate family member'' means spouse, child, sibling, parent,
grandparent, grandchild, stepparents, stepchildren, stepsiblings, and
adoptive relationships.
``Loans'' means any type of loan product the credit union offers.
This includes, but is not limited to, consumer loans, lines of credit,
credit cards, member business loans, commercial loans, and real estate
loans.
``Management'' means the Board, Financial Officer, and Management
Official.
``Member'' means a person must:
1. Be eligible for membership under Section 5 of the charter;
2. Sign membership forms as approved by the credit union board;
3. Subscribe to at least one share (par value) of stock;
4. Pay the initial installment;
5. Pay an entrance fee, if required; and
6. Be eligible to vote upon reaching the minimum age the credit
union establishes for voting and participation in the affairs of the
credit union.
``Membership Officer'' means a majority of the board of directors,
a majority of the members of a duly authorized executive committee, or
an individual(s) appointed by the board of directors to serve as such.
``NCUA Board'' means the Board of the National Credit Union
Administration.
``Person in the same household'' means an individual living in the
same residence maintaining a single economic unit.
``Regulation'' or ``regulations'' means rules and regulations
issued by the NCUA Board.
``Share'' or ``shares'' means all classes of shares and share
certificates that may be held in accordance with applicable law and
regulations.
Official NCUA Commentary--Federal Credit Union Bylaws
Article II. Qualifications for Membership
i. Entrance fee: FCUs may not vary the entrance fee among different
classes of members (such as students, minors, or non-natural persons)
because the Act requires a uniform fee. FCUs may, however, eliminate
the entrance fee for all applicants.
ii. Membership application procedures: Under section 113 of the
Act,\25\ the board acts upon applications for membership. However, the
board can appoint membership officers from among the members of the
credit union. Such membership officers cannot be a paid officer of the
board, the financial board officer, any assistant to the paid officer
of the board or to the financial officer, or any loan officer. As
described under section 2 of this Article, an applicant becomes a
member upon approval by a membership officer and payment of at least
one share (or installment or uniform entrance fee).
---------------------------------------------------------------------------
\25\ See 12 U.S.C. 1761b.
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iii. Violent, belligerent, disruptive, or abusive members: a. Many
credit unions have confronted the issue of handling a violent,
belligerent, disruptive, or abusive individual. Doing so is not a
simple matter, insofar as it requires the credit union to balance the
need to preserve the safety of individual staff, other members, and the
integrity of the workplace, on one hand, with the rights of the
affected member on the other. In accordance with the Act and applicable
interpretations by the NCUA's Office of General Counsel, there is a
reasonably wide range within which FCUs may fashion a policy that works
in their case. Thus, an individual that has become violent,
belligerent, disruptive, or abusive may be prohibited from entering the
premises or making telephone contact with the credit union, and the
individual may be severely restricted in terms of eligibility for
products or services. So long as the individual is not barred from
exercising the right to vote at annual meetings and is allowed to
maintain a regular share account, the FCU may fashion and implement a
policy that is reasonably designed to preserve the safety of its
employees and the integrity of the workplace.\26\ The policy need not
be identical nor applied uniformly in all cases--there is room for
flexibility and a customized approach to fit the particular
circumstances. In fact, the NCUA anticipates that some circumstances,
such as violence against another member or credit union staff in the
FCU or its surrounding property, an FCU may take immediate action to
restrict most, if not all, services to the violent member. In other
situations, such as a member that frequently writes checks with
insufficient funds, the FCU may attempt to resolve the matter with the
member before limiting check writing services. Once adopted, the FCU
must disclose the policy to new members when they join, and, as
required by the Act,\27\ notify existing members of the policy at least
30 days before it becomes effective. The FCU's board has the option to
adopt the optional amendment addressing members in good standing.
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\26\ See OGC Op. No. 08-0431 (Aug. 12, 2008).
\27\ See 12 U.S.C. 1764.
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b. FCUs should also make specific note of Article XIV, Sec. 1 of
the bylaws, which spells out in detail the procedure required to expel
an individual from membership. This procedure is mandated by the
Act.\28\ Furthermore, this Article specifies that the credit union, its
powers and duties, and the functions of its members, officers and
directors, are all strictly circumscribed by law and regulation. The
commentary for this Article provides more details on members using
accounts for unlawful purposes.
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\28\ Id.
