[Federal Register Volume 61, Number 227 (Friday, November 22, 1996)]
[Rules and Regulations]
[Pages 59305-59311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29886]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701


Organization and Operations of Federal Credit Unions

AGENCY: National Credit Union Administration.

ACTION: Interim final rule with request for comments and Interpretive 
Ruling and Policy Statement 96-2 (IRPS 96-2).

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SUMMARY: The purpose of this interim Interpretive Ruling and Policy 
Statement is to permit federal credit unions to restructure their 
fields of membership consistent with the recent Court of Appeals 
decision (``the Decision'') and District Court order (``the Order'') 
limiting federal credit unions' ability to serve eligible credit union 
members and new select groups. NCUA recognizes that this interim policy 
will not provide complete relief to all multiple group federal credit 
unions, since any interim policy must meet the requirements set forth 
in the Decision and the Order. Similarly, this interim policy does not 
assist

[[Page 59306]]

individuals who wish to obtain, but do not currently have, access to 
federal credit unions as a result of the Decision. This interim policy 
is intended to provide limited and temporary relief until the legal 
issues with respect to the Decision are finally resolved. NCUA is also 
issuing a final amendment to update its rules entitled ``Organization 
and Operations of Federal Credit Unions.''

DATES: The interim rule is effective November 14, 1996. Comments must 
be received on or before February 1, 1997.

ADDRESSES: Comments should be directed to Becky Baker, Secretary of the 
Board. Mail or hand deliver comments to: National Credit Union 
Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. Fax 
comments to (703) 518-6319. Post comments on NCUA's electronic bulletin 
board by dialing (703) 518-6480. Please send comments by one method 
only.

FOR FURTHER INFORMATION CONTACT: J. Leonard Skiles, President, Asset 
Management and Assistance Center, 4807 Spicewood Springs Road, Suite 
5100, Austin, Texas 78759, or telephone (512) 795-0999; Stephen E. 
Austin, Director of Supervision, Office of Examination and Insurance, 
1775 Duke Street, Alexandria, Virginia, or telephone (703) 518-6360, 
Lynn K. McLaughlin, Program Officer, at the above address and telephone 
number, Michael J. McKenna, Acting Associate General Counsel, Office of 
General Counsel, at the above address or telephone (703) 518-6540.

SUPPLEMENTARY INFORMATION: In 1982, safety and soundness concerns 
prompted the NCUA Board to revise chartering policy consistent with the 
Federal Credit Union Act to permit the combination of multiple groups 
with unlike common bonds. Such combinations could be accomplished 
through the chartering process, amendment of the charter, or by way of 
merger to form a single credit union. Another primary reason for the 
policy change was to provide small groups of people who did not have 
the resources to charter their own credit unions access to credit union 
service.
    In First National Bank and Trust Co., et al. v. NCUA, the U.S. 
Court of Appeals for the District of Columbia Circuit invalidated 
certain select group additions to the field of membership of a North 
Carolina credit union (``the Decision''). In the context of that case, 
the Court ruled that groups with unlike common bonds could not be 
joined to form a single credit union. Furthermore, in the consolidated 
cases of First National Bank and Trust Co., et al. v. NCUA and the 
American Bankers Association v. NCUA, et al., the District Judge issued 
a nationwide injunction ordering that federal credit unions are 
immediately barred from adding select groups without the same common 
bond to their fields of membership (``the Order''). The District Court 
further ordered that federal credit unions are prohibited from adding 
any new members to select groups which were added pursuant to the 
multiple group policy. The Order adversely impacts approximately 
158,000 select groups in 3,586 multiple group federal credit unions. 
NCUA has analyzed the impact of the Order and has determined that it 
has created and will continue to create disruption in the operations of 
credit unions. Equally important, a significant number of persons in 
small groups will be denied access to credit union services. This is 
particularly burdensome and harmful to persons in low to moderate 
income communities.
    The Court of Appeals, in its Decision, recognized that NCUA may 
identify and approve interpretations that provide broader common bonds 
than NCUA's current ``single employer'' policy. This interim policy, 
therefore, affords some relief to the federal credit unions affected by 
the Order by allowing them to restructure their existing fields of 
membership within the limits of the Federal Credit Union Act as 
construed in the Decision. NCUA will continue to pursue all available 
legal means to seek reversal of the Decision and Order. The interim 
policy is not intended to exhaust NCUA's authority to interpret the 
common bond provisions. NCUA will continue to review possible 
chartering and field of membership policy changes in an effort to 
permit federal credit unions to exercise to the fullest extent possible 
their ability to serve those who want or need credit union service.
    This interim policy takes effect immediately upon adoption by the 
NCUA Board and is effective until further notice. To the degree this 
policy is inconsistent with IRPS 94-1, as amended by IRPS 96-1, those 
policies are superseded and this policy statement is controlling. More 
specifically, the select group policies and those procedures related to 
the select group polices, such as the Streamlined Expansion Procedure, 
are superseded. To the extent any action taken pursuant to this interim 
policy is more restrictive than any future revision of this interim 
rule requires, then the more restrictive provisions adopted by the 
credit unions can be modified. To the extent any action taken pursuant 
to this interim rule is less restrictive than any future revision of 
this interim rule requires, then the less restrictive provisions 
adopted by credit unions will not be unilaterally revoked by NCUA.
    The NCUA Board has adopted three basic substantive changes to 
current chartering and field of membership policy as set forth in IRPS 
94-1 as amended by IRPS 96-1. These changes include adding a fourth 
definition of occupational common bond, streamlining the documentation 
requirements for a community charter, and adding a subset to the 
community charter option.

