64512 Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations

NATIONAL CREDIT UNION

ADMINISTRATION

12 CFR Part 701

Organization and Operations of

Federal Credit Unions

AGENCY: National Credit Union

Administration.

ACTION: Final rule.

SUMMARY: The NCUA Board is amending

its chartering and field of membership

manual to update chartering policies

and further streamline the select group

application process. These amendments

result from NCUA’s experience

addressing field of membership issues

and concerns that surfaced after the

adoption of the current chartering and

field of membership policies.

EFFECTIVE DATE: November 27, 2000.

ADDRESSES: National Credit Union

Administration, 1775 Duke Street,

Alexandria, Virginia 22314–3428.

FOR FURTHER INFORMATION CONTACT: J.

Leonard Skiles, Chairman, Field of

Membership Task Force, 4807

Spicewood Springs Road, Suite 5200,

Austin, Texas 78759 or telephone (512)

231–7900; Michael J. McKenna, Senior

Staff Attorney, Office of General

Counsel, 1775 Duke Street, Alexandria,

Virginia 22314 or telephone (703) 518–

6540; Lynn K. McLaughlin, Program

Officer, Office of Examination and

Insurance, 1775 Duke Street,

Alexandria, Virginia 22314 or telephone

(703) 518–6360.

SUPPLEMENTARY INFORMATION: In 1998,

Congress revised the laws on field of

membership with the passage of the

Credit Union Membership Access Act

(‘‘CUMAA’’). On August 31, 1998, the

NCUA Board issued a proposed rule

updating NCUA’s chartering and field of

membership policies. 62 FR 49164

(September 14, 1998). On December 17,

1998, the NCUA Board issued a final

rule with an effective date of January 1,

1999. When the NCUA Board issued its

final rule it instructed the Field of

Membership Taskforce to coordinate

and monitor implementation of the new

chartering policies and make necessary

recommendations for policy

clarifications and amendments to IRPS

99–1.

Over the past twenty-two months,

NCUA’s Field of Membership Taskforce

has monitored and reviewed the

implementation of IRPS 99–1 in an

effort to improve consistency and

provide a basis, if necessary, for further

clarifications and modifications. As a

result of this continued oversight, the

Field of Membership Taskforce made a

number of recommendations to clarify

and update field of membership policies

and address the issues that arose during

the oversight period.

On June 6, 2000, the NCUA Board

issued proposed amendments to its

chartering and field of membership

policies with a sixty-day comment

period. 65 FR 37065 (June 13, 2000).

The comment period ended on August

14, 2000.

Four hundred and forty-nine

comments were received. Comments

were received from two hundred and

eighty-seven federal credit unions, one

hundred and seventeen state chartered

credit unions, one United States

Senator, four United States

Congressmen, twenty-one state leagues,

six national credit union trade

associations, two bank trade

associations, two state representatives,

one shared service cooperative, one

technical support specialist, and seven

credit union members.

Generally, with the exception of the

proposed addition of a community

action plan requirement (CAP) for

community chartered credit unions,

most commenters were supportive of

the proposed revisions to NCUA’s

chartering policies. As a result of those

comments, a number of modifications to

the proposed rule have been

incorporated into the final rule. An

overwhelming majority of the

commenters concentrated on the CAP

provision and recommended that it be

deleted. The final rule, while not

deleting the CAP concept, has been

modified from the proposed rule.

A. Final Amendments

1. Occupational Common Bond

The NCUA Board proposed to amend

the language in the section on

occupational common bonds so that in

situations where multiple contractors

who qualify based on a strong

dependency relationship are sole

proprietors (for example, there may be

hundreds of independent drivers for a

particular taxi company), the regional

director may use generalized wording in

the credit union’s charter. Seven

commenters agreed with this proposed

change. One commenter opposed the

change. One commenter stated the more

generalized language should be used in

all cases of sole proprietors. The NCUA

Board believes that the regions will, in

most cases, use the generalized wording

for most sole proprietors, but there may

be cases when the generalized wording

would not be appropriate. Therefore, the

final rule incorporates the amendment

as proposed.

2. Associational Common Bond

Students Groups. The NCUA Board

believes that students are a unique

group that can be considered either

occupational or associational depending

on the circumstances. A student group,

by itself or when combined with school

employees, can be or constitute part of

an occupational common bond.

Similarly, when part of a faith-based

group, the student group can be treated

as part of an associational common

bond. Therefore the NCUA Board

proposed to amend Chapter 2, Section

III. A.1. of IRPS 99–1 to reflect this

view. Nine commenters agreed with this

change. One commenter believes this

proposal is too expansive. For the

reasons stated in the proposed rule, the

NCUA Board is adopting the

amendment as proposed.

Two commenters stated that alumni

of a school should not have to join the

alumni association before being eligible

for credit union service. The Board does

not agree. Eligibility for credit union

membership based on an alumni

associational common bond requires

that an alumnus be a member of the

association. Additionally, the alumni

association must meet the requirements

of an association. Those requirements

include consideration of the payment of

dues, voting rights, sponsored activities,

etc. These commenters also stated that,

in some cases, alumni of a college or a

university were automatically members

of their alumni association and, in some

cases, alumni associations do not charge

dues to belong to the alumni

association. To clarify current policy, if

an alumnus is automatically a member

of the alumni association as a result of

graduation, and there are no other

membership requirements, then the

membership requirement is satisfied

provided the other indicia of

membership in an association are met.

Graduates of a college or university

would not be a legitimate associational

common bond.

One commenter stated that Chapter 2,

Section IV.A.1 should be amended to

demonstrate that a multiple common

bond credit union can add students as

either an associational group or

occupational group. The Board believes

that since this is addressed in both the

occupational and associational sections,

this revision is not necessary.

3. Multiple Common Bond Credit

Unions

Expedited Process for Groups of 500

or Less. In the chartering process, as

well as the addition of select groups to

a multiple common bond credit union,

economic advisability is critically

Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations 64513

important. It is the responsibility of

NCUA to ensure that if a credit union

is chartered, it has, at a minimum, a

reasonable opportunity to succeed in

today’s financial marketplace.

In addressing these responsibilities in

relation to the historical data related to

chartering new credit unions, the NCUA

Board established an expedited process

in IRPS 99–1 for groups of 200 or less

primary potential members. Although a

written determination regarding the

various statutory criteria was still

required, the expedited process allowed

for the streamlined processing of groups

of 200 or less since the Board found that

such groups, in almost all cases, would

not be economically viable. Thus, in the

past 21 months, applicant credit unions

applying to add a group of 200 or less

simply had to complete the Form 4015–

EZ. Additionally, no overlap analysis

was required for these small groups.

Based on the historical experience

since the promulgation of IRPS 99–1,

plus other chartering data since 1990,

the NCUA Board proposed to raise the

expedited processing number for adding

groups to 500. In conjunction with this

proposal, the NCUA Board also

proposed raising the number of

members in a group requiring an

overlap analysis from 200 to 500.

Two commenters opposed increasing

the expedited processing number to 500.

Fourteen commenters agreed with the

proposed amendment that the expedited

processing number for adding select

groups should be increased to 500, and

that no overlap analysis should be

required of groups of 500 or less. Eleven

commenters recommended raising the

expedited processing number above

500. Of those eleven commenters, one

commenter suggested increasing the

threshold to 1,000, one to 1,500, two to

2,000, and seven commenters suggested

raising the number to 3,000.

The NCUA Board believes that

historical experience and other data

support raising the number to 500. The

Board will consider a further increase to

the expedited processing number when

more historical data is accumulated. If

subsequent evidence demonstrates a

higher number is justified, the Board

will revisit the issue. The Board is also

restating its position that desire and

initiative to form a credit union are

critical factors in evaluating economic

advisability.

One commenter asked if a credit

union could appeal an overlap when a

group in its field of membership is

added to another credit union. A credit

union can appeal any decision by the

regional director, but an overlapped

credit union is not provided written

notification and appeal rights.

Adequate Capitalization for Multiple

Common Bond Credit Union

Expansions. One of the statutory

requirements for the addition of a select

group to a multiple common bond credit

union is that the credit union be

adequately capitalized. However, the

statute did not define adequate

capitalization. Consequently, the Board

stated in IRPS 99–1 that six percent

capitalization for a credit union in

existence more than 10 years should be

considered adequate for field of

membership expansion purposes. Since

the adoption of that standard, the NCUA

Board has come to believe that for

reasons totally outside the control of the

credit union, such as sponsor problems,

temporary asset fluctuations or

economic downturns, a credit union

may temporarily drop below or not be

able to achieve or sustain a six percent

capitalization level. Therefore, the

NCUA Board proposed giving the

regional director latitude to determine

that any credit union with less than six

percent net worth is adequately

capitalized for field of membership

purposes if the credit union is making

reasonable progress toward meeting the

requirement.

Twelve commenters agreed with

providing the regional director with this

discretionary authority, although one of

these commenters would reduce the

number to five percent. One commenter

believes that the regional director

should not have discretionary authority

and that a minimum level of capital

should be maintained. Two commenters

suggested that all expanding credit

unions should maintain a six percent

capitalization level. One commenter

opposed this policy change. The NCUA

Board is adopting the proposed

amendment in the final rule. The NCUA

Board was provided no compelling

rationale for lowering the standard for

adequately capitalized or for not

providing the regional director with this

discretionary authority.

Reasonable Proximity for Select

Group Expansions. Since the adoption

of IRPS 99–1, an issue has been raised

regarding the policies affecting the

addition of groups that are within

reasonable proximity of a service facility

(this term includes a service center,

branch or shared branch or any offsite

credit union location that meets the

definition of a service facility.) In

defining reasonable proximity, the

NCUA Board stated in IRPS 99–1 that

the group to be added must be within

the ‘‘service area’’ of a ‘‘service facility’’

of the credit union. Service facility was

defined to mean a place where shares

are accepted for members’ accounts,

loan applications are accepted, and

loans are disbursed. This definition

included a credit union owned branch,

a shared branch, a mobile branch, an

office operated on a regularly scheduled

weekly basis, or a credit union owned

electronic facility that meets, at a

minimum, these requirements. This

definition did not include an ATM.

Most importantly, the Board articulated

the position that in order to expand

around a service facility, the credit

union must have ownership in the

service facility, but the degree of

ownership was not defined.

Participation in a service facility,

without ownership, was not an

allowable basis for adding a select group

and otherwise satisfy the requirement of

the statute that the credit union must be

within reasonable proximity to the

location of the group.

In reviewing this issue, the Board

determined that the current policy was

overly restrictive and that the threshold

for allowing the addition of groups

around a service facility should be

modified. The proposed amendment

would provide greater flexibility to

credit unions to add select groups

around service facilities if either (1) the

credit union owns directly or through a

CUSO or similar organization, at least a

5 percent interest in the service facility

or (2) the service facility is local to the

credit union and the credit union is an

authorized participant in the service

center.

A total of twenty-six commenters

addressed this issue, most of whom

recommended greater flexibility than

that proposed. Five commenters

approved of the expansion requirements

for shared branches. Two commenters

stated that any ownership interest

should be sufficient. One commenter

stated that a five percent ownership

interest is too high. Three commenters

stated that NCUA should not allow

expansions around shared service

centers.

Nine commenters stated that shared

branches should be treated like any

other credit union branch for expansion

purposes, without any requirement of

ownership interest or that it be local.

Two commenters suggested that instead

of a specific ownership amount, the

agency should define ownership as that

which conveys or allows a voting right

in the partnership, corporation or

organization, regardless of its size

relative to other owners. These

commenters stated that a voting right

demonstrates the ability of the credit

union to participate in the direction of

the partnership, corporation or

organization and should resolve

NCUA’s concern as to ownership and its

relationship to FOM expansions. Many

64514 Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations

of the commenters who opposed the

ownership interest requirement believed

that the proposal would hurt small

credit unions.

Three commenters stated that NCUA

should give a regional director

discretionary authority concerning the

five percent limitation, with one of

these commenters providing the

following test for an expansion: (1) The

circumstances are such that less than a

five percent ownership level is achieved

because the number of owners makes it

difficult or impossible to own more than

five percent; or (2) the applicant credit

union is serving at least one group of

greater than 500 potential members

within a reasonable proximity of the

shared facility. One commenter believed

NCUA should consider items other than

ownership including the availability of

other credit union services, the location

of other select groups presently in the

credit union’s field of membership, the

presence of branch offices or other

locations of existing select groups, and

the usage statistics of shared branches

by current members of the requesting

credit union.

