[Federal Register Volume 60, Number 192 (Wednesday, October 4, 1995)]
[Proposed Rules]
[Pages 51936-51942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24689]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
Federal Credit Union Field of Membership and Chartering Policy
AGENCY: National Credit Union Administration (``NCUA'').
ACTION: Proposed Amendments to Interpretive Ruling and Policy Statement
94-1 (``IRPS 95-2'').
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SUMMARY: The NCUA Board is proposing to amend its policies so that
senior citizen and retiree groups will be required to meet the same
conditions as other associational groups in order to qualify for a
federal credit union charter or addition to an existing charter through
a field of membership amendment. The Board is also proposing five
technical amendments to clarify operational issues. The amendments
clarify: The application of field of membership requirements to
mergers; the streamlined expansion procedure; the documentation
requirements for low-income communities; the use of surveys to support
a community common bond; and appeal procedures.
DATES: Comments must be postmarked or received or posted on NCUA's
electronic bulletin board by December 4, 1995. Do not fax and send by
U.S. Mail.
ADDRESSES: Send comments to Becky Baker, Secretary of the Board,
National Credit Union Administration, 1775 Duke Street, Alexandria,
Virginia 22314 or via NCUA's electronic bulletin board to Becky Baker
at 703-518-6480.
FOR FURTHER INFORMATION CONTACT: Michael J. McKenna, Staff Attorney, at
the above address or telephone (703) 518-6540.
SUPPLEMENTARY INFORMATION:
The Senior Citizen and Retiree Association Policy
In 1984, NCUA adopted a policy that encouraged federal credit
unions (FCUs) to accept local senior citizens and retirees through the
formation of associations. The only requirement for adding these
associations to a credit union charter was a written request from the
FCU to the NCUA; no request from the group or copy of the associations
charter or bylaws was necessary. This policy resulted in many FCUs
creating and adding senior citizen/retiree associations to their
charters. Subsequent policy statements, including IRPS 94-1 (the
Chartering Manual), continued this policy. 59 FR 29066 (June 3, 1994).
In 1994, two bank trade associations and six Texas commercial banks
filed suit against Communicators FCU, Houston, Texas, as a result of
several additions to the FCUs field of membership. The suit challenged,
among other additions, the 1994 addition of a senior citizen/retiree
group formed solely for the purpose of acquiring credit union service.
While upholding the other additions, the court vacated the addition of
the senior citizen/retiree association and permanently enjoined NCUA
from adding any similar associations to the FCU. Texas Bankers
Association, et al. v. NCUA, et al., 1995 WL 328319 (D.D.C., May 31,
1995) (the ``Communicators FCU'' decision).
An informal survey of credit unions with Communicators FCU-like
senior citizen/retiree associations in their charters conducted by
NCUAs regional office in Austin, Texas found that only a small
percentage of potential members of such associations actually join the
credit unions. The Board believes that the current policy may not
sufficiently promote NCUAs goal of making quality credit union service
available to all persons who wish to have it. It is also apparent that
continuing the current policy may leave some FCUs exposed to costly
litigation. Although the court's order applies only to Communicators
FCU, the Board is reviewing the senior citizen/retiree policy and is
now proposing to change that policy after considering public comment.
Proposed Policy
The Board is proposing to modify its senior citizen/retiree policy
to require such groups to meet normal associational common bond
requirements before seeking to join or charter an FCU. In determining
whether
[[Page 51937]]
a group satisfies this common bond requirement, NCUA will consider the
totality of the circumstances, such as whether the members pay dues,
have voting rights, hold office, hold meetings, whether there is
interaction among members and whether the group has its own bylaws.
See, Chapter 1, Section II.B. of the Chartering Manual, 59 FR at 29076.
Provided operational area requirements are met, senior citizen/retiree
associations formed for purposes other than seeking credit union
service will then qualify to join an existing FCU. An FCU may still
assist a senior citizen group to form an association that will qualify
under the Chartering Manual. Accordingly, the Board is proposing to
eliminate the section of IRPS 94-1 which permits Communicator FCU-like
senior citizen/retiree associations to join FCUs, Chapter 1, Section
V.B of the Chartering Manual, 59 FR 29082.