Occupational Common Bond

    IRPS 94-1, and previous policy statements by NCUA since 1982, 
allowed the combination of unlike common bond groups. Federal credit 
unions that utilized the multiple group policy and now have select 
groups within their fields of membership must now designate a core 
common bond. This designation of a core common bond is extremely 
important and must be completed by March 1, 1997. New field of 
membership expansions will not be permitted unless a core common bond 
has been designated. Those groups that are not within the core common 
bond cannot be served, except that members of record as of October 25, 
1996, can still receive service from the credit union. New members can 
only be added from the core common bond.
    Consistent with the Decision in First National Bank and Trust 
Company, et al. v. NCUA, the NCUA Board is adding a fourth definition 
of occupational common bond. Under previous policy, an occupational 
common bond was based on:
     Employment (or a long-term contractural relationship 
equivalent to employment) in a single corporation or other legal 
entity;
     Employment in a corporation or other legal entity with an 
ownership interest in or by another legal entity; and
     Employment in a corporation or other legal entity which is 
related to another legal entity (such as a company under contract and 
possessing a strong dependency relationship with another company).
    Pursuant to this interim policy, an occupational common bond 
incorporates any charter based on employment in a trade, industry, or 
profession. This type of common bond can include employment at any 
number of corporations or other legal entities, that while not under 
common ownership, share a common bond by

[[Page 59307]]