The Board notes that the Federal

Credit Union Act clearly states that if

the formation of a separate credit union

is not practicable or consistent with the

standards set forth in the statute, then

a select group can be included in the

‘‘field of membership of a credit union

that is within reasonable proximity to

the location of the group.’’ The statutory

standard, therefore, is that if the group

cannot form a credit union, then it can

be added to the field of membership of

another credit union if it is reasonably

proximate to the expanding credit

union. In addressing this issue,

therefore, it is necessary to determine

what is meant by credit union and

reasonable proximity.

The second of these two issues is

easily addressed. NCUA has

consistently held that the group being

added must be within the expanding

credit union’s geographic service area.

The House Committee Report for

CUMAA addressed the reasonable

proximity requirement and offered

valuable guidance on how NCUA

ultimately viewed the statutory

language. H.R. Rep. No. 104–472, 105th

Cong., 2nd Sess. 19 (1998). On page 20

of the Report it is stated that the statute

‘‘articulates a strong policy towards

placing groups which cannot form their

own credit unions with a local credit

union.’’ (Emphasis added.)

The definition of a credit union,

therefore, is crucial to determining how

flexible NCUA can be in allowing

expansions around service facilities.

Can it be reasonably determined that a

service facility constitutes a credit

union in the context of the statute, if the

expanding credit union has little or no

ownership interest in the service

facility? In other words, can a credit

union that is simply linked to the

service facility through a state or

national network use that linkage,

without ownership, to expand its field

of membership by adding groups within

the service area of the service facility?

Prior to CUMAA, NCUA’s policy did

not permit the addition of select groups

around shared branches. Additionally, a

branch could not be established without

an existing membership base. With the

passage of CUMAA and the adoption of

IRPS 99–1, the only change in this

policy was that a credit union could

establish a branch office in any location

regardless of membership location. This

policy allowed greater expansion

opportunities, but it required a capital

commitment.

The proposed amendment would

allow greater flexibility for credit unions

to add new groups, but it would not

permit credit unions that are simply

linked to a service facility through a

state or national network use that

linkage, without ownership, to expand

by adding select groups located within

the service area of those service

facilities? It is the Board’s view that a

service facility is not a credit union for

the purposes of field of membership

expansion unless the credit union has

an ownership interest in that service

facility, or the service facility is

otherwise local to the credit union and

already serves an existing membership

base.

The question then becomes, what

degree of ownership interest is

appropriate? A number of commenters

suggested various levels of ownership

interest or alternatives to ownership,

such as voting rights; however, the

Board continues to believe that a 5

percent level of ownership interest is

reasonable and satisfies the intent of the

statute. It is important to note that this

interpretation does not limit service to

members through a service facility not

owned by a credit union. It simply

prescribes certain ownership

requirements that must be met before a

credit union can expand around a

service facility.

The amendment, as proposed, is

adopted in the final rule.

Multiple Common Bond

Documentation Requirements. Since the

implementation of IRPS 99–1, a number

of questions and issues have been raised

related to the documentation

requirements that must be satisfied

before adding select groups. To clarify

this issue, the NCUA Board proposed

adding language to Chapter II, IV.B.3 as

follows:

Why the formation of a separate credit

union for the group is not practical or

consistent with safety and soundness

standards. Some of the areas the credit

union may consider include:

• Member location—whether the

membership is widely dispersed or

concentrated in a central location.

• Demographics—the employee

turnover rate, economic status of the

group’s members, and whether the

group is more apt to consist of savers

and/or borrowers.

• Market competition—the

availability of other financial services.

• Desired services and products—the

type of services the group desires in

comparison to the type of services a new

credit union could offer.

• Sponsor subsidies—the availability

of operating subsidies.

• Employee interest—the extent of

the employees’ interest in obtaining a

credit union charter.

• Evidence of past failure—whether

the group previously had its own credit

union or previously filed for a credit

union charter.

• Administrative capacity to provide

services—will the group have the

management expertise to provide the

services requested.

Eight commenters approved of adding

the clarifying language for why it may

not be practical for a group to form its

own credit union. Five commenters

suggested that the desire of the sponsor

should be added to the list. The NCUA

Board agrees with this suggestion and

has added the desire of the sponsor as

a factor to be considered in determining

why a group may not wish to form its

own credit union.

One commenter stated that the

‘‘availability of other financial services’’

is not relevant and recommended

deleting it from the list of factors to be

considered. This commenter would also

delete ‘‘the availability of operating

subsidies,’’ and suggested consideration

of operating subsidies may discourage

potential sponsors. The NCUA Board

disagrees with these comments and

believes both factors could be important

in determining economic viability.

Two commenters recommended that

NCUA not contact the group when

trying to determine economic

advisability. Although direct contact

with a group seeking credit union

service is infrequent, occasionally it is

necessary in order to obtain additional

information in support of the request.

Most often the direct contact is related

to obtaining more documentation on

economic advisability criteria or

obtaining clarification on assertions

Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations 64515

made by the group. Generally, directly

contacting a group that has submitted

incomplete information has expedited

the field of membership expansion

request. As a result, NCUA reserves the

right to contact the group when

additional information is needed to

process an application.

Two commenters stated that the

manual should specifically state, as the

preamble did, that a ‘‘credit union need

not address every item on the list,

simply those issues that are relevant to

its particular request.’’ The NCUA Board

agrees with this suggestion since it will

provide clarification and has

incorporated it into the final rule.

Two commenters stated that the

economic advisability list should state

that widely dispersed groups do not

meet the criteria for the formation of a

separate credit union. The NCUA Board

does not agree with these commenters.

Although rare, widely dispersed

members of groups may still have the

ability to form their own credit union;

however, it is recognized that

membership dispersion is a critical

consideration in determining economic

advisability.

Voluntary Mergers. Consistent with

current policy, two single common bond

credit unions that share the same

common bond (same field of

membership) can voluntarily merge. For

example, corporation A is nationally

based. As a result of being nationally

based, it has several credit unions that

are not geographically restricted serving

its employees. These single common

bond credit unions share the same

common bond and field of membership.

Accordingly, by policy, no analysis of

the groups are required to determine if

they can stand on their own and the

credit unions can voluntarily merge.

Similarly, if corporation A is served

by a single common bond credit union

and corporation B is served by a single

common bond credit union, the two

single common bond credit unions can

merge if one corporation is acquired by

the other. In other words, if corporation

A purchases corporation B, then the two

single common bond credit unions

share the same common bond and there

is no restriction on the two credit

unions voluntarily merging. Again, no

field of membership analysis is

required, other than to determine they

share the same common bond.

The two situations described above

have not presented a problem this past

year. However, in the examples

provided above, if one of the credit

unions is a healthy multiple common

bond credit union, the result can be

entirely different. In some cases, this

places an undue burden on the credit

unions and often presents potential

long-term supervisory concerns. To

illustrate, if in the second example the

credit union serving corporation B is a

multiple common bond credit union,

and corporation A purchases

corporation B, under current policy, if

the primary field of membership in

corporation B’s credit union has more

than 3,000 primary potential members

and every other group has less than

3,000 primary potential members, then

NCUA still must analyze each group of

3,000 or more potential members to

determine whether the formation of a

separate credit union is practical. This

is a harsh result when both credit

unions essentially share the same

common bond.

The NCUA Board believes that if two

credit unions have a substantial overlap

of their fields of membership, then the

two credit unions should be allowed to

voluntarily merge without analyzing

that group’s ability to form its own

credit union.

Therefore, the NCUA Board proposed

a modification to its merger policy to

permit the voluntary merger of credit

unions with fields of membership that

substantially overlap. That is, if two or

more credit unions share the same

primary fields of membership, and each

of the remaining select groups have

primary potential members less than

3,000, then the remaining groups will be

considered incidental and the credit

unions should be allowed to merge.

Eleven commenters approved of the

change to the voluntary merger section.

Two of these commenters suggested that

NCUA consider expanding this

interpretation to also allow voluntary

mergers of credit unions sharing similar

fields of membership without an

intervening corporate event. The NCUA

Board agrees, but believes that the

proposed revision reflects this position;

therefore, no additional change is

necessary.

Two commenters opposed the change

in policy. Three commenters stated that

even this proposed voluntary merger

policy is overly restrictive. One

commenter stated that NCUA should

approve voluntary mergers with little or

no restrictions in the case of corporate

acquisitions or restructuring. Six

commenters, notwithstanding the law,

stated that any voluntary merger should

be permitted. For the reasons cited

above, the NCUA Board is changing its

voluntary merger policy. However,

unrestricted voluntary mergers of

multiple common bond credit unions

cannot be permitted due to the statutory

restrictions contained in CUMAA.

Supervisory Mergers. When safety and

soundness concerns are present, NCUA

may approve the merger of any federally

insured credit union. The NCUA Board

proposed to amend Chapter II, Section

IV.D.2 of the Chartering Manual to

clarify that abandonment by the

management and/or officials and an

inability to find replacements, loss of

sponsor support, serious and persistent

record keeping problems, sustained

material decline in financial condition,

or other serious or persistent

circumstances are examples that may

constitute grounds for merging a credit

union due to supervisory concerns.

These are just examples and not an allinclusive list.

Seven commenters approved of this

amendment to this section. Two

commenters objected to the restriction

that a financially healthy, single

common bond credit union with

potential members in excess of 3,000

may not merge with a multiple group

credit union unless there are

supervisory reasons. The NCUA Board

is bound by the merger provision in

CUMAA and is adopting the

amendment as proposed.

Common Bond Charter Conversions.

The NCUA Board proposed to permit a

credit union to continue to serve any

group included in or added to its single

common bond field of membership at

the time of conversion to a single

common bond credit union for a period

of three years from the date of

conversion, even if the group is later

sold, spun-off, or otherwise divested as

a result of a corporate reorganization/

restructuring. If the credit union elects

to continue to serve any sold, spun-off

or otherwise divested group, then the

credit union must convert back to a

multiple common bond credit union on

the third anniversary of the date of

conversion. During this three-year

period, it will continue to be treated as

a single common bond credit union.

Ten commenters approved of this

policy change. Three commenters stated

this policy change is still overly

restrictive. One commenter opposed the

policy change. One commenter

suggested that NCUA allow single

common bond credit unions to continue

in a single common bond status,

consistent with the new corporate

restructuring policy, if the credit union

is still serving only its single sponsor

and groups spun-off by the single

sponsor and/or groups related to the

single sponsor. The Board does not

agree that additional changes, beyond

those proposed, are necessary.

One commenter stated that NCUA

should apply this same three-year

provision to a credit union that converts

to a community charter and has groups

outside the community boundaries.

64516 Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations

That is, the credit union should be able

to serve new members of these select

groups for three years after the

conversion. The NCUA Board believes

that when a credit union converts to a

community charter, it should serve the

community and not select groups. The

only exception is for groups obtained

through an emergency merger or

emergency purchase and assumption.

The grandfather provision in CUMAA is

not applicable since the credit union

has changed its charter type. Therefore,

the NCUA Board is not adopting this

commenter’s suggestion.

Conversions of Multiple Common

Bond Credit Unions. The NCUA Board

proposed a clarification that a statechartered multiple common bond credit

union that converts to a federal charter

may retain in its field of membership

any group that it was serving at the time

of conversion. Any subsequent

additions or amendments to the field of

membership would have to comply with

federal field of membership policies.

Additionally, the NCUA Board clarified

that if any state chartered credit union

that was considered under state law to

be a single common bond credit union,

but under federal rules would be

classified a multiple common bond

credit union, converts to a federal

charter, the charter type must be

changed to reflect federal policy.

Six commenters approved of the

amendment regarding state multiple

group credit union conversions to

federal multiple group charters. Two

commenters stated that NCUA should

make this policy more expansive. One

commenter opposed this policy change.

The NCUA Board believes that the

proposed change is proper and is

adopting the proposed amendment.

The NCUA Board also proposed an

amendment to Chapter IV, Section III.A

of the Chartering Manual to clarify that

a federal credit union converting to a

state charter remains responsible for the

operating fee for the year in which it

converts. Four commenters opposed this

clarification and requested that the fee

be pro-rated. Currently, the operating

fee is not pro-rated and the clarification

does not change existing policy.

4. Corporate Restructuring for

Occupational Common Bond Credit

Unions and Multiple Common Bond

Credit Unions

The most challenging and complex

field of membership issues have

involved the loss or dilution of a field

of membership as a result of corporate

reorganization or restructuring.