The Board is requesting comment on this proposal as well as how to
address existing senior citizen/retiree groups in other FCU's fields of
membership that do not meet the proposed characteristics of an
association. The Board requests comment on the following proposed
treatment of existing groups. First, FCUs that currently have a senior
citizen/retiree group in their field of membership and wish to continue
to add members from this group must ensure that the group meets the
normal associational common bond requirements. Many of these groups may
already meet the proposed requirements. The examination program will
monitor compliance. Second, no new group members may join an FCU that
does not have the characteristics of an association. In this case, the
group should be deleted from the FCUs charter. This will also be
monitored through the exam process. However, if the FCU has adopted the
once a member, always a member bylaw, it could continue to serve
members that had joined based on their membership in the senior
citizen/retiree group.
Until the Board approves a final policy, it is continuing its
moratorium on FCUs adding self-created senior citizen/retiree groups to
their field of membership. The moratorium has no effect on groups that
are already in an FCU's field of membership and it does not apply to
the addition of senior citizen groups that have the characteristics of
an association as defined in the Chartering Manual. 59 FR at 29076.
Low-Income Associations
The Board is also considering the possible effects of the
Communicators FCU decision on low-income group additions. Congress and
the Board have long recognized that special efforts must be made for
those who are attempting to serve the needs of persons of limited
means. IRPS 94-1 provided new methods for credit unions to serve low-
income persons with the establishment of two new policies. The first
policy permitted any occupational, associational, multiple group or
community FCU to include in its field of membership, without regard to
location, communities satisfying the low-income definition of
Sec. 701.32 of NCUA's Regulations. The second policy allowed any FCU to
add associational groups of low-income persons to their fields of
membership. Current policy allows low-income groups to be formed solely
for the purpose of obtaining credit union service without meeting the
standard characteristics of an association.
The Board proposes that FCUs continue to be allowed to add low-
income groups formed solely for the purpose of seeking credit union
service. NCUA defines as ``low-income'' persons earning less than 80
percent of the average for all wage earners and persons whose annual
household income falls at or below 80 percent of the median household
income for the nation. 12 CFR 701.32(d)(2). The FCU Act was enacted
``to make more available to people of small means credit for provident
purposes through a national system of cooperative credit.'' 12 U.S.C.
1751. Congress established a special segment of credit unions serving
predominantly low-income members. 12 U.S.C. 1752(5). Congress also
established and funded a Community Development Revolving Loan Fund for
Credit Unions, designed to help, through loans to credit unions serving
predominantly low-income persons, in providing ``basic financial and
related services'' to low-income persons and in ``stimulating economic
activities * * * which will result in increased income, ownership and
employment opportunities for low-income residents.'' 12 CFR 705.2(a).
See also, 12 U.S.C. 1766(k) (giving the Board authority over the
Community Development Revolving Loan Fund for Credit Unions). The Board
believes that the current low income credit union program continues to
serve an important governmental purpose and is not proposing any
changes to its low-income association policy.
Technical Changes
The Board is proposing five technical amendments to its policy to
clarify operational issues. The amendments address: (1) The application
of field of membership rules to credit union mergers; (2) the use of
streamlined expansion procedure; (3) the documentation requirements for
low-income community credit unions as well as low-income additions; (4)
the use of surveys to support a community charter; and (5) appeal
procedures.
Mergers
A. Operational Area. The Board wishes to clarify how it applies
operational area and field of membership requirements to mergers.
NCUA's field of membership expansion rules apply to mergers where the
continuing credit union is a federal charter. If the merging credit
union is state chartered, the field of membership rules for conversions
from state to federal charter also apply. Chapter 2, Section III.A,
Chartering Manual. 59 FR at 29086. The following is an explanation of
how field of membership expansion, and particularly operational area,
requirements apply in the merger context.