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Article III. Shares of Members
i. Installments: FCUs may insert zero for the number of
installments. The Act allows membership upon the payment of the initial
installment of a membership share, but the NCUA no longer views this
provision as requiring FCUs to offer the option of paying for the
membership share in installments.
ii. Par value: FCUs may establish differing par values for
different classes of members or types of accounts (such as students,
minors, or non-natural persons), provided this action does not violate
any federal, state or local antidiscrimination laws. For example, an
FCU may want to establish a higher par value for recent credit union
members, without requiring long-time members to bring their accounts up
to the new par value. A differing par value may also be permissible for
different types of accounts, such as requiring a higher par value for a
member with only a share draft account. If a credit union adopts
differing par values, all of the possible par values must be stated in
section 1. The FCU Bylaws include several options for differing par
values. The credit union may select one or more of these or establish
its own.
iii. Regular share account: To establish membership, the member
must subscribe to one par value of share. The
[[Page 56662]]
share does not have to be in a regular share account. The bylaws
include two options. One option requires the member to have a regular
share account to open membership, and one option allows them to use any
other account. The board may select which option to use. If the board
does not select an option, the member must have a regular share account
to open an account. Please note, if the board selects an account other
than the regular share, the requirements of Article III, Sec. 3 still
apply. The member must maintain one share to remain a member. If the
share balance falls below the par value and does not increase the
balance within the time set by the board, membership is terminated. If
the board decides to allow the members to use a share draft account,
this section still applies if the member overdrafts the account below
the par value.
iv. Reduction in share balance below par value: When a member's
account balance falls below the par value, section 3 of this article
requires FCUs to allow members a minimum time period to restore their
account balance to the par value before membership is terminated. FCUs
may not delete this requirement or delete references to this
requirement in Article II, Sec. 3.
v. Trusts: a. Trusts and shares issued in trust can be a
complicated subject. For purposes of the FCU Bylaws, perhaps the main
issue is the distinction between revocable and irrevocable trusts. In
the case of a revocable trust, the individual who establishes the trust
is essentially still in control of the funds during his lifetime. Thus,
the account owner can change the designated beneficiary at any time,
and he or she can determine whether the identified beneficiary actually
receives any money simply by deciding to withdraw the funds before his
or her own death. Accordingly, the requirement in the case of revocable
trust accounts is simply that the owner of the funds be a member of the
FCU. Furthermore, provided the owner of the funds is within the field
of membership and eligible for membership, he or she may use the
vehicle of the payable-on-death or revocable trust account itself as
the method of becoming a member. There is no requirement that the
account holder first establish a regular share account to become a
member. In accordance with legal opinions issued by the NCUA's Office
of General Counsel, an individual may fulfill the requirement of
becoming a member by subscribing to the equivalent of the par value of
one share, which can be done through the opening of any type of account
the credit union offers.\29\
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\29\ See OGC Op. No. 92-0522 (June 15, 1992).
---------------------------------------------------------------------------
b. There is no requirement that the beneficiaries be members, since
they may never actually come to own the funds or have a right to them.
Furthermore, in the case of a revocable trust, since it is essentially
indistinguishable from the member, there is no need for the trust to
have a separate account number assigned or for it to be viewed as a
legal entity separate from the member who set it up.
c. In the case of an irrevocable trust, the requirements are
somewhat different. Membership requirements here may be met though
either the settlor, who is the original owner of the funds, or the
beneficiary, who obtains an equitable, beneficial interest in the funds
once the trust is established. So long as one or the other is eligible
for membership, the credit union may accept the account. Furthermore,
as with revocable trusts, the membership obligation can be met through
the opening of the trust account itself; it is not required that the
beneficiary or the settlor have previously established a separate,
regular share account. Most irrevocable trusts have a trustee who has
administrative responsibility for the account, and so the credit union
will typically deal with the trustee for purposes such as sending
monthly statements and year-end tax reporting. However, the trustee
need not actually be a member of the credit union, and the credit union
need not necessarily view the trust account as a separate legal entity,
with its own separate tax ID number. Instead, it need only verify and
confirm the eligibility of either the settlor or the beneficiary (or
all of the settlors or all of the beneficiaries in the case of multiple
settlors or beneficiaries) to join the credit union.
d. A trust itself, either revocable or irrevocable, may be a member
of the credit union in its own right if all parties to the trust,
including all settlors, beneficiaries and trustees, are within the
field of membership.\30\ If all parties to the trust are within a
credit union's field of membership, the trust will qualify as ``an
organization of such persons,'' which is a standard clause in FCU
fields of membership.
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\30\ OGC Op. No. 99-1110 (Feb. 25, 2000).