virtue of producing similar products or providing similar services. 
While there is some latitude in defining trade, industry, or 
profession, the groups must have a close nexus. NCUA will evaluate such 
factors as the nature, size and diversity of the trade, industry, or 
profession and the geographic limits associated with the proposed 
charter. For example, all manufacturing enterprises in Seattle, 
Washington, would not qualify since manufacturing, in and of itself, is 
overly broad and would include manufacturing of all types of products. 
However, all computer software manufacturers in Seattle would qualify, 
since it relates to a specific type of manufactured product. This type 
of common bond charter can be similar to, but distinguishable from, a 
common bond based on a single corporation. For example, all Navy 
personnel would qualify as a single corporation (employer), but all 
teachers would not. The latter would be a profession and subject to 
certain limitations as discussed below. NCUA will interpret the 
industry standard in a manner consistent with the Act and Congressional 
purpose.
    Further examples of this type of occupational common bond include 
all textile workers, all coal miners, or the medical profession. 
Federal credit unions with this type of occupational common bond can 
only provide credit union service to those qualifying groups within the 
credit union's operational area. For example, a credit union located in 
California may serve the oil industry, but such groups must be within 
the operational area of the credit union's service facilities.
    As defined in IRPS 94-1, operational area is that area which, as 
determined by NCUA, in its sole discretion, may reasonably be served by 
the service facilities that will be accessible to the groups in the 
field of membership. The operational area will vary depending on the 
location of the credit union. For example, the operational area for a 
credit union in an urban area may be smaller than the operational area 
for a credit union in a sparsely populated rural district.
    An existing credit union that wishes to serve a trade, industry, or 
profession must first designate its occupational common bond. This 
requirement does not apply to a new charter. This could be the original 
core common bond group or another group within its field of membership. 
For example, a credit union that serves primarily teachers, but whose 
original core common bond was municipal employees, could designate 
teachers or ``education'' as it occupational common bond. It would then 
be able to add new members from that occupational group. However, the 
designation must come from an existing group within its current field 
of membership. For example, a credit union that serves primarily 
teachers, could not be redesignated as a credit union serving the auto 
industry if the auto industry is not already included in the field of 
membership.
    To designate its common bond, the credit union must submit a 
request to the appropriate regional director. If the request is 
approved, the credit union may immediately begin serving all groups 
within its previously existing field of membership meeting this 
occupational common bond definition. Credit unions that have groups 
within their fields of membership that do not meet this new definition, 
cannot add new members from those groups. For these groups, credit 
unions can only serve members of record as of October 25, 1996.
    To add new groups from within the new occupational common bond, the 
credit union must apply and obtain written approval of the regional 
director. The application letter must demonstrate that the group is 
within the common bond, the group has provided a written request for 
service, the group presently does not have service available, and the 
group is within the operational area of one of the credit union's 
service facilities. If the group to be added was previously served by 
another credit union but has lost service as a result of the court 
decisions, the credit union wishing to add the group must consult with 
the other credit union prior to submitting its application to NCUA.

Community Chartering Policy

    NCUA's community chartering policy is not affected by the ongoing 
litigation. However, the NCUA Board is making two changes to the 
community chartering policy that are consistent with the Federal Credit 
Union Act in order to provide all federal credit unions with further 
options in restructuring their fields of membership.
    First, the documentation requirements for a community charter have 
been streamlined. A credit union that wants to serve anyone who lives, 
works, worships, or goes to school in a community area must still meet 
the long-standing community criteria. For example, the community must 
have clearly defined geographic boundaries that are recognized as a 
distinct neighborhood, community, or rural district. However, the 
documentation required to demonstrate that the proposed service area is 
a well-defined community has been streamlined. This will greatly 
facilitate the expeditious processing of community charters.
    The ``well defined neighborhood, community or rural district'' 
requirement will automatically be met if the area to be served is in a 
single political jurisdiction or portion thereof, and if the population 
of the requested political jurisdiction does not exceed 1,000,000. If 
the area to be served is not contained within a single political 
jurisdiction or if the population of the area exceeds 1,000,000, then 
more detailed documentation is necessary to support that the proposed 
area is a well-defined community. Generally, the political subdivision 
will most often coincide with a ``county'', or its political 
equivalent, and any portion thereof.
    Except as noted below, a credit union seeking a community charter 
must contact all the credit unions with a service facility in the 
proposed service area. The applicant credit union should provide the 
comments of any overlapped credit unions in the area, and the regional 
director will conduct a standard overlap analysis. An overlap analysis 
may result in denial of the charter, change in the community 
boundaries, or use of exclusionary clauses. Documentation reflecting 
support for the charter application is still required, except as noted 
below.
    Second, while NCUA traditionally has interpreted the field of 
membership authority for ``groups within a well-defined neighborhood, 
community, or rural district'' to encompass all groups within that 
community, a subset of a community charter credit union (called ``group 
community'') is now authorized. This type of community charter is 
available to those wishing to serve specific occupational, 
associational, and community groups within a well-defined neighborhood, 
community, or rural district. The requirements for a group community 
parallel those required of a community charter. However, if a multiple 
group credit union is converting to a group community, then a business 
plan, overlap analysis, and evidence of community support is not 
required.
    Upon converting to a group community charter, the credit union will 
immediately recover the ability to add new members from all groups that 
were previously served by the credit union (i.e., at the time of the 
Order) and that are located within the community. New members from 
existing groups outside the community cannot be served by the group 
community. To add new groups from within the community, the credit 
union must receive prior approval by submitting an application to the