For each group in the merging credit union's field of membership,
there are two means of merging into an occupational, associational or
multiple group FCU. First, if the merging group is part of an
occupational or associational common bond which constitutes a majority
of the continuing credit union's field of membership, the group may be
added regardless of location. These are called ``common bond
additions.'' For any other occupational or associational common bond,
the group must be within the credit union's operational area. These are
commonly called ``select group additions.'' A ``select group'' can also
be added if it is within the operational area of a planned service
facility of the continuing credit union provided:
* The planned facility begins operation shortly after the group
- is added; and
* The current field of membership constitutes a significant
portion of - the total field of membership to be served initially by
the proposed - facility. Although the addition of a new select group
is not enough to justify a planned service facility, it is
permissible to include new groups as partial justification for such
a facility.
Chapter 2, Section II.A.1 of the Chartering Manual, 59 FR at 29085.
Mergers will usually fall into either the common bond addition or
select group addition categories, but some may fall into both. Field of
membership requirements are met for each merging group only if the
group could have been added to the continuing credit union without the
benefit of the merger. The continuing credit union must analyze
[[Page 51938]]
each group in the merging credit union's field of membership as if the
continuing credit union was expanding its own field of membership
without a merger. For those groups from the merging credit union that
do not meet operational area requirements, only the members of record
will be transferred to the continuing credit union. Merger applicants
must provide NCUA with their own analysis of how the proposed field of
membership conforms to the requirements set forth in the Chartering
Manual.
The Board is seeking comment on the application of operational area
requirements to mergers involving select group additions. Specifically,
in addition to welcoming comment on the above analysis, the Board
requests comment on whether mergers should be further limited to credit
unions which primarily serve groups in the same geographic location. If
so, the continuing credit union would only be permitted to continue to
serve groups in that geographic location.
B. Views of Overlapped Credit Unions. The Chartering Manual does
not require the Region when it reviews the merger plan to apply an
overlap analysis to a group in a discontinuing credit union's field of
membership that has service available from another credit union. The
Board requests comment on whether such an analysis is necessary and
whether an affected credit union should be notified of the merger and
be given an opportunity to object to the continuing credit union
retaining the overlapped group in its field of membership.
The Board also requests comment on whether credit unions that may
be adversely affected by the merger should have the right to appeal the
Regional Director's determination. An appeal after the merger is
approved may pose administrative and procedural difficulties. Because
of these potential problems, the Board is requesting comment on whether
it should establish a formal process for credit unions to comment on a
merger prior to the Regional Director making a determination. One
procedure would be to require the merging credit unions to notify all
affected credit unions of the proposed merger. Credit unions would have
30 days from receipt of the notification to send written comments
regarding their views to the Regional Director. Only after
consideration of the comments would the Regional Director make a
determination.
C. Waivers. An operational area waiver procedure is available when
a state-chartered credit union is merged into an FCU ``on a proper
showing that the [continuing] credit union will continue to be able to
provide quality service to its current field of membership as a federal
credit union.'' Chapter 2, Section III.A, 59 FR at 29086. A waiver is
discretionary on the part of NCUA and permits groups already receiving
quality credit union services, who are located outside of the credit
union's operational area, to continue to have credit union service
after the merger. It is the responsibility of the merger applicants,
not NCUA, to provide an adequate basis for a waiver. Absent any
waivers, only members of record of those groups that do not meet
operational area requirements may be transferred to the continuing
credit union. Finally, operational areas requirements do not apply in
emergency mergers. 12 U.S.C. 1785(h).
Streamlined Expansion Procedure (``SEP'')
SEP was adopted by the Board in IRPS 94-1 and permits well operated
FCUs to add small groups of less than 100 persons with an occupational
common bond without prior NCUA approval. The group must be located
within 25 miles of one of the FCU's service facilities and have made a
written request to the FCU for service. In general, the group must not
have credit union service currently available. The Board is proposing
three clarifications to the SEP program. First, an FCU may use SEP if
the only other credit union service available is from a community
credit union. NCUA does not afford overlap protection to a community
credit union when it is being overlapped by an occupational group.
Chapter I, IV.B.1, Chartering Manual, 59 FR at 29080. Second,
consistent with standard field of membership expansions, the group as a
whole will be considered to be within a credit union's 25 mile limit
when: a majority of the group's members live, work, or gather regularly
within the 25 mile limit; the group's headquarters is located within
the 25 mile limit; or the group's ``paid from'' or ``supervised from''
location is within the 25 mile limit. Third, if an FCU has SEP in its
charter and merges into a credit union without SEP, the continuing
credit union must submit a charter amendment and receive NCUA approval
if it wishes to use SEP. This can be accomplished as part of the merger
process. The Board is proposing to amend the Chartering Manual to
incorporate all three clarifications.