Although IRPS 99–1 addressed this

issue, the current policy does not

completely set forth the resolution to

various, and sometime numerous,

consequences of a corporate

restructuring/reorganization,

particularly when the credit unions

involved are reluctant and, in some

cases, refuse to mutually address the

problem. Therefore, the NCUA Board

proposed amendments regarding

corporate restructuring for both single

bond credit unions and multiple

common bond credit unions.

For single common bond credit

unions, the NCUA Board proposed an

amendment to clarify that if the group

comprising the single common bond of

a credit union merges with, or is

acquired by, another group, the credit

unions originally serving both groups

can serve the new group resulting from

the merger or acquisition after receiving

a housekeeping amendment. In other

words, it will be permissible for both

credit unions to serve the same single

common bond group. However, the

credit unions may agree to divide the

field of membership in some way. To

clarify this practice, additional language

was proposed to state that unless an

agreement is reached limiting the

overlap resulting from the corporate

restructuring, NCUA will permit a

complete overlap of the credit unions’

fields of membership.

For multiple common bond credit

unions, the NCUA Board proposed an

amendment to clarify that when two

groups merge, or one group is acquired

by the other, and each is in the field of

membership of a credit union, then both

(or all affected) credit unions can serve

the resulting merged or acquired group,

subject to any existing geographic

limitation and without regard to any

overlap provisions by a housekeeping

amendment to its charter. As with single

common bond credit unions, both credit

unions will be allowed to serve the new

group resulting from the merger, buyout

or acquisition, and the credit unions can

mutually divide the new field of

membership. If they do not agree to a

division of the field of membership,

then a total overlap will be permitted,

subject to any existing geographic

limitation. The NCUA Board believes

this to be in the best interests of the

credit unions and the members due to

the safety and soundness concerns that

evolve when a credit union loses its

field of membership.

Seventeen commenters strongly

approved of all of the amendments

regarding corporate restructuring. Many

of these commenters commended NCUA

for how it proposed to address this

complex issue. One commenter stated

the changes to this section are not

appropriate. This commenter states that

the desire of the corporate sponsor

should have a significant bearing on

which credit union will serve the

employees. Although the desires of the

sponsor are important, from a safety and

soundness perspective, as well as

consumer choice, it would not be

advisable to allow a sponsor to control

the fate of a credit union. Therefore, the

NCUA Board is adopting the proposed

amendments on corporate restructuring

in final as proposed. The corporate

restructuring policy is applicable in any

situation where two or more credit

unions, regardless of their charter type,

acquire a group as a result of a merger

or corporate restructuring/acquisition.

One commenter requested that single

common bond credit unions should not

have to list their subsidiaries. The Board

does not agree. New groups, whether

added as a result of an expansion or a

housekeeping amendment, should be

included in the field of membership to

allow NCUA to monitor overlaps. It is

important to note, however, that a credit

union may have language in its field of

membership as follows: ‘‘ XYZ

Corporation and its subsidiaries.’’ If

such language exists or is added to the

field of membership of a single common

bond credit union, then the credit union

can legitimately serve any new

subsidiary acquired by the sponsor

through a housekeeping amendment

provided the ownership requirements

are met. In this instance, no overlap

analysis would be required.

5. Community Charters

Although the NCUA Board did not

propose any changes to its definition of

a local community, one commenter

suggested that any county or equivalent

political jurisdiction, regardless of size,

should be deemed a local community

where residents interact or have

common interests. Three commenters

stated that they agree with NCUA that

there is no negative presumption that

arises with populations larger than

300,000 in chartering a community

credit union. One commenter stated that

NCUA should consider defining a local

community as one or more metropolitan

statistical areas, as defined by the Office

of Management and Budget, or one or

more contiguous political subdivisions,

such as counties, cities or towns. One

commenter believes NCUA’s definition

of a local community is overly broad.

Although the NCUA Board is not

making any changes to the definition of

local community, it does wish to note

that areas larger than 300,000, such as

Reno, Nevada, and San Francisco,

California, qualify as a local community.

Although not every large city will

qualify as a local community, many

Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations 64517

cities and/or metropolitan areas may

have the indicia of a local community.

Community Action Plan (CAP). The

Board recommended amending IRPS

99–1 to require all community credit

unions to develop a CAP. The intent of

the CAP provision is to supplement a

community credit union’s marketing

plan by specifically addressing how the

credit union plans to market its services

to the entire community, including any

underserved or low-income areas, if

applicable. The proposed amendment

also included a provision to require the

board of community credit unions to

periodically review and update their

CAP to determine if all segments of the

community were being served. If a

credit union failed to make reasonable

efforts to follow its CAP, then NCUA

could initiate appropriate supervisory

actions to require compliance.

The rationale for CAP is relatively

simple. Since service to the entire

community is an essential consideration

for community charters, then NCUA can

and should set forth its expectation in

this regard. Most importantly, a

fundamental premise underlying the

granting of any community charter is

that the entire defined community area

will be served. It has been, and

continues to be, the intent of this Board

that all segments of a community will be

served, particularly members that reside

in underserved areas. To this end, the

CAP was proposed, notwithstanding the

absence of tangible evidence regarding

the manner in which credit unions

attempt to meet this important goal.

While the overwhelming majority of

the responses opposed the proposed

CAP provision, it is noteworthy that

only 99 of the commenters would be

directly affected by the provision as it

was proposed. Also, one comment letter

received from a trade association in

favor of the provision counts 110

community charters among its members.

Six other commenters favored CAP and

four hundred and twenty-three

commenters opposed CAP, some in very

strong terms. However, in raising those

concerns, it was evident that most

commenters would agree that

community credit unions should serve

the entire community. The method by

which this should be accomplished was

the focal point of disagreement since

most commenters relayed their belief

that community credit unions were, in

fact, meeting the goal highlighted by the

CAP provision.

Of those who approved of CAP, one

recommended amending the proposal as

follows: (a) Credit unions with less than

$10 million in assets should be

exempted; (b) NCUA should specify

appropriate sanctions rather than

reserving broad discretionary

supervisory powers; and (c) NCUA

should require that credit unions

expanding into low-income

communities submit regular service

status reports. Another commenter

recommended that CAP should extend

to all federal credit unions.

The commenters who objected

primarily made the following points: (1)

They believe the proposal is similar to

Community Reinvestment Act (CRA)

requirements; (2) it is unnecessary since

there is no evidence that community

credit unions are not serving their entire

field of membership adequately; (3)

NCUA’s legal authority to promulgate

this requirement is doubtful; (4)

meaningful comment is impossible

because the guidance to examiners in

reviewing the CAP is not part of the

proposal (also examiners are not

qualified to review such a plan); (5)

implementation of CAP will encourage

more conversions to state charters or

thrifts and eventually destroy the dual

chartering system; (6) community

charters naturally serve their entire

communities; (7) the CAP provision is

not safety and soundness related; (8)

CAP increases regulatory burden; and

(9) CAP harms small credit unions by

making them develop unnecessary

paperwork. Some commenters were also

concerned that NCUA will extend this

proposal to all federal and state

chartered credit unions. One commenter

stated it would take close to 40 hours to

prepare a CAP and not the two hours

estimated by NCUA.

In opposing CAP, many commenters

raised concerns tangential to the intent

of CAP. In view of the objections raised,

some observations relative to the CAP

provision are appropriate.

CAP is not the same as the

Community Reinvestment Act (CRA),

nor was it intended to be ‘‘like CRA.’’

CRA and its implementing regulations

(12 U.S.C. 2901 et seq. and 12 CFR 228)

set forth lending tests, investment tests,

service tests, standards and assessments

to assess an institution’s record of

helping the needs of the local

communities in which the institution is

chartered, regardless of whether the

people in some of these communities

are customers or affiliated with the

institution. Conversely, the CAP

provision is intended to serve as a tool

to ensure that a community credit union

has a plan to serve all segments of the

community it is chartered to serve.

Although there is only anecdotal

evidence regarding community credit

unions, as a group, serving their entire

fields of membership, a CAP

underscores the importance of this

underlying principle for community

charters. In fact, some federal credit

union commenters sent in their business

plans and marketing plans showing that

they already had a plan in place to serve

the entire community. Based on the

comments of community credit unions

and the submissions some of them

provided, many community credit

unions already have adopted plans and

offer products and services designed to

serve the entire community. Therefore,

imposing this requirement on

community credit unions should be

minimally burdensome, if at all.

Many commenters suggested that

their community credit unions are

already serving the entire community

and that their credit unions are

accomplishing the intent of the CAP

provision. To suggest, as some did, that

addressing the issue of serving the

entire community is unnecessary

overlooks the fact that many credit

unions already recognize the

importance of this issue. Additionally,

any new community credit union, or a

credit union converting to a community

charter, must have addressed this issue

under IRPS 99–1. For example, in this

year alone, over 75 credit unions have

converted to community charters and

another 20 community credit unions

have expanded their community

boundaries.

In recognition of the concerns raised

by the commenters, the Board modified

the proposed language requiring a

separate CAP document. Rather, a

community credit union must address

in some form how it is going to serve the

community it was granted, whether it is

in their business or marketing plan, or

other appropriate documentation. This

revision to the proposed rule

accommodates those community credit

unions that already have found an

appropriate method of setting forth how

they intend to serve the entire

community.

The Board does not agree with the

proposition that the CAP provision

cannot be legally imposed. The Board

has broad general authority to prescribe

rules and regulations for the

administration of the Federal Credit

Union Act. 12 U.S.C. 1766(a); 12 U.S.C.

1789(a)(11). The Supreme Court has

recognized that regulations promulgated

under such broad empowering

provisions of a statute ‘‘will be

sustained so long as *** [the regulation]

is reasonably related to the purposes of

the enabling legislation.’’ Mourning v.

Family Publications Service, Inc., 411

U.S. 356, 369 (1973) quoting Thorpe v.

Housing Authority of the City of

Durham, 393 U.S. 268, 280–81 (1969).

The Board also has specific regulatory

authority in connection with its

64518 Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations

chartering and supervision of

community credit unions, 12 U.S.C.

1759(g), and general statutory

responsibility, 12 U.S.C. 1781(c)(1)(D),

to assure that the convenience and

needs of the members to be served are

being met by any credit union to which

it provides federal share insurance.

Consequently, the CAP provision is

intended to underscore this

responsibility.

Failure to adequately serve the entire

membership is a safety and soundness

issue for a community credit union. A

community credit union is frequently

more susceptible to competition from

other local financial institutions,

sometimes lacks the ability to

adequately implement payroll

deduction and does not have support

from any single sponsoring company or

association. The long-term success of a

community credit union is based on its

ability to serve its entire community.

Financial health and steady growth stem

from a community credit union having

an adequate plan to serve its entire

membership and its entire community.

Consequently, the failure to adequately

serve the entire membership and/or the

lack of an adequate plan to serve the

entire community may ultimately

become a safety and soundness issue for

a community credit union.

Generally, the remainder of the

commenter’s primary reasons for

opposing CAP were based on

philosophical positions or on

speculation of what may or may not

happen if CAP is implemented. Those

concerns have been carefully

considered. Briefly, the Board is not

convinced, based on the evidence to

date, that a plan devised by credit union

management on how they intend to

serve the entire community, the basis

upon which the community charter was

granted, will be harmful to small credit

unions or decrease the value of a federal

charter. In view of the modified

approach, the issue of examiner

guidance is moot since the examiner

will review the document in the context

of safety and soundness in the same

manner they review a credit union’s

business plan or marketing plan.

It is the Board’s view that the

underlying goals for proposing a CAP

should not be abandoned. In light of the

comments received, however, a

modified approach to accomplish the

goal of ensuring service to all segments

of a community, and with less

regulatory burden, can still be

accomplished.

The final rule requires that a

community credit union address in

either its marketing or business plan or

other appropriate separate

documentation, such as the strategic

plan, project differentiation, etc, how it

plans on serving the entire community,

including how the credit union will

market to the community and what

products and services will be offered by

the credit union to assist underserved

members in the community. A separate

document is not necessarily required. It

will be the responsibility of credit union

management to periodically review its

business, marketing or other plans to

evaluate all aspects of its annual and

strategic goals, including service to all

within the community. A credit union’s

use of its business or marketing plan is

a factor that has been and will continue

to be considered in the overall

assessment of management. Included in

this assessment will be the absence of

any plan addressing how the credit

union will serve the entire community.

As stated in the preamble to the

proposed rule, existing credit unions

will have until December 31, 2001 to

have a plan in place addressing how the

credit union will serve the entire

community. Finally, pursuant to this

regulation, as well as Section 741.6 of

NCUA’s Rules and Regulations, the

regional director may request periodic

service status reports from a community

credit union to ensure that the needs of

the community are being met.