[[Page 59308]]

regional director documenting that the group is within the community, 
the group has provided a written request for service, and whether the 
group presently has credit union service available.
    If the credit union wishes to add a group that was previously 
served by another credit union, but has lost service as a result of the 
court decisions concerning common bond, the federal credit union 
wishing to add the group must consult with the other credit union and 
provide the results of that consultation in its application to NCUA. A 
determination as to whether that group can be added will be made based 
on a review of any safety and soundness concerns and the needs of the 
group.

Associational Common Bonds

    No amendments to the associational common bond requirements are 
included in this interim policy. After review of the associational 
common bond requirements in IRPS 94-1 as amended by IRPS 96-1, the 
Board determined that the policy allows for many types of associations 
to qualify as eligible groups. However, any associational credit union 
with multiple groups must designate a core common bond.

Emergency Mergers

    NCUA is issuing clarifying amendments to the provisions concerning 
emergency mergers and purchase and assumptions consistent with the 
Order and Decision. Further, NCUA is removing the 12 month insolvency 
limitation since it is not required by the Federal Credit Union Act.

Regional Action

    This policy is not self-executing. Credit Unions must receive the 
approval of NCUA before restructuring their fields of membership to 
serve either specified groups within a single common bond of ``trade, 
industry, or profession'' or specified groups within a ``well-defined 
community.'' Once approval is granted by NCUA, a federal credit union 
can serve new members from all of its previously approved groups that 
fall within the newly defined field of membership.

Effective Date; Interim Rule; Comment Period

    Although this amendment is being issued as an interim final rule 
and is effective immediately, the NCUA Board encourages interested 
parties to submit comments. Comments may be submitted on or before 
February 1, 1997.
    Federal credit unions are suffering irreparable injury due to the 
injunction issued in the consolidated cases of First National Bank and 
Trust Co., et al. and the American Bankers Association v. NCUA, et al. 
Since 1982, federal credit unions have been permitted to diversify 
their membership base through the addition of select groups. This 
ability has strengthened federal credit unions and reduced losses to 
the NCUSIF and extended credit union service to millions of persons who 
would not otherwise be eligible to join a credit union.
    The inability to add new members from existing select groups 
effectively begins the process of divesting those groups from the 
credit union. This has an immediate effect of cutting off service to 
millions of potential members and adversely affecting credit unions. 
This adverse effect on credit unions poses potential safety and 
soundness concerns with respect to the National Credit Union Share 
Insurance Fund.
    Therefore, the Board finds it is necessary and appropriate to act 
expeditiously in this matter in order to allow credit unions to 
partially restructure their fields of membership. If this rule is not 
effective immediately, credit unions and their members will continue to 
be adversely impacted. Accordingly, the Board for good cause finds that 
(i) pursuant to 5 U.S.C. 553(b)(3)(B), notice and public procedure are 
impracticable, unnecessary, and contrary to the public interest, and 
(ii) pursuant to 5 U.S.C. 553(d)(3), the rule shall be effective 
immediately and without 30 days advance notice or publication. Further, 
NCUA has determined that this is not a major rule under 5 U.S.C. 
Chapter 8, and shall be effective immediately.

Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a regulation may have on a 
substantial number of small credit unions (primarily those under $1 
million in assets). This interim rule will not have a significant 
economic impact on a substantial number of small credit unions and 
therefore a regulatory flexibility analysis is not required.

Paperwork Reduction Act

    NCUA has determined that the amendments do not increase paperwork 
requirements under the Paperwork Reduction Act of 1995 and regulations 
of the Office of Management and Budget (OMB). 60 FR 44978 (August 29, 
1995).