Documentation Requirements to Establish Low-Income Services
Generally, a low-income credit union is chartered as a community or
associational credit union. To further the interest of making credit
union service available to persons in low-income communities, NCUA also
permits any occupational, associational, multiple group, or community
FCU to include in its field of membership, without regard to location,
communities satisfying the low-income definition of Sec. 701.32 of
NCUA's Regulation. The Board believes that any low-income community
requesting either a new charter or inclusion in an existing field of
membership expansion must meet the requirements of the Chartering
Manual for demonstrating a community common bond, i.e., the geographic
area's boundaries must be clearly defined; and the charter applicant
must establish that the area is recognized as a distinct
``neighborhood, community or rural district.'' Chapter 1, Section
II.C.1, 59 FR at 29077. In many cases, a low-income community already
has the common interest and characteristic by lacking the basic
financial services found in more affluent communities. The Board is
proposing that for new low-income charters or community expansions, the
Regional Director will decide what documentation satisfies the
community common bond requirement. Such documentation must clearly
define the area's geographic boundaries and whether the area is
recognized as a distinct neighborhood, community or rural district.
Community Charters
Many credit unions use surveys to demonstrate the need for a
community charter. A survey of the residents and employees of the area
often indicates whether there is interest in credit union service.
Although surveys are useful in demonstrating whether a community
exists, they are not required if other evidence is more relevant or
demonstrates the sentiment of the community. Consequently, the Board is
proposing to amend the IRPS to clarify that surveys are not always
required to demonstrate a community charter.
Procedures for Appealing Chartering and Field of Membership
Determinations
IRPS 94-1 did not articulate any timeframes for an appeal of a
Regional Director's decision. In order to deal with appeals
expeditiously, the Board is proposing that all appeals of the Regional
Director's determination be made within 60 days of his/her
[[Page 51939]]
decision. The Board is also requesting comment on whether there should
be a time limit on the Board to render a decision on an appeal.
Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires the NCUA to prepare an
analysis to describe any significant economic impact a proposed
regulation may have on a substantial number of small credit unions
(primarily those under $1 million in assets). The changes to NCUA
policy resulting from the adoption of these proposed amendments to the
IRPS would not have a significant economic impact on a substantial
number of small credit unions. The changes are either legally required
or simply clarify existing policy. Accordingly, the Board determines
and certifies that this proposed rule does not have a significant
economic impact on a substantial number of small credit unions and that
a Regulatory Flexibility Act analysis is not required.
Paperwork Reduction Act
The proposed amendments to IRPS 94-1 do not impose any additional
paperwork requirements.
Executive Order 12612
Executive Order 12612 requires NCUA to consider the effect of its
actions on state interests. The proposed amendments apply to federal
credit unions as well as state chartered credit unions that seek to
become federal credit unions. Therefore, the actions will not affect
state interests.
List of Subjects in 12 CFR Part 701
Chartering, Conversions, Credit union, Field of membership
addition, Mergers.
By the National Credit Union Administration Board on September
28, 1995.-------
Becky Baker,
Secretary of the Board.
Accordingly, NCUA proposes to amend 12 CFR part 701, by amending
IRPS 94-1 as follows:
PART 701--ORGANIZATION AND OPERATIONS OF FEDERAL CREDIT UNIONS
1. The authority citation for part 701 continues to read as
follows:
Authority: 12 U.S.C. 1755, 1756, 1757, 1759, 1761a, 1761b, 1766,
1767, 1782, 1784, 1787, 1789, and 1798.
2. Section 701.1 is revised to read as follows:
Sec. 701.1 Federal credit union chartering, field of membership
modifications, and conversions.
National Credit Union Administration practice and procedure
concerning chartering, field of membership modifications, and
conversions are set forth in Interpretive Ruling and Policy Statement
94-1--Chartering and Field of Membership Policy (IRPS 94-1), as amended
by IRPS 95-2. Both IRPS are incorporated into this regulation.