6. Underserved Areas

Three criteria must be met before an

underserved area can be added to any

federal credit union’s field of

membership. First, the area must be a

local community. Second, the area must

also be classified as an investment area

as defined in section 103(16) of the

Community Development Banking and

Financial Institutions Act of 1994 (12

U.S.C. 4703 (16)) and meet any

additional requirements the Board may

impose (the Board has not imposed any

additional requirements). Third, the

credit union adding the underserved

area must establish and maintain an

office or facility in the local community,

neighborhood, or rural district.

After reviewing the statutory intent of

service to underserved areas and the

overall goal of improving credit union

service to these areas, the NCUA Board

proposed to modify the current polices

relating to each of the three criteria in

order to encourage further development

of credit union activities in underserved

areas and thereby improve financial

services to those most in need.

First, the NCUA Board proposed that

if a geographic area meets the

requirements for an investment area,

and the size of the investment area,

whether contained wholly or in part of

a single political jurisdiction or multiple

political jurisdictions, meets the

presumptive criteria established in IRPS

99–1, then the credit union will not

have to demonstrate common interests

or interaction among the residents.

Accordingly, the NCUA Board proposed

that Chapter III, Section III, should be

amended to state that the ‘‘well-defined

local community, neighborhood, or

rural district’’ requirement will be met

if:

(1) the underserved area to be served is in

a recognized single political jurisdiction, i.e.,

a county or its political equivalent or any

contiguous political subdivisions contained

therein, and if the population of the

requested well-defined area does not exceed

300,000, or

(2) the underserved area to be served is in

multiple contiguous political jurisdictions,

i.e., a county or its political equivalent or any

political subdivisions contained therein and

if the population of the requested welldefined area does not exceed 200,000.

Second, the NCUA Board proposed

that if the area meets the poverty,

median family income, unemployment,

distressed housing, or population loss

criteria as set forth in the Community

Development Banking and Financial

Institutions Act of 1994, then the Board

will presume that there are significant

unmet needs for loans or equity

investments.

Third, the NCUA Board proposed that

at the time the underserved area is

added to the credit union’s field of

membership, a plan must be in place to

establish and maintain an office or

facility within two years. In addition to

a permanent office or facility, this

requirement may also be satisfied

through periodic service to the

underserved area through the use of a

mobile office, an office open at select

times each week, a service facility or

shared service facilities. A credit union

that has multiple underserved areas in

its field of membership must meet the

statutory requirement for each

underserved area unless the

underserved areas are contiguous. In

addition, the NCUA Board proposed

that if a credit union has a preexisting

service facility within close proximity to

the underserved area(s), then it will not

be required to maintain a service facility

within the underserved area. Close

proximity will be determined on a caseby-case basis. However, the service

facility must be readily accessible to the

residents and the distance from the

underserved area to the service facility

should not be an impediment to a

majority of the residents to transact

credit union business.

Twelve commenters approved of the

amendments regarding underserved

areas. One of these commenters stated

Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations 64519

that a service facility is close to an

underserved area if it is accessible by

public transportation or within walking

distance. Another commenter suggested

a service facility is not necessary and a

credit union could use electronic means

to serve the underserved community.

Two commenters opposed the change

on the location of the service facility

stating that it is contrary to statute.

The NCUA Board is adopting the

changes as proposed in the final rule. To

clarify, the credit union adding the

underserved area must establish a

service facility within the underserved

area within a two-year period, or the

credit union’s service facility must be

reasonably proximate to the

underserved area. The key to the

reasonably proximate concept is that the

availability of products and services be

easily accessible to community

residents.

In addition to the amendments

discussed above, the Board requested

comment on providing incentives for

credit unions to add underserved

communities if the underserved

community is a minimum population

size. Comments were specifically

requested on what the population size

of the underserved area should be in

order for the credit union to qualify for

one or more of the following incentives:

• The asset base used to compute the

credit union’s operating fee will be

frozen for a two-year period.

• The operating fee will be reduced

by ten percent or more per year until the

total reduction equals $20,000 over a

maximum five-year period.

• The assets of the underserved area

will not be included in the calculation

of the credit union’s operating fee for

five years.

• Fixed assets in the underserved area

will not be counted toward the fixed

asset limitation of § 701.35 of NCUA’s

Rules and Regulations. In addition, the

credit union would be exempt from the

charitable donation regulation, § 701.25,

and would be allowed to increase the

dollar threshold from $100,000 to

$250,000 when an appraisal is required,

§ 722.3(a)(1).

Two commenters stated that the final

rule should provide incentives for

adding underserved areas, but did not

suggest any specific incentive. One

commenter appeared to approve of all

the incentives, but suggested a

minimum size for the underserved area

for the incentives to be applicable.

Another commenter stated that there

should be no minimum size. One

commenter believes that incentives to

encourage the addition of underserved

areas should be geared to performance.

This commenter further stated that no

credit union should receive any

incentive if it simply adds an

underserved area, but fails to serve the

low-income population therein.

Assuming that NCUA links incentives to

performance, this commenter would

support the regulatory waivers set forth

above.

One commenter stated that providing

incentives for adding underserved areas

needs further study before any of them

are implemented. One commenter

specifically opposed the operating fee

incentive. One commenter specifically

opposed exempting credit unions from

certain regulations simply because they

added an underserved area. One

commenter believes NCUA should

encourage and support credit unions

that serve underserved groups but did

not approve of the cited incentives.

Three commenters did not approve of

having incentives to add underserved

areas.

One commenter stated that credit

unions adding underserved areas should

get special consideration of loan

delinquency or loss experience in

connection with serving an underserved

community. One commenter suggested

that NCUA consider allowing credit

unions that serve underserved areas to

accept some form of secondary capital

account or nonmember deposit that

would be considered regulatory net

worth.

One commenter suggested that,

instead of incentives, NCUA establish a

grant program wherein credit unions

could apply for monetary awards based

on the extent of their operations in

underserved communities. One

commenter did not approve of the

incentives, but suggested deleting a

regional director’s ability to request a

credit union’s service status report on

serving an underserved area. One

commenter requested NCUA always

request periodic service status reports

on serving underserved areas.

At this time, the NCUA Board is

deferring any immediate action

regarding providing incentives to credit

union’s adding underserved areas. As a

result of the changes adopted in this

final regulation, it would appear that

additional incentives may not be

necessary. Further, the Board is

encouraged that as of September 30,

2000, thirty credit unions have added

underserved areas, as opposed to nine

in 1999. The Board will continue to

monitor this issue, and if more

incentives are required to increase

service to underserved areas, it will

again be reviewed. The NCUA Board is

also intrigued by the idea of a grant

program and will further consider this

idea.

The NCUA Board still believes that it

is important for the regional director to

have the discretion to ask for service

status reports to determine if the

underserved areas are being adequately

served by the credit union. This data is

especially important if the credit union

seeks to add additional underserved

areas. In addition, this information may

prove useful in determining what type

of problems credit unions may

encounter in serving underserved areas.

7. Miscellaneous

One commenter stated that the

unavailability of credit union service

should not factor into reasonable

proximity. Two commenters requested

that NCUA add the following sentence

in the preamble to the proposed rule to

the final rule: ‘‘the non-availability of

other credit unions is a factor to be

considered in determining whether the

group is within reasonable proximity

* * * ’’ of a credit union wishing to add

the group to its field of membership.

The NCUA Board agrees with these two

commenters and has incorporated this

statement with an additional

clarification in the final rule.

One commenter encouraged NCUA to

continue to consider the ‘‘reasonable

proximity’’ issue on a case-by-case basis

to enable credit unions with the greatest

opportunity to reach out to consumers,

especially those living in underserved

communities. One commenter stated

that NCUA should avoid mileage

limitations in defining reasonable

proximity. To restate current policy, the

NCUA Board does not have any mileage

limitations for adding select groups and

defines reasonable proximity on a caseby-case basis as was previously

discussed in the preamble to IRPS 99–

1. 63 FR 71988, 72002–72003 (December

30, 1998).

One commenter stated that NCUA’s

interpretation of ‘‘single common bond

credit union’’ should include credit

unions that can demonstrate meaningful

affinity and bonds of groups other than

on the basis of the employer entity or

the association entity. One commenter

requested that the definition of

occupational common bond include

trade, industry and professional

designations. Although both of these

suggestions would meet the legal

requirements of CUMAA, the Board has

operational concerns with such an

approach and does not believe a broader

definition is currently necessary.

One commenter asked that NCUA

clarify that, for single common bond

credit unions, additional sponsorrelated groups can be added after the

enactment of CUMAA, but that no

unrelated groups can be added to single

64520 Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations

common bond credit unions. This

commenter’s statement is correct. One

commenter suggested that credit unions

should be allowed to serve the

customers of select groups that have

been approved in their fields of

membership. The NCUA Board

disagrees and does not believe such an

approach is legal under CUMAA.

One commenter requested that NCUA

no longer require a letter from the group

desiring credit union service in regard

to a multiple group field of membership

expansion. The NCUA Board disagrees

with this commenter’s suggestion. It

should be a group’s decision to affiliate

with a credit union. Additionally, there

are legal requirements in adding a group

that a letter from the group may satisfy.

8. Technical Amendment on the Title of

the Section Regarding Immediate

Family Members

The Board proposed to change the

titles of Chapter 2, Section II.H, Chapter

II, Section III.H. and Chapter II, Section

IV.H. to ‘‘Other Persons Eligible for

Credit Union Membership.’’ The NCUA

Board received no comment on this

change and is adopting this amendment

in final as proposed.

9. Express Chartering Program

The Field of Membership Taskforce

and the Office of Examination and

Insurance have developed and are ready

to implement an express chartering

program (ECP). The ECP utilizes

standardized forms, NCUA on-site

assistance, and certain restrictions on

the initial services that may be offered.

The ECP will be periodically reviewed

by the Office of Examination and

Insurance to determine whether it is

achieving its intended purpose without

creating additional risks to the National

Credit Union Share Insurance Fund.

The ECP will use, to the greatest

extent possible, standardized forms to

facilitate the issuance of a charter early

during the chartering process. They

include:

• Model business plan for limited

services;

• Standard member survey format;

• Policy guidelines (shares, lending,

investments, etc.); and

• Sample letters for sponsor support,

grants, and nonmember deposits (where

applicable).

Initially, credit unions using ECP will

only be able to offer basic services, some

of which include regular shares,

signature loans not exceeding

predetermined amounts, and the sale of

money orders and travelers checks. This

will enable the officials to familiarize

themselves with basic credit union

operations and cash management skills.

The Letter of Understanding and

Agreement that always accompanies a

new charter will include this restriction.

An applicant credit union can elect not

to use ECP; however, standard

chartering procedures must then be

used.

Once a credit union demonstrates it

can manage these limited

responsibilities, the officials can submit

a new credit union prepared business

plan to expand services (e.g., share

drafts, credit cards, etc.). This further

refinement of the business plan can be

accomplished in stages with increased

responsibilities and services offered

commensurate with the approved

business plan.

The advantage of the ECP is that once

the credit union is chartered, some

services can be offered, and the officials

will gain experience and knowledge in

the operation of a credit union as they

prepare a more detailed business plan to

implement additional services. It is also

believed that the importance of a

business plan will be better understood

if the officials are actually engaged in

operating the credit union.

While NCUA’s resources are limited,

judicious use of NCUA staff to work

with qualifying groups will be

beneficial. The ECP will make use of the

regional economic development

specialists (EDS) to guide the group

through the application process. Once

the group is chartered, the EDS and

examiner will work with the credit

union, as they do now.

Internet Expansion Requests

The Field of Membership Taskforce

and the Office of the Chief Information

Officer have developed an internet

select group expansion form, which is

expected to be implemented when

testing is completed. This process

allows credit unions to submit requests

for occupational groups of 500 or less

primary potential members online with

an expedited approval by NCUA. The

regional directors can provide credit

unions with specific details on how to

do an expansion through the internet.

B. 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). The final

amendments 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

The reporting requirements in IRPS

00–1 have been approved by the Office

of Management and Budget. The OMB

number is 3133–0015 and will be

displayed in the table at 12 CFR 795.

Executive Order 13132

Executive Order 13132 encourages

independent regulatory agencies to

consider the impact of their regulatory

actions on state and local interests. In

adherence to fundamental federalism

principles, NCUA, an independent

regulatory agency as defined in 44

U.S.C. 3502(5), voluntarily complies

with the executive order. This final rule

only applies to federal credit unions. It

will not have substantial direct effects

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. NCUA has

determined that the final rule does not

constitute a policy that has federalism

implications for purposes of the

executive order.