Executive Order 12612

    Executive Order 12612 requires NCUA to consider the effect of its 
actions on state interests. This interim regulation makes no 
significant changes with respect to state credit unions and therefore, 
will not materially affect state interests.

List of Subjects in 12 CFR Part 701

    Credit, Credit unions, Reporting and recordkeeping requirements.

    By the National Credit Union Administration Board on November 
14, 1996.
Becky Baker,
Secretary of the Board.
    Accordingly, NCUA amends 12 CFR part 701 as follows:

PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

    1. The authority citation for part 701 continues to read as 
follows:

    Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a, 
1761b, 1766, 1767, 1782, 1784, 1787, 1789. Section 701.6 is also 
authorized by 31 U.S.C. 3717. Section 701.31 is also authorized by 
12 U.S.C. 1601, et seq., 42 U.S.C. 1981 and 3601-3610. Section 
701.35 is also authorized by 12 U.S.C. 4311-4312.

    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 96-1 and IRPS 96-2. Copies may be obtained by contacting NCUA 
at the address found in Sec. 792.2(g)(1) of this chapter. The combined 
IRPS are incorporated into this section.

(Approved by the Office of Management and Budget under control 
number 3133-0015.)

    Note: The text of the Interpretive Ruling and Policy Statement 
(IRPS 94-1) does not and the following amendments will not appear in 
the Code of Federal Regulations.

    3. In IRPS 94-1, Chapter 1, Section II.A is revised to read as 
follows:

II.A.--Occupational Common Bonds

II.A.1--General

    A federal credit union may include in a single occupational 
common bond, any and all persons who share that common bond. NCUA 
permits a person's membership eligibility in an occupational common 
bond to be established in four ways:

[[Page 59309]]

     Employment (or a long-term contractual relationship 
equivalent to employment) in a single corporation or other legal 
entity makes that person part of an occupational common bond of 
employees of the entity;
     Employment in a corporation or other legal entity with 
an ownership interest in or by another legal entity makes that 
person part of occupational common bond of employees of the two 
legal entities;
     Employment in a corporation or other legal entity which 
is related to another legal entity (such as a company under contract 
and possessing a strong dependency relationship with another 
company) makes that person part of an occupational common bond of 
employees of the two entities; or
     Employment based on a trade, industry, or profession.
    An occupational common bond based on a trade, industry, or 
profession must include a geographic limitation. This limitation 
does not apply to any other occupational common bonds. However, a 
proposed or existing federal credit union may limit its field of 
membership to a specific geographic area.
    So that NCUA may monitor any potential field of membership 
overlaps, each group to be served (e.g., employees of subsidiaries, 
franchisees, and contractors) must be separately listed in Section 5 
of the charter.
    The corporate or other legal entity (i.e., the employer) may 
also be included in the common bond--e.g., ``ABC Corporation and its 
subsidiaries.'' The corporation or legal entity will be defined in 
the last clause in Section 5 of the credit union's charter.
    Some examples of single occupational common bonds are:
     Employees of the Scott Manufacturing Company who work 
in Chester, Pennsylvania. (common bond--same employer);
     Employees of the Scott Manufacturing Company. (common 
bond--same employer without geographic limitation);
     Employees, elected and appointed officials of municipal 
government in Parma, Ohio. (common bond--same employer with 
geographic limitation);
     Employees of the federal government. (common bond--
single sponsor);
     Employees of Johnson Soap Company and its subsidiary, 
Johnson Toothpaste Company, who work in Augusta and Portland, Maine. 
(common bond--parent and subsidiary company with geographic 
limitation);
     Employees of the Department of Defense--civilian and 
U.S. Army. (common bond--same employer without geographic 
limitation);
     Employees of those contractors who work regularly at 
the U.S. Naval Shipyard in Bremerton, Washington. (common bond--
employees of contractors with geographic limitation);
     Employees, doctors, medical staff, technicians, medical 
and nursing students who work in or are paid from Boston Medical 
Center. (single corporation); or
     Employees of JKL, Incorporated and STU, Incorporated 
working for the XYZ Joint Venture Company in Los Gatos, California. 
(common bond--same employer--ongoing dependent relationship).
    Some examples of insufficiently defined single occupational 
groups are:
     Employees of manufacturing firms in Seattle, 
Washington. (no defined sponsor or industry);
     Persons employed or working in Chicago, Illinois. (no 
occupational common bond); or
     Employees of all colleges and universities in the State 
of Texas. (not a single occupational common bond; although this may 
qualify as an occupational common bond based on trade).