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Article IV. Meetings of Members
i. Annual and special meetings: FCUs are encouraged to provide a
live webcast of annual and special meetings for interested members,
and/or post a video of the annual meeting on the FCU's website. The
NCUA Board encourages this policy for FCUs that currently have a
website.
Article V. Elections
i. Eligibility requirements: The Act and the FCU Bylaws contain the
only eligibility requirements for membership on an FCU's board of
directors, which are as follows:
(a) The individual must be a member of the FCU before distribution
of ballots;
(b) The individual cannot have been convicted of a crime involving
dishonesty or breach of trust unless the NCUA Board has waived the
prohibition for the conviction; and
(c) The individual meets the minimum age requirement established
under Article V, Sec. 7 of the FCU Bylaws.
Anyone meeting the three eligibility requirements may run for a
seat on the board of directors if properly nominated. It is the
nominating committee's duty to ascertain that all nominated candidates,
including those nominated by petition, meet the eligibility
requirements.
ii. Nomination criteria for nominating committee: The Act and the
FCU Bylaws do not prohibit a board of directors from establishing
reasonable criteria, in addition to the eligibility requirements, for a
nominating committee to follow in making its nominations, such as
financial experience, years of membership, or conflict of interest
provisions. The board's nomination criteria, however, applies only to
individuals nominated by the nominating committee; they cannot be
imposed on individuals who meet the eligibility requirements and are
properly nominated from the floor or by petition.
iii. Candidates' names on ballots: When producing an election
ballot, the FCU's secretary may order the names of the candidates on
the ballot using any method for selection provided it is random and
used consistently from year to year so as to avoid manipulation or
favoritism.
iv. Secret ballots: An FCU must establish an election process that
assures members their votes remain confidential and secret from all
interested parties. If the election process does not separate the
member's identity from the ballot, FCUs should use a third-party teller
that has sole control over completed ballots. If the ballots are
designed so that members' identities remain secret and are not
disclosed on the ballot, FCUs may use election tellers from the FCU. In
any case, FCU employees, officials, and members must not have access to
ballots identifying members or to information that links members' votes
to their identities.
[[Page 56663]]
v. Plurality voting: At least one nominee must be nominated for
each vacant seat. When there are more nominees than seats open for
election, the nominees who receive the greatest number of votes are
elected to the vacant seats.
vi. Minimum age requirement: The age the board selects may not be
greater than eighteen or the age of majority under the state law
applicable to the credit union, whichever is lower.
vii. Electronic voting: Some members lack digital access or wish to
have a choice to vote non-electronically. The FCU Bylaws protect
members who cannot or choose not to vote electronically. For those
members who vote electronically, credit unions have the flexibility to
use as many forms of electronic voting (phone, internet, etc.) as they
wish.
viii. Voting methods: Options A1, A2 and A3 provide for in-person
voting at the annual meeting, or, for Option A3, by voting machine.
Option A4 provides for remote voting via electronic device or mail
ballot. The NCUA has approved several bylaw amendments for FCUs that
combine in-person and remote options for member voting. The NCUA
encourages FCUs using one of the first three options to consider
whether they can also incorporate mail ballots or electronic voting.
Likewise, the NCUA encourages FCUs using option A4 to consider whether
they can also provide a means to vote for members who come to the
annual meeting but have not voted in the election, such as a paper
ballot.
ix. Uncontested elections: Options A2, A3 and A4 provide for
election by acclamation or consensus when the number of nominees for
board positions equals the number of positions to be filled. These
options do not permit nominations from the floor at the meeting, so a
petition is the only way for members to nominate a candidate not on the
nominating committee's slate. Accordingly, section (1)(c) in each of
these options requires the notice to members to include the fact that
there are no nominations from the floor at the meeting, as well as a
notice that the credit union will not conduct a vote by ballot if the
number of nominees equals the number of positions to be filled. The FCU
Bylaws do not require a particular procedure for uncontested elections.
The contents of the notice to members required in section (1)(c)
does not alter the basic election procedures the credit union has
selected. Should the number of the nominating committee nominees fall
below the number of positions to be filled after the member notice is
sent, this section does not permit nominations from the floor. Only
option A1 permits nominations from the floor.
x. Nomination procedures: Under all options under this Article, the
nominating committee must widely publicize the call for nominations to
all members by any medium. This requirement can be satisfied by
publicizing the information to a large audience, whether by newsletter,
email, or any other satisfactory medium that reaches as many members as
possible. The NCUA emphasizes that member participation is important
during an election, and FCUs must make sure that members are aware of
the nomination process.