Congressional Review

OMB has determined that the

provisions of IRPS 00–1 do not

constitute a major rule.

C. Agency Regulatory Goal

NCUA’s goal is clear, understandable

regulations that impose a minimal

regulatory burden. We requested

comments on whether the proposed

amendments are understandable and

minimally intrusive if implemented as

proposed. No commenters addressed

this issue, except in regard to CAP,

which was previously addressed.

List of Subjects in 12 CFR Part 701

Credit, Credit unions, Reporting and

recordkeeping requirements.

By the National Credit Union

Administration Board on October 19, 2000.

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 15

U.S.C. 3717.

Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations 64521

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 12

U.S.C. 4311–4312.

2. Section 701.1 is revised to read as

follows:

§ 701.1 Federal credit union chartering,

field of membership modifications, and

conversions.

National Credit Union Administration

policies concerning chartering, field of

membership modifications, and

conversions are set forth in Interpretive

Ruling and Policy Statement 99–1,

Chartering and Field of Membership

Policy (IRPS 99–1), as amended by IRPS

00–1. Copies may be obtained by

contacting NCUA at the address found

in § 790.2(b) 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 99–1) does not,

and the following amendments will not,

appear in the Code of Federal Regulations.

3. In IRPS 99–1, Chapter 2, Section

II.A is revised to read as follows:

A single occupational common bond

federal credit union may include in its field

of membership all persons and entities who

share that common bond. NCUA permits a

person’s membership eligibility in a single

occupational common bond group to be

established in four ways:

• Employment (or a long-term contractual

relationship equivalent to employment) in a

single corporation or other legal entity makes

that person part of an single occupational

common bond;

• Employment in a corporation or other

legal entity with a controlling ownership

interest (which shall not be less than 10

percent) in or by another legal entity makes

that person part of a single occupational

common bond;

• Employment in a corporation or other

legal entity which is related to another legal

entity (such as a company under contract and

possessing a strong dependency relationship

with another company) makes that person

part of a single occupational common bond;

or

• Employment or attendance at a school

makes that person part of a single

occupational common bond (see Chapter 2,

III.A.1).

A geographic limitation is not a

requirement for a single occupational

common bond. However, for purposes of

describing the field of membership, the

geographic areas being served will be

included in the charter. For example:

• Employees, officials, and persons who

work regularly under contract in Miami,

Florida for ABC Corporation or the

subsidiaries listed below;

• Employees of ABC Corporation who are

paid from * * *;

• Employees of ABC Corporation who are

supervised from * * *;

• Employees of ABC Corporation who are

headquartered in * * *; and/or

• Employees of ABC Corporation who

work in the United States.

So that NCUA may monitor any potential

field of membership overlaps, each group to

be served (e.g., new employees of

subsidiaries, franchisees, and contractors)

should be separately listed in Section 5 of the

charter. However, in situations where

multiple contractors, who qualify based on a

strong dependency relationship, are sole

proprietors, the regional director may

determine that more generalized wording is

acceptable (e.g., ‘‘non-incorporated owneroperators who work regularly under contract

to AJM Industries, Inc. in Glenville, New

York’’). In addition, it is permissible to

simply state in a single common bond charter

the following: ‘‘AJM Industries, Inc. and its

subsidiaries.’’ If AJM Industries, Inc. adds

new subsidiaries the charter can be amended

with a simple housekeeping amendment and

no overlap analysis is required.

The corporate or other legal entity (i.e., the

employer) may also be included in the

common bond—e.g., ‘‘ABC Corporation.’’

The corporation or legal entity will be

defined in the last clause in Section 5 of the

credit union’s charter.

A charter applicant must provide

documentation to establish that the single

occupational common bond requirement has

been met.

Some examples of a single occupational

common bond are:

• Employees of the Hunt Manufacturing

Company who work in West Chester,

Pennsylvania. (common bond—same

employer with geographic definition);

• Employees of the Buffalo Manufacturing

Company who work in the United States.

(common bond—same employer with

geographic definition);

• Employees, elected and appointed

officials of municipal government in Parma,

Ohio. (common bond—same employer with

geographic definition);

• Employees of Johnson Soap Company

and its majority owned subsidiary, Johnson

Toothpaste Company, who work in, are paid

from, are supervised from, or are

headquartered in Augusta and Portland,

Maine. (common bond—parent and

subsidiary company with geographic

definition);

• Employees of MMLLJS contractor who

work regularly at the U.S. Naval Shipyard in

Bremerton, Washington. (common bond—

employees of contractors with geographic

definition);

• Employees, doctors, medical staff,

technicians, medical and nursing students

who work in or are paid from the Newport

Beach Medical Center, Newport Beach,

California. (single corporation with

geographic definition);

• Employees of JLS, Incorporated and

MJM, Incorporated working for the LKM Joint

Venture Company in Catalina Island,

California. (common bond—same employer—

ongoing dependent relationship);

• Employees of and students attending

Georgetown University. (common bond—

same occupation); or

• Employees of all the schools supervised

by the Timbrook Board of Education in

Timbrook, Georgia. (common bond—same

employer).

Some examples of insufficiently defined

single occupational common bonds are:

• Employees of manufacturing firms in

Seattle, Washington. (no defined

occupational sponsor);

• Persons employed or working in

Chicago, Illinois. (no occupational common

bond);

• Employees of all colleges and

universities in the State of Texas. (not a

single occupational common bond); or

• Employees of Timbrook School District

and Swanbrook School District, in Burns,

Georgia. (not a single occupational common

bond).

4. In IRPS 99–1, Chapter 2, Section

III.A.1 is revised to read as follows:

A single associational federal credit union

may include in its field of membership,

regardless of location, all members and

employees of a recognized association. A

single associational common bond consists of

individuals (natural persons) and/or groups

(non natural persons) whose members

participate in activities developing common

loyalties, mutual benefits, and mutual

interests. Separately chartered associational

groups can establish a single common bond

relationship if they are integrally related and

share common goals and purposes. For

example, two or more churches of the same

denomination, Knights of Columbus

Councils, or locals of the same union can

qualify as a single associational common

bond.

Individuals and groups eligible for

membership in a single associational credit

union can include the following:

• Natural person members of the

association (for example, members of a union

or church members);

• Non-natural person members of the

association;

• Employees of the association (for

example, employees of the labor union or

employees of the church); and

• The association.

Generally, a single associational common

bond does not include a geographic

definition. However, a proposed or existing

federal credit union may limit its field of

membership to a single association or

geographic area. NCUA may impose a

geographic limitation if it is determined that

the applicant credit union does not have the

ability to serve a larger group or there are

other operational concerns. All single

associational common bonds will include a

definition of the group that may be served

based on the effective date of the

association’s charter, bylaws, and any other

equivalent documentation. If the

associational charter crosses NCUA regional

boundaries, each of the affected regional

directors must be consulted prior to NCUA

action on the charter.

Qualifying associational groups must hold

meetings open to all members, must sponsor

64522 Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations

other activities which demonstrate that the

members of the group meet to accomplish the

objectives of the association, and must have

an authoritative definition of who is eligible

for membership. Usually, this will be found

in the association’s charter and bylaws.

The common bond for an associational

group cannot be established simply on the

basis that the association exists. In

determining whether a group satisfies

associational common bond requirements for

a federal credit union charter, NCUA will

consider the totality of the circumstances,

such as:

• Whether members pay dues;

• Whether members participate in the

furtherance of the goals of the association;

• Whether the members have voting rights.

To meet this requirement, members need not

vote directly for an officer, but may vote for

a delegate who in turn represents the

members’ interests;

• Whether the association maintains a

membership list;

• The association’s membership eligibility

requirements; and

• The frequency of meetings.

A support group whose members are

continually changing or whose duration is

temporary may not meet the single

associational common bond criteria.

Individuals or honorary members who only

make donations to the association are not

eligible to join the credit union. Other classes

of membership that do not meet to

accomplish the goals of the association

would not qualify.

Educational groups—for example, parentteacher organizations, alumni associations,

and student organizations in any school—

and church groups constitute associational

common bonds and may qualify for a federal

credit union charter.

Student groups (e.g., students enrolled at a

public, private, or parochial school) may

constitute either an associational or

occupational common bond. For example,

students enrolled at a church sponsored

school could share a single associational

common bond with the members of that

church and may qualify for a federal credit

union charter. Similarly, students enrolled at

a university, as a group by itself, or in

conjunction with the faculty and employees

of the school, could share a single

occupational common bond and may qualify

for a federal credit union charter (see Charter

2, II.A).

Homeowner associations, tenant groups,

co-ops, consumer groups, and other groups of

persons having an ‘‘interest in’’ a particular

cause and certain consumer cooperatives

may also qualify as an association.

The terminology ‘‘Alumni of Jacksonville

State University’’ is insufficient to

demonstrate an associational common bond.

To qualify as an association, the alumni

association must meet the requirements for

an associational common bond. The alumni

of a school must first join the alumni

association, and not merely be alumni of the

school to be eligible for membership.

Associations based primarily on a clientcustomer relationship do not meet

associational common bond requirements.

However, having an incidental clientcustomer relationship does not preclude an

associational charter as long as the

associational common bond requirements are

met. For example, a fraternal association that

offers insurance, which is not a condition of

membership, may qualify as a valid

associational common bond.

Applicants for a single associational

common bond federal credit union charter or

a field of membership amendment to include

an association must provide, at the request of

the regional director, a copy of the

association’s charter, bylaws, or other

equivalent documentation, including any

legal documents required by the state or

other governing authority.

The associational sponsor itself may also

be included in the field of membership—e.g.,

‘‘Sprocket Association’’—and will be shown

in the last clause of the field of membership.

5. In IRPS 99–1, Chapter 2, Section

II.B.4 and Section III.B.4 replace the

number ‘‘200’’ with the number ‘‘500.’’:

6. In IRPS 99–1, Chapter 2, Section

IV.B.3 is revised to read as follows:

A multiple common bond credit union

requesting a select group expansion must

submit a formal written request, using the

Application for Field of Membership

Amendment (NCUA 4015) to the appropriate

NCUA regional director. If a credit union is

adding a group of 500 or less primary

potential members, then the NCUA 4015–EZ

should be used. The request must be signed

by an authorized credit union representative.

The NCUA 4015 (for groups in excess of

500 primary potential members) must be

accompanied by the following:

• A letter signed by an authorized

representative of the group to be added.

Wherever possible, this letter must be

submitted on the group’s letterhead

stationery. The regional director may accept

such other documentation or certification as

deemed appropriate. This letter must

indicate:

—The group’s occupational or associational

common bond;

—That the group wants to be added to the

federal credit union’s field of membership;

—Whether the group presently has other

credit union service available;

—The number of persons currently included

within the group to be added and their

locations;

—The group’s proximity to credit union’s

nearest service facility, and

—Why the formation of a separate credit

union for the group is not practical or

consistent with safety and soundness

standards, and provide comments on as

many of the following factors that are

applicable (A credit union need not

address every item on the list, simply those

issues that are relevant to its particular

request):

• Member location—whether the

membership is widely dispersed or

concentrated in a central location.

• Demographics—the employee turnover

rate, economic status of the group’s members,

and whether the group is more apt to consist

of savers and/or borrowers.

• Market competition—the availability of

other financial services.

• Desired services and products—the type

of services the group desires in comparison

to the type of services a new credit union

could offer.

• Sponsor subsidies—the availability of

operating subsidies.

• The desire of the sponsor.

• Employee interest—the extent of the

employees’ interest in obtaining a credit

union charter.

• Evidence of past failure—whether the

group previously had its own credit union or

previously filed for a credit union charter.

• Administrative capacity to provide

services—will the group have the

management expertise to provide the services

requested.

• If the group is eligible for membership in

any other credit union, documentation must

be provided to support inclusion of the group

under the overlap standards set forth in

Section IV.E of this Chapter; and

• The most recent copy of the group’s

charter and bylaws or equivalent

documentation (for associational groups).

The NCUA 4015–EZ (for groups of 500 or

less primary potential members) must be

accompanied by the following:

• A letter signed by an authorized

representative of the group to be added.