II.A.2--Trade, Industry, or Profession

    A common bond based on employment in a trade, industry, or 
profession can include employment at any number of corporations or 
other legal entities that--while not under common ownership--have a 
common bond by virtue of producing similar products or providing 
similar services. Because this type of common bond is the most 
expansive and has overlap implications, a geographic limitation is 
required. In general, a geographic limitation corresponds to the 
credit union's operational area. Also, each employee group to be 
served must be separately listed in Section 5 of the credit union 
charter.
    While proposed or existing credit unions have some latitude in 
defining a trade, industry, or profession occupational common bond, 
it can not be defined so broadly as to include groups in fields 
which are not closely related. For example, all textile workers or 
all government employees in a limited geographic area (including 
federal, state, and local) may qualify under this category. However, 
employees of all manufacturing companies would not. The common bond 
relationship must be one that demonstrates a commonality of 
interests within a specific trade, industry, or profession. More 
than one federal credit union may serve the same trade, industry, or 
profession.
    Some examples of trade, industry, or profession common bonds 
are:
     Employees and teachers who work for universities and 
colleges in Austin, Texas. (same profession; acceptable if within 
the credit union's operational area);
     All persons working in the educational system in 
Atlanta, Georgia. (same trade, acceptable if within the credit 
union's operational area);
     Employees of the federal, state, and municipal 
governments in Fairfax County, Virginia. (same industry; acceptable 
with a geographic limitation, i.e., within the credit union's 
operational area);
     Employees of the coal mining industry in Erie County, 
Pennsylvania. (same industry; acceptable if within the credit 
union's operational area); or
     Persons working as Certified Public Accountants in Los 
Angeles, California. (same profession; acceptable if within the 
credit union's operational area).
    Some examples of insufficiently defined trade, industry, or 
profession common bonds are:
     Employees and teachers who work for public schools. 
(same trade, but no geographic limitation); or
     Employed persons in Maryland. (no common bond--no 
specified trade).

II.A.3--Common Bond Amendments

II.A.3.a--Designation of Common Bond

    The chartering and field of membership policies effective prior 
to the implementation of this interim policy statement allowed for 
the combination of multiple select groups that did not share the 
same common endeavor, purpose or interest to form a single credit 
union. These policies have been suspended. Accordingly, It is now 
necessary for those federal credit unions that were chartered, or 
expanded their field of membership pursuant to the multiple select 
group policies, to designate a core field of membership, i.e., a 
common bond. Credit unions must designate a core common bond by 
March 1, 1997. If a credit union fails to designate its core common 
bond, NCUA will designate the original core group as its common 
bond.
    The core common bond can be defined as the employee group that 
constituted the field of membership, i.e., its core group, at the 
time of charter. The core common bond can also be defined as any 
group in the credit union's field of membership, including a common 
bond of trade, industry, or profession. If a group other than the 
one that constituted the core common bond at the time of charter is 
designated as the core common bond, then the newly designated core 
common bond must receive NCUA's concurrence. To change the core 
common bond the credit union must submit a written request to NCUA 
for approval. The designation of a core common bond does not apply 
to community charters.
    The designation of a core common bond is critical for the 
following reasons:
     New members can be accepted only from the designated 
core common bond;
     Future field of membership expansions will be based on 
the designated core common bond;
     Only members of record, as of October 25, 1996, of 
select groups that do not have the same designated core common bond 
can continue to be served; and
     Once a core common bond has been designated, it can not 
be changed. However, in those cases where there is a valid safety 
and soundness concern or a different common bond group is acquired 
as a result of an emergency merger, the credit union may request a 
new designation.