Note: Neither the amendments nor the interpretive ruling and
policy statement will appear in the Code of Federal Regulations.
3. Chapter 1, Section II.C.2 is revised to read as follows:
II.C.2--Special Documentation Requirements
Information to support that the area chosen represents one well-
defined area, distinguishable from the immediate surrounding areas,
includes: -
Political jurisdictions.
Major trade areas (shopping patterns).
Traffic flows.
Shared/common facilities (for example, educational,
medical, police and fire protection, school district, water, etc.).
Organizations/clubs whose membership is made up
exclusively of persons within the area.
Newspapers or other periodicals published for and about
the area.
Census tracts.
Common characteristics and background of residents (for
example, income, religious beliefs, primary ethnic groups, similarity
of occupations, household types, primary age group, etc.).
History of area.
In general, what causes the chosen area and its residents
to be distinguishable from the immediate surrounding areas and
residents--some examples are old, well-established ethnic
neighborhoods, planned communities and small/rural towns or rural
counties.
The following information must be provided to support a need for a
community credit union or community field of membership expansion:
A list of credit unions presently in the area and those
credit union's positions regarding a new charter or field of membership
expansion; and
A list of other financial institutions (for example,
banks, savings and loan associations) that service the area.
Written documentation reflecting support for the
application for the charter, field of membership expansion or
conversion to a community credit union may be in the form of letters,
surveys, studies, pledges, or a petition. Other types of evidence may
also be acceptable. If a survey is used it should reflect the
following:
For the residents of the community:
Approximate number contacted
Number in favor of the credit union
Number against the credit union
Number who will join the credit union
Number who have pledged initial and/or systematic savings and amount of
pledges
For the employers in the community:
Number of area employers and number of employees
Number contacted
Number in favor of the credit union
Number against the credit union
Number willing to provide payroll deductions to the credit union
Number willing to provide other type(s) of support to the credit union
For community organizations (including churches):
Number in area and number of members
Number contacted
Number in favor of the credit union
Number against the credit union
Number willing to provide some type of support to the credit union,
i.e., advertising facilities, etc.
Letters of support from area civic leaders
If the community is also a recognized legal entity, it may be
served as, or be included in, the field of membership--for example,
``DEF Township, Kansas'' or ``GHI County, Minnesota.''
4. Chapter 1, Section V.A.2 is revised to read as follows:
V.A.2--Special Common Bond Rules for Low-Income Federal Credit Unions
Generally, a low-income credit union is chartered as a community or
associational credit union. The Regional Director will determine
whether the applicants have provided sufficient evidence to demonstrate
the need for a low-income community charter. Such evidence must
establish that the geographic area's boundaries are clearly defined and
that the area is recognized as a distinct neighborhood, community, or
rural district. A low-income credit union that has a community common
bond may include the following language in its field of membership:
``Persons who live in (the target area); persons who regularly
work, worship, perform volunteer services, or participate in
associations headquartered in (the target area); persons participating
in programs to alleviate poverty or distress which are located in (the
target area); incorporated
[[Page 51940]]
and unincorporated organizations located in (the target area) or
maintaining a facility in (the target area); and organizations of such
persons.''
In recognition of the special efforts needed to help make credit
union service available to persons in low-income communities, NCUA
permits credit union chartering and field of membership amendments
based on associational groups formed for the sole purpose of making
credit union service available to low-income persons. The association
must be defined so that all its members will meet the low-income
definition of Sec. 701.32 of NCUA's Regulations. The association, in
documenting its low-income membership, may use the same types of
documentation as are currently permitted for determining whether a
community is low-income under Sec. 701.32 of NCUA's Regulations.
In addition, a proposed or existing low-income federal credit union
whether community or associationally based, may include in its field of
membership, without regard to location, one or more groups constituting
an occupational, associational or community common bond. Except for the
operational area requirements, the proposed or existing credit union
must meet all the requisites for including the group in its charter.
Moreover, the proposed or existing credit union must take care to
ensure that it will continue to meet the requirements for low-income
status.