Article VI. Board of Directors
i. Vacancies: In accordance with the Act, when a vacancy on the
board of directors occurs between annual elections, the remaining
directors are to appoint a replacement. This replacement will serve as
a director until the next annual meeting. The vacancy is then to be
filled at the next annual meeting through the normal membership voting
process, with the newly elected director serving out the remainder of
the original term.\31\ The number of director positions may be changed
to any odd number between 5 and 15, inclusive, but a position may not
be eliminated if it is currently an occupied position. As the bylaw
itself specifies, no reduction in the number of director positions may
be made unless there is a corresponding vacancy, caused by death,
resignation, expiration of term or other action permissible under the
FCU Bylaws. In other words, the FCU may not arbitrarily propose to
reduce the number of director positions and terminate one or more
incumbent directors.
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\31\ 12 U.S.C. 1761(a).
---------------------------------------------------------------------------
ii. Director emeritus: As a matter of board policy, the board may
establish the position of director emeritus for former directors who
faithfully fulfilled their responsibilities as members of the board for
at least a specified minimum number of years. The board may determine
that director emeritus status confers authority to attend board
meetings and to participate in discussions and other board events;
however, directors emeritus may not vote on any matter before the board
or exercise any official duties of a director. The position is
essentially an honorary title designed to recognize and reward the good
service of those designated and to retain some of their institutional
knowledge for the benefit of the board and the FCU. The decision to
establish a director emeritus position, as well as the selection of
individuals to become directors emeritus, is solely within the
discretion of the board. The board may establish a director emeritus
position by adopting either the optional bylaw amendment or a board
policy.
To assist them in providing advice, Directors emeriti have access
to confidential information, including but not limited to the credit
union's examination reports and CAMEL ratings, to the same extent as
members of the board. Directors emeriti are also subject to the same
confidentiality and conflict of interest standards applicable to
directors.
iii. Associate directors: a. The board may also establish the
position of associate director through board policy. This position is
designed to provide qualified individuals with an opportunity to gain
exposure to board meetings and discussions but without formal director
responsibility or the right to vote. It may be thought of as an
apprenticeship position in which the incumbent receives training and
knowledge about the business of the board, with the expectation that
the experience will prepare him or her for an eventual election to a
director position. As with the director emeritus position, the decision
to establish an associate director position, as well as the selection
of individuals to become associate directors, is solely within the
discretion of the board.
b. To assist their learning process, the board may determine to
permit associate directors to have access to confidential information,
including but not limited to the credit union's examination reports and
CAMEL ratings, to the same extent as members of the board. Associate
directors are also subject to the same confidentiality and conflict of
interest standards applicable to directors.
iv. Composition of the board: The NCUA Board encourages the
composition of the board of directors to reflect the field of
membership of the FCU.
v. Notice to members of change in size of board: The NCUA
encourages FCUs changing the size of their boards to post a notice of
the change on the FCU's website (if the FCU maintains a website). An
FCU is not required to establish and maintain a website solely for this
purpose, however. An FCU that does not maintain a website can post such
a notice in a conspicuous place in the office of the FCU, such as at
the teller window or on the front door of the FCU.
Article VII. Board Officers, Management Officials and Executive
Committee
[[Page 56664]]
i. Board officers: a. As specified in this bylaw, members of the
board are elected by the credit union membership to the board itself.
Once on the board, the directors themselves vote to select individuals
from among their number to serve as officers of the board (chair, one
or more vice chairs, secretary and financial officer). One board
officer may be compensated as such for services he or she performs in
that capacity. The offices of financial officer and secretary may be
held by the same person.
b. Members of the board must hold the vote for the specified
officer positions at the first board meeting following the annual
meeting of the members. This board meeting should be held not later
than seven days after the annual meeting. The Act requires the credit
union to file a record of the names and addresses of the executive
offices, members of the supervisory committee, credit committee, and
loan officers be filed with the Administration within ten days after
election or appointment.\32\ The NCUA's regulations also require
federally insured credit unions to file NCUA Form 4501 or its
equivalent within 10 days after an election or appointment of senior
management or volunteer officials.\33\
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\32\ 12 U.S.C. 1761(b).
\33\ 12 CFR 741.6.