II.A.3.b--Documentation Requirements

    A charter applicant or existing occupational federal credit 
union that submits a request to amend its charter to add new groups 
must provide documentation to establish that the occupational common 
bond requirement has been met.
    All amendments to an occupational common bond credit union's 
field of membership, except the designation of the original core 
common bond, must be approved by the regional director. The regional 
director may approve an amendment to expand the field of membership 
if:
     The common bond requirements of this section are 
satisfied;

[[Page 59310]]

     The group to be added has provided a written request 
for service to the credit union;
     The group presently does not have credit union service 
available (if credit union service is available, the region must 
conduct an overlap analysis), other than through a community credit 
union; and
     The occupational common bond is based on a trade, 
industry, or profession only if the group is within the operational 
area of one of the credit union's service facilities.
    If the credit union wishes to add a group that was previously 
served by another credit union, but has lost service as a result of 
the court decisions concerning common bond, the federal credit union 
wishing to add the group must consult with the other credit union 
and provide the results of that consultation in its application to 
NCUA. A determination as to whether that group can be added will be 
made based on a review of any safety and soundness concerns and the 
needs of the group.

    4. In IRPS 94-1, Chapter 1, Section II.C is revised to read as 
follows:

II.C--Community Charters

II.C.1--General

    A community credit union is permitted to serve persons who live 
in, worship in, go to school in, or work in a ``well-defined 
neighborhood, community or rural district.'' A subset of a community 
charter is a group community, which permits a credit union to serve 
specific occupational, associational, and community groups within 
that same well defined area. Although there are differences in 
documentation requirements for a group community charter, the 
definition of a ``well defined neighborhood, community or rural 
district'' is the same.

II.C.2--General Community Charter Criteria

    NCUA policy is to limit a community to a single, geographically 
well-defined area where residents have common interests or interact. 
NCUA recognizes four types of affinity on which a community common 
bond can be based--persons who live in, worship in, go to school in, 
or work in the community. Businesses and other legal entities within 
the community boundaries may also qualify for membership. More than 
one community credit union may serve the same community area.
    Given the diversity of community characteristics throughout the 
country and NCUA's goal of making credit union service available to 
all eligible groups, NCUA has established the following requirements 
for community charters:
     The geographic area's boundaries must be clearly 
defined; and
     The charter applicant must establish that the area is 
recognized as a well defined ``neighborhood, community, or rural 
district.''
    Some examples of community charter definitions are:
     Persons who live, work, worship, or go to school in, 
and businesses located in the area of XYZ City bounded by Fern 
Street on the north, Long Street on the east, Fourth Street on the 
south, and Elm Avenue on the west.
     Persons who live or work in Green County, Maine.
     Persons who live, worship, go to school in, or work in 
and businesses and other legal entities located in Independent 
School District No. 1, DuPage County, Illinois.
    Some examples of insufficiently defined community charter 
definitions are:
     Persons who live or work within and businesses located 
within a ten-mile radius of Washington, D.C. (Not a recognized 
neighborhood, community, or rural district).
     Persons who live or work in the industrial section of 
New York, New York. (No clearly defined boundaries).

II.C.3--Documentation Requirements for a Community Charter

    For a community charter, any political jurisdiction or portion 
thereof, excluding state boundaries, automatically qualifies as a 
well-defined community, if the population of the requested political 
jurisdiction does not exceed 1,000,000. If the area to be served is 
not contained within a single political jurisdiction, or if the 
population of the area to be served exceeds 1,000,000, the credit 
union should provide to NCUA for approval, if available, the 
following documentation to support that it is a well-defined 
community:
     The defined political jurisdictions;
     Major trade areas (shopping patterns and traffic 
flows);
     Shared/common facilities (for example, educational, 
medical, police and fire protection, school district, water, etc.);
     Organizations and clubs within the community area;
     Newspapers or other periodicals published for and about 
the area;
     Maps designating the areas to be served;
     Common characteristics and background of residents (for 
example, income, religious beliefs, primary ethnic groups, 
similarity of occupations, household types, primary age group, 
etc.); and
     History of area.
    Except for a group community, the following information must be 
provided to support a need for a community credit union:
     A list of credit unions presently in area and evidence 
that these credit unions were contacted regarding the community 
charter. If available, provide the opinion of the overlapped credit 
unions; and
     Written documentation reflecting support for the 
charter application, field of membership expansion, or conversion to 
a community credit union. This may be in the form of letters, 
surveys, studies, pledges, or a petition. Other types of evidence 
may also be acceptable.