5. Chapter 1, Section V.A.3 is revised to read as follows:
V.A.3--Special Common Bond Rules for Other Federal Credit Unions
Seeking to Serve Low-Income Persons
In the interest of making credit union service available to persons
in low-income communities, NCUA also permits any occupational,
associational, multiple group, or community federal credit union to
include in its field of membership, without regard to location,
communities and associational groups satisfying the low-income
definition of Sec. 701.32 of NCUA's Regulations. The associational
group may be formed for the sole purpose of providing eligibility for
federal credit union service, but must comprise only persons meeting
NCUA's low-income definition.
The federal credit union adding the low-income community or
association must document that the community or association meets the
low income definition in Sec. 701.32 of NCUA's Regulations, just as is
required for a designated low-income credit union. The Regional
Director will ensure that the proposed low-income community addition is
sufficient to establish a community common bond. A federal credit union
adding such a community or association, however, would not be able to
receive the benefits, such as expanded use of non member deposits and
access to the Community Development Revolving Loan Program for Credit
Unions, offered to low-income credit unions.
A federal credit union that desires to include a low-income
community or association in its field of membership must first develop
a business plan specifying how it will serve the entire low-income
community. The business plan, at a minimum, must identify the credit
and depository needs of the low-income community or association and
detail how the credit union plans to serve those needs. The credit
union will be expected to regularly review the business plan as well as
loan penetration rates in the community to determine if the community
is being adequately served. NCUA will require periodic service status
reports on its service to the low-income community and may review the
credit union's service to low-income persons during examinations.
6. Chapter 1, Section V.B is deleted and Sections V.C. and V.D. are
redesignated V.B and V.C, respectively.
7. Chapter 1, Section VIII.D is revised to read as follows:
VIII.D--Appeal of Regional Director's Decision
If the Regional Director denies a charter application, the group
may appeal the decision to the NCUA Board. If not included with the
denial notice, a copy of these procedures may be obtained from the
regional director who made the decision. An appeal will be sent to the
appropriate regional office within sixty days of the denial. The
Regional Director will then forward the appeal to the NCUA Board. NCUA
central office staff will make an independent review of the facts and
present the appeal to the Board.
Before appealing, the prospective group may, within thirty days of
the denial, provide supplemental information to the regional director
for reconsideration. In these cases, the request will not be considered
as an appeal but as a request for reconsideration by the regional
director. If the request is again denied, the group may proceed with
the appeal process.
8. Chapter 2, Section II.A.3.a is revised to read as follows:
II.A.3.a--General
The special rules for credit unions serving low-income persons and
serving employees at industrial parks, shopping centers and similar
facilities apply equally to field of membership additions. However,
there are two special situations unique to existing federal credit
unions: (1) Corporate restructurings and (2) plant or base closings,
and other kinds of distress to a substantial portion of a credit
union's membership.
9. Chapter 2, Section III.A is revised to read as follows:
III.A--Mergers
Generally, the standards applicable to field of membership
amendments apply to mergers where the continuing credit union is a
federal charter. This requires analyzing each group in the merging
credit union's field of membership as if the continuing credit union
was proposing to expand its own field of membership without a merger.
This analysis may include the use of the planned service facility
concept. Merger applicants must provide NCUA with their own analysis of
how the proposed field of membership conforms to this policy. For those
groups from the merging credit union that do not meet operational area
requirements, only the members of record will be transferred to the
continuing credit union.
Where the merging credit union is state chartered, the field of
membership rules for a credit union converting to a federal charter
apply with the following differences:
As to a merger involving a common bond addition, the
requirements to provide a request for credit union service from the
corporate, associational, or other unit to be added is not required,
since the unit already has credit union service.
As to a merger involving a select group addition:
For the same reason, the requirement for a letter from each group
included in the credit union's field of membership is not required.
Where a state credit union is merging into a federal credit union,
the operational area requirement may be waived if it can demonstrate
that it will continue to be able to provide quality credit union
service to its current field of membership as a federal credit union.