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c. Officers hold their respective officer positions for a term of
one year, until the first board meeting that follows the next annual
meeting of the members. At that board meeting, officer positions are
again filled. Each board officer holds his or her position until the
election and qualification of his or her successor. Thus, a board
officer who is re-elected to the position he or she is currently
holding serves for another year. Where another director is chosen to
fill the position, he or she takes office effective as of the date of
the election, assuming he or she is qualified--meaning simply that he
or she was properly elected by the membership to the board in the first
place and is in good standing as a director.
d. As specified in this bylaw, the board chair presides at all
board meetings. In the absence of the chair or his or her inability to
act, the vice chair presides at the meeting. In the absence or
inability to act of both the chair and the vice chair, those directors
who are present may select from among their number an individual
director to act as temporary chair for that particular meeting. Actions
taken by the board under the direction of the temporary chair have the
same validity and effect as if taken under the direction of the chair
or the vice chair, provided a quorum of the board, including the
temporary chair, is present. If the board secretary is absent for any
reason from a meeting, the chair (or acting chair) must select another
director to fulfill the secretary's function at the meeting.
ii. Committee Membership: The NCUA encourages FCUs to publicize the
names of the members of each FCU committee to FCU members. FCUs could
provide this information either on the FCU's public website or to the
portion of the website only accessible to members after logging in. The
NCUA encourages this policy for FCUs that have a website. An FCU is not
required to establish and maintain a website solely for this purpose,
however. Providing a short description of the committee's duties also
assists members in better understanding the leadership structure of the
FCU.
Article VIII. Credit Committee or Loan Officers
i. Automated lending systems: Many FCUs now use automated systems
for accepting loan applications, loan underwriting, and loan
processing, as permitted by several of the NCUA Office of General
Counsel's legal opinions. The bylaws reflect that FCUs may use
automated lending systems, as long as the credit committee or a loan
officer: (1) Reviews the loans the automated system granted for fraud
and other purposes; and (2) reviews loans the automated system denied.
Article IX. Supervisory Committee
i. Nominations: The Act requires that the FCU's board appoint the
members of the Supervisory Committee. It is permissible for the board
to seek nominations from members before making Supervisory Committee
appointments.
Article XIV. Expulsion and Withdrawal
i. Expulsion procedures: As noted in the commentary to Article II,
there is a fairly wide range of measures available to the credit union
in responding to abusive or disruptive members. However, in accordance
with the Act, there are only two ways a member may be expelled: (1) A
two-thirds vote of the membership present at a special meeting called
for that purpose, and only after the individual is provided an
opportunity to be heard; and (2) for non-participation in the affairs
of the credit union, as specified in a policy adopted and enforced by
the board.\34\ Only in-person voting is permitted in conjunction with
the special meeting, so that the affected member has an opportunity to
present their case and respond to the credit union's concerns. In
addition, FCUs should consider the commentary under Article XVI about
members using accounts for unlawful purposes.
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\34\ See 12 U.S.C. 1764.
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Article XVI. General
i. Special meeting requirements: To remove a director under section
3 of this Article requires a majority vote of members present at a
special meeting called for the purpose of voting on removal. The bylaw
requires that the affected director have the ``opportunity to be
heard.'' NCUA interprets this provision as requiring the vote to occur
at an in-person meeting rather than by mail ballot. At an in-person
meeting, the director subject to the removal vote can make his or her
case before the members. The director removal provisions derive from
provisions of the Act, as follows:
The bylaws govern the conduct of special meetings; \35\
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\35\ 12 U.S.C. 1760.
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Members must have the opportunity to vote, at a meeting,
on the Supervisory Committee's suspension of a director; \36\ and
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\36\ 12 U.S.C. 1761d.
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FCU members may be expelled by vote of members present at
a meeting called for that purpose.\37\
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\37\ 12 U.S.C. 1764(a).
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ii. Unlawful purposes: FCUs expressed concerns that some members
may be using their accounts for unlawful purposes. Section 1 of this
Article specifies that the credit union, its powers and duties, and the
functions of its members, officers and directors, are all strictly
circumscribed by law and regulation. Insofar as this provision is
included in the bylaws, an FCU need not adopt a specific policy or
requirement that members conform their use of credit union products or
services to lawful purposes. Furthermore, the existence of this bylaw
provides ample support should an FCU determine to impose strict limits
on products and services available to any individual who is found to be
using the FCU in furtherance of unlawful purposes.
iii. Posting of bylaws on website: FCUs that maintain a website
must post a copy of the FCU's bylaws on the website. After adopting
amendments, FCUs must post an updated copy of the bylaws. An FCU is not
required to establish and maintain a website solely for this purpose,
however.
[FR Doc. 2018-24169 Filed 11-9-18; 8:45 am]
BILLING CODE 7535-01-P