II.C.4--Business Plan

    Business plans are required of all credit unions expanding their 
community boundaries or converting to a community charter (except 
for a credit union converting to a group community). The business 
plan for a community federal credit union should comply with the 
requirements of Chapter 1, Section IV.A.4.b, except that a summary 
of survey results is not required.

II.C.5--Community Service Area

    The service area for a community federal credit union is the 
area defined in its charter usually with north, south, east, and 
west boundaries. If the community is a recognized political 
jurisdiction, the service area may be defined by the applicable 
political jurisdiction, such as ``DEF Township, Kansas'' or ``GHI 
County, Minnesota.''

II.C.6--Group Community

    A group community charter is available to those wishing to serve 
specific occupational, associational, and community groups within a 
well-defined neighborhood, community, or rural district.
    An example of a group community common bond definition is:
     The following groups within Smithson County, 
Pennsylvania: Employees of HAC Corporation and Smith and Wesson 
Firearms, who work in Smithson County, Pennsylvania; members of the 
Greater Smithson County Ruritan Club who qualify for membership in 
accordance with its bylaws in effect on November 9, 1996; members of 
the First Amish Church in Smithson County, Pennsylvania; members of 
the National Rifle Association in Smithson County, Pennsylvania, who 
qualify for membership in accordance with its bylaws in effect on 
November 9, 1996; and members of the Greystone Electric Membership 
Cooperative in Smithson County, Pennsylvania.
    A group community charter must receive regional director 
approval to expand its field of membership to include new groups 
within that community. The regional director may approve the 
amendment if the request supports:
     The group is within the defined geographical area;
     The group has provided a written request for service to 
the credit union; and
     Whether the group presently has credit union service 
available from an occupational or associational credit union.
    If the credit union wishes to add a group that was previously 
served by another credit union, but has lost service as a result of 
the court decisions concerning common bond, the federal credit union 
wishing to add the group must consult with the other credit union 
and provide the results of that consultation in its application to 
NCUA. A determination as to whether that group can be added will be 
made based on a review of any safety and soundness concerns and the 
needs of the group.

    5. In IRPS 94-1, Chapter 2, Section III.B is amended by removing 
the words ``within 12 months'' and adding a new paragraph at the end of 
the section to read as follows:

III.B. * * *

    If the continuing and merging credit union do not have the same 
core common bond, then the continuing credit union's core common 
bond will be controlling for future common bond expansions. However, 
the continuing credit union may, at the time of the emergency 
merger, request a redesignation to the merging credit union's core 
common bond. Subsequent field of membership expansions must be based 
on a single designated core common bond.

[[Page 59311]]

However, the continuing credit union may serve new members of the 
merging credit union's core common bond and members of record as of 
October 25, 1996, of the non-core common bond groups.

    6. In IRPS 94-1, Chapter 2, Section III.C is amended by adding a 
new paragraph at the end of the section to read as follows:

III.C. * * *

    If the continuing and the purchased and assumed credit unions do 
not have the same common bond, then the continuing credit union's 
core common bond will be controlling for future common bond 
expansions. However, the continuing credit union may, at the time of 
the P&A, request a redesignation to the purchased and assumed credit 
union's core common bond if the P&A meets the emergency merger 
criteria. Subsequent field of membership expansions must be based on 
a single designated common bond. However, the continuing credit 
union may serve new members of the purchased and assumed credit 
union's core common bond and members of record as of October 25, 
1996, of the non-core common bond groups.

[FR Doc. 96-29886 Filed 11-21-96; 8:45 am]
BILLING CODE 7535-01-P