The waiver is discretionary on the part of NCUA. Absent any waivers,
only members of record of groups that do not meet operational area
requirements will be transferred to the continuing credit union. Upon
merging, the state credit union's field of membership will be
[[Page 51941]]
worded to conform to the NCUA standards set forth in Chapter 1. Any
subsequent field of membership amendments must comply with applicable
amendment procedures.
As to a merger of a community credit union into a federal
credit union of any type, the continuing credit union may be permitted
to continue to provide service to the merging credit union's members of
record as of the merger date where the operational area requirement is
satisfied. Except in the case of an emergency merger or where the
continuing credit union is low-income, the continuing federal credit
union can obtain only the members of record of the merging community
credit union.
Where both credit unions are community charters, the continuing
credit union is a federal credit union, and the criteria for expanding
the service area of a community federal credit union (as discussed
previously in this Chapter) are satisfied, the entire field of
membership of the merging credit union may be added to the continuing
federal credit union's charter.
-Mergers must be approved by all affected NCUA regional directors,
and, as applicable, the state regulators.
10. Chapter 2, Section III.B. is revised to read as follows:
III.B--Emergency Mergers
A specifically designated emergency merger may be approved by NCUA
without regard to field of membership or other legal constraints. An
emergency merger involves NCUA's direct intervention. The credit union
to be merged must either be insolvent or be likely to become insolvent
within 12 months and NCUA must determine that:
An emergency requiring expeditious action exists.
Other alternatives are not reasonably available.
The public interest would best be served by approving the
merger.
In an emergency merger situation, NCUA takes an active role in
finding a suitable merger partner (continuing credit union). NCUA is
primarily concerned that the continuing credit union has the financial
strength and management expertise to absorb the troubled credit union
without adversely affecting its own financial condition and stability.
As a stipulated condition to an emergency merger, the field of
membership of the merging credit union may be transferred intact to the
continuing federal credit union without regard to any field of
membership restrictions and without changing the character of the
continuing federal credit union for future amendments. Under this
authority, therefore, a federal credit union may take into its field of
membership a group defined by a community or associational common bond
permitted under state law, regardless of whether that common bond
definition could be approved under the Federal Credit Union Act. If a
federal credit union which has added groups or communities under an
emergency merger later proposes to merge with another federal credit
union, the groups or communities added pursuant to the emergency merger
will not be subject to operational area or field of membership
analysis.
11. Chapter 2, Section VIII.B is revised to read as follows:
VIII.B--Streamlined Expansion Procedure (SEP) for Small Occupational
Groups
In keeping with the goals of NCUA chartering policy to provide
service to all eligible groups desiring credit union service, well
operated federal credit unions except those designated as
``distressed'' may take advantage of the SEP for adding occupational
groups to their fields of membership.
To use this procedure, the federal credit union's board of
directors must first apply to their respective NCUA regional director
for a charter amendment. The charter amendment request must be signed
by the presiding officer of the board of directors.
The following is a sample amendment for permitting a federal credit
union to use the SEP authority:
Groups of persons with occupational common bonds which are located
within 25 miles of one of the credit union's service facilities, which
have provided a written request for service to the credit union, which
do not presently have credit union service available, other than
through a community credit union, which have no more members in the
group than the maximum number established by the NCUA Board for
additions under this provision: Provided, however, that the National
Credit Union Administration may permanently or temporarily revoke the
power to add groups under this provision upon a finding, in the
Agency's discretion, that permitting additions under this provision are
not in the best interests of the credit union, its members, or the
National Credit Union Share Insurance Fund.
Once NCUA has approved the amendment and the credit union board has
adopted it, the SEP authority may be implemented. The charter amendment
permits approved federal credit unions to immediately begin serving
employee groups meeting criteria set forth in this section. Under this
procedure, there is no formal NCUA action necessary on each group being
added.
The maximum number of persons for each group of employees which may
be added under SEP will be established by the NCUA Board from time to
time. The number will be based on potential primary members--that is,
the persons sharing the basic occupational affinity to each sponsor
group; family members and other derivative members are not included in
the SEP limit. Several groups may be simultaneously added using these
procedures; however, the maximum number of persons for each group must
fall within the SEP limit.