Wherever possible, this letter must be

submitted on the group’s letterhead

stationery. The regional director may accept

such other documentation or certification as

deemed appropriate. This letter must

indicate:

—How the group shares the credit union’s

occupational or associational common

bond;

—That the group wants to be added to the

applicant federal credit union’s field of

membership;

—The number of persons currently included

within the group to be added and their

locations; and

• The group’s proximity to credit union’s

nearest service facility.

• The most recent copy of the group’s

charter and bylaws or equivalent

documentation (for associational groups).

7. In IRPS 99–1, Chapter 2, Section

II.E.1 is revised to read as follows:

An overlap exists when a group of persons

is eligible for membership in two or more

credit unions. As a general rule, NCUA will

not charter two or more credit unions to

serve the same single occupational group. An

overlap is permitted when the expansion’s

beneficial effect in meeting the convenience

and needs of the members of the group

proposed to be included in the field of

membership clearly outweighs any adverse

effect on the overlapped credit union.

However, when two or more credit unions

are attempting to serve the same occupational

group, an overlap can be permitted.

Proposed or existing credit unions must

investigate the possibility of an overlap with

federally insured credit unions prior to

submitting an application for a proposed

charter or expansion if the group(s) is greater

than 500 primary potential members.

When an overlap situation does arise,

officials of the involved credit unions must

Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations 64523

attempt to resolve the overlap issue. If the

matter is resolved between the affected credit

unions, the applicant must submit a letter to

that effect from the credit union whose field

of membership already includes the subject

group.

If no resolution is possible or the

overlapped credit union fails to provide a

letter, an application for a new charter or

field of membership expansion may still be

submitted, but must also include information

regarding the overlap and documented

attempts at resolution. Documentation on the

interests of the group, such as a petition

signed by a majority of the group’s members,

will be strongly considered.

An overlap will not be considered adverse

to the overlapped credit union if:

• The group has 500 or less primary

potential members or the overlap is

otherwise incidental in nature—i.e., the

group of persons in question is so small as

to have no material effect on the original

credit union;

• The overlapped credit union does not

object to the overlap; or

• There is limited participation by

members or employees of the group in the

original credit union after the expiration of

a reasonable period of time.

In reviewing the overlap, the regional

director will consider:

• The nature of the issue;

• Efforts made to resolve the matter;

• Financial effect on the overlapped credit

union;

• The desires of the group(s);

• Whether the original credit union fails to

provide requested service;

• The desire of the sponsor organization;

and

• The best interests of the affected group

and the credit union members involved.

Potential overlaps of a federally insured

state credit union’s field of membership by

a federal credit union will generally be

analyzed in the same way as if two federal

credit unions were involved. Where a

federally insured state credit union’s field of

membership is broadly stated, NCUA will

exclude its field of membership from any

overlap protection.

New charter applicants and every single

occupational common bond group which

comes before the regional director for

affiliation with an existing federal credit

union must advise the regional director in

writing whether the group is included within

the field of membership of any other credit

union except a community charter. This

notification requirement is not applicable to

groups with 500 or less primary potential

members. If cases arise where the assurance

given to a regional director concerning

unavailability of credit union service is

inaccurate, the misinformation is grounds for

removal of the group from the federal credit

union’s charter.

NCUA will permit single occupational

federal credit unions to overlap community

charters without performing an overlap

analysis.

8. In IRPS 99–1, Chapter 2, Section

II.E.2 is revised to read as follows:

A federal credit union’s field of

membership will always be governed by the

common bond descriptions contained in

Section 5 of its charter. Where a sponsor

organization expands its operations

internally, by acquisition or otherwise, the

credit union may serve these new entrants to

its field of membership if they are part of the

common bond described in Section 5. Where

acquisitions are made which add a new

subsidiary, the group cannot be served until

the subsidiary is included in the field of

membership through a housekeeping

amendment.

Overlaps may occur as a result of

restructuring or merger of the parent

organization. Credit unions affected by

organizational restructuring or merger should

attempt to resolve overlap issues among

themselves. If an agreement is reached, they

must apply to NCUA for a modification of

their fields of membership to reflect the

groups each will serve. Unless an agreement

is reached limiting the overlap resulting from

the corporate restructuring, NCUA will

permit a complete overlap of the credit

unions’ fields of membership.

In addition, credit unions must submit to

NCUA documentation explaining the

restructuring and providing information

regarding the new organizational structure.

The credit union must identify divisions and

subsidiaries and the locations of each. Where

the sponsor and its employees desire to

continue service, NCUA may use wording

such as the following:

• Employees of Lucky Corporation,

formerly a subsidiary of Tool, Incorporated,

located in Charleston, South Carolina.

9. In IRPS 99–1, Chapter 2, Section

III.E.1 is revised to read as follows:

An overlap exists when a group of persons

is eligible for membership in two or more

credit unions. As a general rule, NCUA will

not charter two or more credit unions to

serve the same single associational group. An

overlap is permitted when the expansion’s

beneficial effect in meeting the convenience

and needs of the members of the group

proposed to be included in the field of

membership clearly outweighs any adverse

effect on the overlapped credit union.

However, when two or more credit unions

are attempting to serve the same associational

group, an overlap can be permitted.

Proposed or existing credit unions must

investigate the possibility of an overlap with

federally insured credit unions prior to

submitting an application for a proposed

charter or expansion if the group(s) is greater

than 500 primary potential members.

When an overlap situation does arise,

officials of the involved credit unions must

attempt to resolve the overlap issue. If the

matter is resolved between the credit unions,

the applicant must submit a letter to that

effect from the credit union whose field of

membership already includes the subject

group.

If no resolution is possible or the

overlapped credit union fails to provide a

letter, an application for a new charter or

field of membership expansion may still be

submitted, but must also include information

regarding the overlap and documented

attempts at resolution. Documentation on the

interests of the group, such as a petition

signed by a majority of the group’s members,

will be strongly considered.

An overlap will not be considered adverse

to the overlapped credit union if:

• The group has 500 or less primary

potential members or the overlap is

otherwise incidental in nature—i.e., the

group of persons in question is so small as

to have no material effect on the original

credit union;

• The overlapped credit union does not

object to the overlap;

• There is limited participation by

members of the group in the original credit

union after the expiration of a reasonable

period of time; or

• The field of membership is broadly

stated, such as a national association.

In reviewing the overlap, the regional

director will consider:

• The nature of the issue;

• Efforts made to resolve the matter;

• Financial effect on the overlapped credit

union;

• The desires of the group(s);

• Whether the original credit union fails to

provide requested service;

• The desire of the sponsor organization;

and

• The best interests of the affected group

and the credit union members involved.

Potential overlaps of a federally insured

state credit union’s field of membership by

a federal credit union will generally be

analyzed in the same way as if two federal

credit unions were involved. Where a

federally insured state credit union’s field of

membership is broadly stated, NCUA will

exclude its field of membership from any

overlap protection.

New charter applicants and every single

associational common bond group which

comes before the regional director for

affiliation with an existing federal credit

union must advise the regional director in

writing whether the group is included within

the field of membership of any other credit

union except a community charter. This

notification requirement is not applicable to

groups with 500 or less primary potential

members. If cases arise where the assurance

given to a regional director concerning

unavailability of credit union service is

inaccurate, the misinformation is grounds for

removal of the group from the federal credit

union’s charter.

NCUA will permit single associational

federal credit unions to overlap community

charters without performing an overlap

analysis.

10. In IRPS 99–1, Chapter 2, Section

III.E.2 is revised to read as follows:

A federal credit union’s field of

membership will always be governed by the

common bond descriptions contained in

Section 5 of its charter. Where a sponsor

organization expands its operations

internally, by acquisition or otherwise, the

credit union may serve these new entrants to

its field of membership if they are part of the

common bond described in Section 5.

Overlaps may occur as a result of

restructuring or merger of the parent

organization. Credit unions affected by

organizational restructuring or merger should

64524 Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations

attempt to resolve overlap issues among

themselves. If an agreement is reached, they

must apply to NCUA for a modification of

their fields of membership to reflect the

groups each will serve. Unless an agreement

is reached limiting the overlap resulting from

the corporate restructuring, NCUA will

permit a complete overlap of the credit

unions’ fields of membership.

11. In IRPS 99–1, Chapter 2, Section

IV.E.2 is revised to read as follows:

A federal credit union’s field of

membership will always be governed by the

field of membership descriptions contained

in Section 5 of its charter. Where a sponsor

organization expands its operations

internally, by acquisition or otherwise, the

credit union may serve these new entrants to

its field of membership if they are part of any

select group listed in Section 5. Where

acquisitions are made which add a new

subsidiary, the group cannot be served until

the subsidiary is included in the field of

membership through a housekeeping

amendment.

Overlaps may occur as a result of

restructuring or merger of the parent

organization. When such overlaps occur,

each credit union must request a field of

membership amendment to reflect the new

groups each wishes to serve. The credit

union can continue to serve any current

group in its field of membership that is

acquiring a new group or has been acquired

by a new group. The new group cannot be

served by the credit union until the field of

membership amendment is approved by

NCUA.

Credit unions affected by organizational

restructuring or merger should attempt to

resolve overlap issues among themselves.

Unless an agreement is reached limiting the

overlap resulting from the corporate

restructuring, NCUA will permit a complete

overlap of the credit unions’ fields of

membership. When two groups merge, or one

group is acquired by the other, and each is

in the field of membership of a credit union,

both (or all affected) credit unions can serve

the resulting merged or acquired group,

subject to any existing geographic limitation

and without regard to any overlap provisions.

This can be accomplished through a

housekeeping amendment.

In addition, credit unions must submit to

NCUA documentation explaining the

restructuring and providing information

regarding the new organizational structure.

The credit union must identify divisions and

subsidiaries and the locations of each. Where

the sponsor and its employees desire to

continue service, NCUA may use wording

such as the following:

• Employees of MHS Corporation,

formerly a subsidiary of Tool, Incorporated,

located in Charleston, South Carolina.

12. In IRPS 99–1, Chapter 2, Section

IV.A.1 is revised to read as follows:

A federal credit union may be chartered to

serve a combination of distinct, definable

single occupational and/or associational

common bonds. This type of credit union is

called a multiple common bond credit union.

Each group in the field of membership must

have its own occupational or associational

common bond. For example, a multiple

common bond credit union may include two

unrelated employers, or two unrelated

associations, or a combination of two or more

employers or associations. Additionally,

these groups must be within reasonable

geographic proximity of the credit union.

That is, the groups must be within the service

area of one of the credit union’s service

facilities. These groups are referred to as

select groups. A multiple common bond

credit union cannot expand using single

common bond criteria.

A federal credit union’s service area is the

area that can reasonably be served by the

service facilities accessible to the groups

within the field of membership. The service

area will most often coincide with that

geographic area primarily served by the

service facility. Additionally, the groups

served by the credit union must have access

to the service facility. The non-availability of

other credit union service is a factor to be

considered in determining whether the group

is within reasonable proximity of a credit

union wishing to add the group to its field

of membership.

A service facility is defined as a place

where shares are accepted for members’

accounts, loan applications are accepted, and

loans are disbursed. This definition includes

a credit union owned branch, a mobile

branch, an office operated on a regularly

scheduled weekly basis, or a credit union

owned electronic facility that meets, at a

minimum, these requirements. A service

facility also includes a shared branch if the

credit union either (1) owns directly or

through a CUSO or similar organization at

least a 5 percent interest in the service

facility, or (2) the service facility is local to

the credit union and the credit union is an

authorized participant in the service center.

This definition does not include an ATM.

The select group as a whole will be

considered to be within a credit union’s

service area when:

• A majority of the persons in a select

group live, work, or gather regularly within

the service area;

• The group’s headquarters is located

within the service area; or

• The group’s ‘‘paid from’’ or ‘‘supervised

from’’ location is within the service area.

13. In IRPS 99–1, Chapter 2, Section

IV.B.2 is revised to read as follows:

An existing multiple common bond federal

credit union that submits a request to amend

its charter must provide documentation to

establish that the multiple common bond

requirements have been met. All

amendments to a multiple common bond

credit union’s field of membership must be

approved by the regional director.

NCUA will approve groups to a credit

union’s field of membership, if the agency

determines in writing that the following

criteria are met:

• The credit union has not engaged in any

unsafe or unsound practice, as determined by

the regional director, which is material

during the one year period preceding the

filing to add the group;

• The credit union is ‘‘adequately

capitalized.’’ NCUA defines adequately

capitalized to mean the credit union has a net

worth ratio of not less than 6 percent. For

low-income credit unions or credit unions

chartered less than ten years, the regional

director may determine that a net worth ratio

of less than 6 percent is adequate if the credit

union is making reasonable progress toward

meeting the 6 percent net worth requirement.

For any other credit union, the regional

director may determine that a net worth ratio

of less than 6 percent is adequate if the credit

union is making reasonable progress toward

meeting the 6 percent net worth requirement,

and the addition of the group would not

adversely affect the credit union’s

capitalization level.

• The credit union has the administrative

capability to serve the proposed group and

the financial resources to meet the need for

additional staff and assets to serve the new

group;

• Any potential harm the expansion may

have on any other credit union and its

members is clearly outweighed by the

probable beneficial effect of the expansion.

With respect to a proposed expansion’s effect

on other credit unions, the requirements on

overlapping fields of membership set forth in

Section IV.E of this Chapter are also

applicable; and

• If the formation of a separate credit

union by such group is not practical and

consistent with reasonable standards for the

safe and sound operation of a credit union.

A more detailed analysis is required for

groups of 3,000 or more primary potential

members requesting to be added to a multiple

common bond credit union; however, only

groups over 500 must address why they

cannot form their own credit union. It is

incumbent upon the credit union to

demonstrate that the formation of a separate

credit union by such a group is not practical.

The group must provide evidence that it

lacks sufficient volunteer and other resources

to support the efficient and effective

operations of a credit union or does not meet

the economic advisability criteria outlined in

Chapter 1. If this can be demonstrated, the

group may be added to a multiple common

bond credit union’s field of membership.

14. In IRPS 99–1, Chapter 2, Section

IV.E.1 is revised to read as follows:

An overlap exists when a group of persons

is eligible for membership in two or more

credit unions, including state charters. An

overlap is permitted when the expansion’s

beneficial effect in meeting the convenience

and needs of the members of the group

proposed to be included in the field of

membership clearly outweighs any adverse

effect on the overlapped credit union.

Proposed or existing credit unions must

investigate the possibility of an overlap with

federally insured credit unions prior to

submitting an application for a proposed

charter or expansion if the group(s) is greater

than 500 primary potential members. An

overlap analysis is not required for groups

with 500 or less primary potential members.

When an overlap situation requiring

analysis does arise, officials of the expanding

credit union must ascertain the views of the

overlapped credit union. If the overlapped

credit union does not object, the applicant

Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations 64525

must submit a letter or other documentation

to that effect. If the overlapped credit union

does not respond, the expanding credit union

must notify NCUA in writing of its attempt

to obtain the overlapped credit union’s

comments.

NCUA will generally not approve an

overlap unless the expansion’s beneficial

effect in meeting the convenience and needs

of the members of the group proposed to be

included in field of membership clearly

outweighs any adverse effect on the

overlapped credit union.

In reviewing the overlap, the regional

director will consider:

• The view of the overlapped credit

union(s);

• Whether the overlap is incidental in

nature—the group of persons in question is

so small as to have no material effect on the

original credit union;

• Whether there is limited participation by

members or employees of the group in the

original credit union after the expiration of

a reasonable period of time;

• Whether the original credit union fails to

provide requested service;

• Financial effect on the overlapped credit

union;

• The desires of the group(s);

• The desire of the sponsor organization;

and

• The best interests of the affected group

and the credit union members involved.

Generally, if the overlapped credit union

does not object, and NCUA determines that

there is no safety and soundness problem, the

overlap will be permitted.

Potential overlaps of a federally insured

state credit union’s field of membership by

a federal credit union will generally be

analyzed in the same way as if two federal

credit unions were involved. Where a

federally insured state credit union’s field of

membership is broadly stated, NCUA will

exclude its field of membership from any

overlap protection.

New charter applicants and every select

group which comes before the regional

director for affiliation with an existing

federal credit union must advise the regional

director in writing whether the group is

included within the field of membership of

any other credit union. This requirement is

not applicable to groups with 500 or less

primary potential members. If cases arise

where the assurance given to a regional

director concerning unavailability of credit

union service is inaccurate, the

misinformation is grounds for removal of the

group from the federal credit union’s charter.

NCUA will permit multiple common bond

federal credit unions to overlap community

charters without performing an overlap

analysis.

15. In IRPS 99–1, Chapter 2, Section

IV.D.1 is revised to read as follows:

a. All Select Groups in the Merging

Credit Union’s Field of Membership

Have Less Than 3,000 Primary

Potential Members

A voluntary merger of two or more

federal credit unions is permissible as

long as each select group in the merging

credit union’s field of membership has

less than 3,000 primary potential

members. While the merger

requirements outlined in Section 205 of

the Federal Credit Union Act must still

be met, the requirements of Chapter 2,

Section IV.B.2 of this manual are not

applicable.

b. One or More Select Groups in the

Merging Credit Union’s Field of

Membership Has 3,000 or More

Primary Potential Members

If the merging credit unions serve the

same group, and the group consists of

3,000 or more primary potential

members, then the ability to form

analysis is not required for that group.

If the merging credit union has any

other groups consisting of 3,000 or more

primary potential members, special

requirements apply. NCUA will analyze

each group of 3,000 or more primary

potential members, except as noted

above, to determine whether the

formation of a separate credit union by

such a group is practical. If the

formation of a separate credit union by

such a group is not practical because the

group lacks sufficient volunteer and

other resources to support the efficient

and effective operations of a credit

union or does not meet the economic

advisable criteria outlined in Chapter 1,

the group may be merged into a

multiple common bond credit union. If

the formation of a separate credit union

is practical, the group must be spun-off

before the merger can be approved.

c. Merger of a Single Common Bond

Credit Union into a Multiple Common

Bond Credit Union

A financially healthy single common

bond credit union with a primary

potential membership in excess of 3,000

primary potential members cannot

merge into a multiple common bond

credit union, absent supervisory

reasons.

d. Merger Approval

If the merger is approved, the

qualifying groups within the merging

credit union’s field of membership will

be transferred intact to the continuing

credit union and can continue to be

served.

Where the merging credit union is

state-chartered, the field of membership

rules applicable to a federal credit union

apply.

Mergers must be approved by the

NCUA regional director where the

continuing credit union is

headquartered, with the concurrence of

the regional director of the merging

credit union, and, as applicable, the

state regulators.

16. In IRPS 99–1, Chapter 2, Section

IV.D.2 is revised to read as follows:

The NCUA may approve the merger of any

federally insured credit union when safety

and soundness concerns are present without

regard to the 3,000 numerical limitation. The

credit union need not be insolvent or in

danger of insolvency for NCUA to use this

statutory authority. Examples constituting

appropriate reasons for using this authority

are: abandonment of the management and/or

officials and an inability to find

replacements, loss of sponsor support,

serious and persistent record keeping

problems, sustained material decline in

financial condition, or other serious or

persistent circumstances.

17. In IRPS 99–1, Chapter 2, Section

IV.F is revised to read as follows:

A multiple common bond federal credit

union may apply to convert to a community

charter provided the field of membership

requirements of the community charter are

met. Groups within the existing charter

which cannot qualify in the new charter

cannot be served except for members of

record, or groups or communities obtained in

an emergency merger or P&A. A credit union

must notify all groups that will be removed

from the field of membership as a result of

conversion. Members of record can continue

to be served. Also, in order to support a case

for a conversion, the applicant federal credit

union may be required to develop a detailed

business plan as specified in Chapter 1,

Section IV.D.

A multiple common bond federal credit

union may apply to convert to a single

occupational or associational common bond

charter provided the field of membership

requirements of the new charter are met.

Groups within the existing charter which

cannot qualify in the new charter cannot be

served except for members of record, or

groups or communities obtained in an

emergency merger or P&A. A credit union

must notify all groups that will be removed

from the field of membership as a result of

conversion. However, a credit union can

continue to serve any group included in, or

added to, its single common bond field of

membership at the time of conversion to a

single common bond credit union for a

period of three years from the date of

conversion if the group is later sold, spun-off

or otherwise divested as a result of a

corporate reorganization/restructuring. If the

credit union elects to continue to serve any

sold, spun-off or otherwise divested group

after three years from the date of conversion,

then it must convert back to a multiple

common bond credit union. During this

three-year period, it will continue to be

treated as a single common bond credit

union.

Once a multiple common bond credit

union converts to a single occupational or

assocational credit union, it cannot convert

back to a multiple common bond credit

union for a period of three years, unless there

are safety and soundness concerns.

18. In IRPS 99–1, Chapter 2, Section

II.B.2 is revised to read as follows:

64526 Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations

If the single common bond group that

comprises a federal credit union’s field of

membership undergoes a substantial

restructuring, the result is often that portions

of the group are sold or spun off. This is an

event which requires a change to the credit

union’s field of membership. NCUA will not

permit a single common bond credit union to

maintain in its field of membership a sold or

spun-off group to which it has been

providing service unless the group otherwise

qualifies for membership in the credit union

or if the credit union converts to a multiple

common bond credit union.

If the group comprising the single common

bond of the credit union merges with, or is

acquired by, another group, the credit union

can serve the new group resulting from the

merger or acquisition after receiving a

housekeeping amendment.

19. In IRPS 99–1, Chapter 2, Section

III.B.2 is revised to read as follows:

If the single common bond group that

comprises a federal credit union’s field of

membership undergoes a substantial

restructuring, the result is often that portions

of the group are sold or spun off. This is an

event which requires a change to the credit

union’s field of membership. NCUA may not

permit a single associational credit union to

maintain in its field of membership a sold or

spun-off group to which it has been

providing service unless the group otherwise

qualifies for membership in the credit union

or the credit union converts to a multiple

common bond credit union.

If the group comprising the single common

bond of the credit union merges with, or is

acquired by, another group, the credit union

can serve the new group resulting from the

merger or acquisition after receiving a

housekeeping amendment.

20. In IRPS 99–1, Chapter 2, Section

IV.B.4 is revised to read as follows:

If a select group within a federal credit

union’s field of membership undergoes a

substantial restructuring, a change to the

credit union’s field of membership may be

required if the credit union is to continue to

provide service to the select group. NCUA

permits a multiple common bond credit

union to maintain in its field of membership

a sold, spun-off, or merged select group to

which it has been providing service. This

type of amendment to the credit union’s

charter is not considered an expansion;

therefore the criteria relating to adding new

groups are not applicable.

When two groups merge and each is in the

field of membership of a credit union, then

both (or all affected) credit unions can serve

the resulting merged group, subject to any

existing geographic limitation and without

regard to any overlap provisions. However,

the credit unions cannot serve the other

multiple groups that may be in the field of

membership of the other credit union.

21. In IRPS 99–1, Chapter 2, Section

V.A.2 is revised to read as follows:

In addition to the documentation

requirements set forth in Chapter 1 to charter

a credit union, a community credit union

applicant must provide additional

documentation addressing the proposed area

to be served and community service policies.

A community credit union is unique in

that it must meet the statutory requirements

that the proposed community area is (1) welldefined, and (2) a local community,

neighborhood, or rural district.

‘‘Well-defined’’ means the proposed area

has specific geographic boundaries.

Geographic boundaries may include a city,

township, county (or its political equivalent),

or clearly identifiable neighborhood.

Although congressional districts or other

political boundaries which are subject to

occasional change, and state boundaries are

well-defined areas, they do not meet the

second requirement that the proposed area be

a local community, neighborhood, or rural

district.

The meaning of local community,

neighborhood, or rural district includes a

variety of factors. Most prominent is the

requirement that the residents of the

proposed community area interact or have

common interests. In determining interaction

and/or common interests, a number of factors

become relevant. For example, the existence

of a single major trade area, shared

governmental or civic facilities, or area

newspaper is significant evidence of

community interaction and/or common

interests. Conversely, numerous trade areas,

multiple taxing authorities, and multiple

political jurisdictions, tend to diminish the

characteristics of a local area.

Population and geographic size are also

significant factors in determining whether

the area is local in nature. A large population

in a small geographic area or a small

population in a large geographic area may

meet NCUA community chartering

requirements. For example, an ethnic

neighborhood, a rural area, a city, and a

county with 300,000 or less residents will

generally have sufficient interaction and/or

common interests to meet community charter

requirements. While this may most often be

true, it does not preclude community

charters consisting of multiple counties or

local areas with populations of any size from

meeting community charter requirements.

Conversely, a larger population in a large

geographic area may not meet NCUA

community chartering requirements. It is

more difficult for a major metropolitan city,

a densely populated county, or an area

covering multiple counties with significant

population to have sufficient interaction and/

or common interests, and to therefore

demonstrate that these areas meet the

requirement of being ‘‘local.’’ In such cases,

documentation supporting the interaction

and/or common interests will be greater than

the evidence necessary for a smaller and less

densely populated area.