The SEP does not apply to associational groups since NCUA must
review membership requirements and geographical area prior to these
groups being added to a field of membership. The procedure also does
not apply to community charter expansions, because of the more
individualized analysis required.
The following SEP steps and documentation requirements must be
adhered to:
The federal credit union must complete, for each group to
be added, an Application for Field of Membership Amendment form, NCUA
4015, shown in Appendix D.
The federal credit union must obtain a letter, on the
group's letterhead where possible, signed by an official representative
identified by title, requesting credit union service and stating that
the group does not have any other credit union service available from
any associational, occupational or multiple group credit union.
The group must be located within 25 miles of one of the
federal credit union's service facilities. The group will be considered
to be within the 25 mile limit when: (1) a majority of the groups
members live, work or gather regularly within the 25 mile limit; or (2)
the groups headquarters is located within the 25 mile limit; or (3) the
group's ``paid from'' or ''supervised from'' location is within the 25
mile limit.
The group must indicate the number of potential members--
the number of employees--seeking service.
The federal credit union must maintain the above
documentation permanently with its charter.
The federal credit union must maintain a control log of
groups added to its field of membership under the SEP procedure. The
control log must include the date the group obtained service, the name
and location of the sponsor group, the number of potential primary
members added, the number of miles to
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the nearest main or branch office, the federal credit union board of
director's approval of the group and the date approved. See Appendix D
for the SEP Control Log, NCUA 4016.
The groups added under SEP must be reported to the federal
credit union's board at the next regular board meeting and made a part
of the meeting minutes.
The control log and other SEP documentation must be made
available to NCUA upon request.-
The regional director may from time to time request service status
reports on groups added under SEP. It is advisable to use some method,
such as a sponsor prefix added to the member account number, to readily
access data for such groups.
Should a federal credit union fail to provide quality credit union
service, as determined by the group's members or employees, to a group
added under SEP, NCUA may subsequently permit dual membership with
another credit union.
Should a federal credit union fail to follow the above procedures
or deteriorate financially or operationally, NCUA, at its discretion,
may revoke the SEP privilege.
If a federal credit union that has SEP in its charter merges with
another federal credit union that does not have SEP, the continuing
credit union, if it desires to have SEP, must submit a charter
amendment and receive approval from NCUA to implement SEP. Otherwise,
the groups obtained by the merging credit union through SEP must be
listed specifically in the continuing credit union's field of
membership or a reference to the merging credit union's SEP log must be
made in the continuing credit union's field of membership as of the
date of the merger.
12. Chapter 2, Section VIII.G is revised to read as follows:
VIII.G--Appeal of Regional Director Decision
If a field of membership expansion, merger, or spin-off is denied
by the Regional Director, the federal credit union may appeal the
decision to the NCUA Board. If not included with the denial notice, a
copy of these procedures may be obtained from the Regional Director who
made the decision. An appeal must be sent to the appropriate regional
office within sixty days of the denial. The Regional Director will then
forward the appeal to the NCUA Board. NCUA central office staff will
make an independent review of the facts and present the appeal to the
Board with a recommendation.
The federal credit union may, within thirty days of the denial,
request reconsideration and provide supplemental information to the
regional director. The request for reconsideration will not be
considered an appeal but will toll the sixty day requirement to file an
appeal until a ruling is received on the request for reconsideration.
13. Chapter 3, Section 3.H, is added as follows:
III.H--Appeal of Regional Director Decision
If a conversion to a state charter is denied by the Regional
Director, the credit union may appeal the decision to the NCUA Board.
If not included with the denial notice, a copy of these procedures may
be obtained from the Regional Director who made the decision. An appeal
must be sent to the appropriate regional office within sixty days of
the denial. The Regional Director will then forward the appeal to the
NCUA Board. NCUA central office staff will make an independent review
of the facts and present the appeal to the Board with a recommendation.
The federal credit union may, within thirty days of the denial,
request reconsideration and provide supplemental information to the
regional director. The request for reconsideration will not be
considered an appeal but will toll the sixty day requirement to file an
appeal until a ruling is received on the request for reconsideration.
* * * * *
[FR Doc. 95-24689 Filed 10-3-95; 8:45 am]
BILLING CODE 7535-01-P