In most cases, the ‘‘well-defined local

community, neighborhood, or rural district’’

requirement will be met if (1) the area to be

served is in a recognized single political

jurisdiction, i.e., a county or its political

equivalent or any contiguous political

subdivisions contained therein, and if the

population of the requested well-defined area

does not exceed 300,000, or (2) the area to

be served is in multiple contiguous political

jurisdictions, i.e. a county or its political

equivalent or any political subdivisions

contained therein and if the population of the

requested well-defined area does not exceed

200,000. If the proposed area meets either of

these criteria, the credit union must only

submit a letter describing how the area meets

the standards for community interaction or

common interests.

If NCUA does not find sufficient evidence

of community interaction or common

interests, more detailed documentation will

be necessary to support that the proposed

area is a well-defined community. The credit

union must also provide evidence of the

political jurisdiction(s) and population.

Evidence of the political jurisdiction(s)

should include maps designating the area to

be served. One map must be a regional or

state map with the proposed community

outlined. The other map must outline the

proposed community and the identifying

geographic characteristics of the surrounding

areas.

If the area to be served does not meet the

political jurisdiction(s) and population

requirements of the preceding paragraph, or

if required by NCUA, the application must

include documentation to support that it is

a well-defined local community,

neighborhood, or rural district. It is the

applicant’s responsibility to demonstrate the

relevance of the documentation provided in

support of the application. This must be

provided in a narrative summary. The

narrative summary must explain how the

documentation demonstrates interaction or

common interests. For example, simply

listing newspapers and organizations in the

area is not sufficient to demonstrate that the

area is a local community, neighborhood, or

rural district.

Examples of acceptable documentation

may include:

• 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 area to be served.

One map must be a regional or state map

with the proposed community outlined. The

other map must outline the proposed

community and the identifying geographic

characteristics of the surrounding areas;

• Common characteristics and background

of residents (for example, income, religious

beliefs, primary ethnic groups, similarity of

occupations, household types, primary age

group, etc.); or

• Other documentation that demonstrates

that the area is a community where

individuals have common interests or

interact.

A community credit union is frequently

more susceptible to competition from other

local financial institutions and generally does

not have substantial support from any single

sponsoring company or association. As a

result, a community credit union will often

encounter financial and operational factors

Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations 64527

that differ from an occupational or

associational charter. Its diverse membership

may require special marketing programs

targeted to different segments of the

community. For example, the lack of payroll

deduction creates special challenges in the

development of savings promotional

programs and in the collection of loans.

Accordingly, it is essential for the

proposed community credit union to develop

a detailed and practical business and

marketing plan for at least the first two years

of operation. The proposed credit union must

not only address the documentation

requirements set forth in Chapter 1, but also

focus on the accomplishment of the unique

financial and operational factors of a

community charter.

An existing community credit union, and

any applicant for a community charter must

also specifically address in its business plan,

marketing plan or other appropriate separate

documentation how the credit union plans to

market its products and services to the entire

community, including any underserved or

low-income areas, if applicable. This may

include current or future delivery systems,

such as ATMs, 24 hour voice response

system, internet web sites, current or future

customized programs to assist community

residents such as credit counseling and

budgeting, and current or future service

facility locations. The community credit

union will be expected to review its plan to

serve the entire community to determine if

the community is being adequately served.

The regional director may request periodic

service status reports from a community

credit union to ensure that the needs of the

community are being met.

22. In IRPS 99–1, Chapter 3, Section

III is revised to read as follows:

All federal credit unions may include in

their fields of membership, without regard to

location, communities satisfying the

definition for serving underserved areas in

the Federal Credit Union Act. More than one

federal credit union can serve the same

underserved area. The Federal Credit Union

Act defines an underserved area as a local

community, neighborhood, or rural district

that is an ‘‘investment area’’ as defined in

Section 103(16) of the Community

Development Banking and Financial

Institutions Act of 1994.

The ‘‘well-defined local community,

neighborhood, or rural district’’ requirement

will be met if (1) the area to be served is in

a recognized single political jurisdiction, i.e.,

a county or its political equivalent or any

contiguous political subdivisions contained

therein, and if the population of the

requested well-defined area does not exceed

300,000 or (2) the area to be served is in

multiple contiguous political jurisdictions,

i.e., a county or its political equivalent or any

political subdivisions contained therein and

if the population of the requested welldefined area does not exceed 200,000. If the

proposed area meets either of these criteria

and meets the definition of an investment

area that is underserved, then it is presumed

to be a local community, neighborhood, or

rural district.

An investment area includes any of the

following:

• An area encompassed or located in an

Empowerment Zone or Enterprise

Community designated under section 1391 or

the Internal Revenue Code of 1996 (26 U.S.C.

1391);

• An area where the percentage of the

population living in poverty is at least 20

percent;

• An area in a Metropolitan Area where

the median family income is at or below 80

percent of the Metropolitan Area median

family income or the national Metropolitan

Area median family income, whichever is

greater;

• An area outside of a Metropolitan Area,

where the median family income is at or

below 80 percent of the statewide nonMetropolitan Area median family income or

the national non-Metropolitan Area median

family income, whichever is greater;

• An area where the unemployment rate is

at least 1.5 times the national average;

• An area where the percentage of

occupied distressed housing (as indicated by

lack of complete plumbing and occupancy of

more than one person per room) is at least

20 percent;

• An area located outside of a

Metropolitan Area with a county population

loss between 1980 and 1990 of at least 10

percent;

In addition, the local community,

neighborhood, or rural district must be

underserved, based on data considered by the

NCUA Board and the Federal banking

agencies.

Once an underserved area has been added

to a federal credit union’s field of

membership, the credit union must establish

and maintain an office or facility in the

community within two years. A service

facility is defined as a place where shares are

accepted for members’ accounts, loan

applications are accepted and loans are

disbursed. This definition includes a credit

union owned branch, a shared branch, a

mobile branch, an office operated on a

regularly scheduled weekly basis, or a credit

union owned electronic facility that meets, at

a minimum, these requirements. This

definition does not include an ATM.

If a credit union has a preexisting office

within close proximity to the underserved

area, then it will not be required to maintain

an office or facility within the underserved

area. Close proximity will be determined on

a case-by-case basis, but the office must be

readily accessible to the residents and the

distance from the underserved area will not

be an impediment to a majority of the

residents to transact credit union business.

The federal credit union adding the

underserved community must document that

the community meets the definition for

serving underserved areas in the Federal

Credit Union Act. The charter type of a

federal credit union adding such a

community will not change and therefore the

credit union will not be able to receive the

benefits afforded to low-income designated

credit unions, such as expanded use of non

member deposits and access to the

Community Development Revolving Loan

Program for Credit Unions.

A federal credit union that desires to

include an underserved community in its

field of membership must first develop a

business plan specifying how it will serve the

community. The business plan, at a

minimum, must identify the credit and

depository needs of the community and

detail how the credit union plans to serve

those needs. The credit union will be

expected to regularly review the business

plan, to determine if the community is being

adequately served. The regional director may

require periodic service status reports from a

credit union about the underserved area to

ensure that the needs of the underserved area

are being met as well as requiring such

reports before NCUA allows a federal credit

union to add an additional underserved area.

23. In IRPS 99–1, Chapter 4, Section

II is revised to read as follows:

Any state-chartered credit union may

apply to convert to a federal credit union. In

order to do so it must:

• Comply with state law regarding

conversion;

• File proof of compliance with NCUA;

• File the required conversion application,

proposed federal credit union organization

certificate, and other documents with NCUA;

• Comply with the requirements of the

Federal Credit Union Act, e.g., chartering and

reserve requirements; and

• Be granted federal share insurance by

NCUA.

Conversions are treated the same as any

initial application for a federal charter,

including mandatory on-site examination by

NCUA. NCUA will also consult with the

appropriate state authority regarding the

credit union’s current financial condition,

management expertise, and past

performance. Since the applicant in a

conversion is an ongoing credit union, the

economic advisability of granting a charter is

more readily determinable than in the case of

an initial charter applicant.

A converting state credit union’s field of

membership must conform to NCUA’s

chartering policy. The field of membership

will be phrased in accordance with NCUA

chartering policy. Subsequent changes must

conform to NCUA chartering policy in effect

at that time. The converting credit union may

continue to serve members of record.

If the converting credit union is a multiple

group charter and the new federal charter is

a multiple group, then the new federal

charter may retain in its field of membership

any group that the state credit union was

serving at the time of conversion. Any

subsequent additions or amendments to the

credit union’s field of membership must

comply with federal field of membership

policies.

If the converting credit union is a

community charter and the new federal

charter is community-based, it must meet the

community field of membership

requirements set forth in Chapter 2, Section

V. If the state chartered credit union’s

community boundary is more expansive than

the approved federal boundary, only

members of record outside of the new

community boundary may continue to be

served.

24. In IRPS 99–1, Chapter 4, Section

III.A is revised to read as follows:

64528 Federal Register / Vol. 65, No. 209 / Friday, October 27, 2000 / Rules and Regulations

1A service facility is defined as a place where

shares are accepted for members’ accounts, loan

applications are accepted, and loans are disbursed.

2A federal credit union’s service area is the area

that can reasonably be served by the service facility

accessible to the groups within the field of

membership. It will most often coincide with that

geographic area primarily served by the service

facility.

Any federal credit union may apply to

convert to a state credit union. In order to do

so, it must:

• Notify NCUA prior to commencing the

process to convert to a state charter and state

the reason(s) for the conversion;

• Comply with the requirements of Section

125 of the Federal Credit Union Act that

enable it to convert to a state credit union

and to cease being a federal credit union; and

• Comply with applicable state law and

the requirements of the state regulator.

It is important that the credit union

provide an accurate disclosure of the reasons

for the conversion. These reasons should be

stated in specific terms, not as generalities.

The federal credit union converting to a state

charter remains responsible for the entire

operating fee for the year in which it

converts.

25. In IRPS 99–1, Chapter 2, the title

of Sections II.H, III.H, and IV.F is

revised to read as ‘‘Other Persons

Eligible for Credit Union Membership.’’

26. In IRPS 99–1, Appendix D, Form

4015EZ is revised to read as follows:

Application for Field of Membership

Amendment NCUA Form 4015–EZ

Use Only for Expansions Covering Groups of

500 Persons or Less

Attach a separate application for each

group included in your request for

expansion. The application must be complete

or it will be returned unprocessed.

1. Name and address of credit union:

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

2. Name and address of group:

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

(If the group is an association, include a copy

of the association’s Charter/Bylaws or other

equivalent organizational documentation.)

3. Provide the proposed field of

membership wording:

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

4. How many primary potential members

(excluding immediate family and household

members) are in the group:

lllllllllllllllllllll

5. Attach a letter, on letterhead stationery

if possible, from the group requesting credit

union service. This letter must indicate:

b how the group shares the occupational or

associational common bond (for single

common bond additions only);

b that the group wants to be added to the

federal credit union’s field of

membership;

b the number of persons to be added and the

group’s location(s); and

b the group’s proximity to the credit union’s

nearest service facility (for multiple

common bond additions only).

Name and title of credit union boardauthorized representative (e.g., President/

CEO):

lllllllllllllllllllll

(Typed/Printed Name)

lllllllllllllllllllll

(Signature)

lllllllllllllllllllll

(Date)

27. In IRPS 99–1, Appendix D, Form

4015 is revised to read as follows:

Application for Field of Membership

Amendment NCUA Form 4015

Use Only for Expansions Covering Groups of

More Than 500 Persons

For expansions covering groups of 500 or

less persons—use the short form application,

NCUA 4015–EZ.

Attach a separate application for each

group included in your request for

expansion. The application must be complete

or it will be returned unprocessed.

1. Name and address of credit union:

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

2. Name and address of the group:

lllllllllllllllllllll

lllllllllllllllllllll

(If the group is an association, include a copy

of the association’s Charter/Bylaws or other

equivalent organizational documentation.)

3. Provide the proposed field of

membership wording. Use the example

wording found in NCUA’s Chartering and

Field of Membership Manual, Chapter 2:

b Section II.A for single occupational

common bond groups;

b Section III.A for single associational

common bond groups; or

Section IV.A for multiple common bond

fields of membership.

4. How many primary potential members

(excluding immediate family and household

members) are in the group:

lllllllllllllllllllll

5. (a) For multiple common bond

expansions, what is the distance between the

group’s location and your credit union’s

nearest service facility 1 to which the group

has access (Reference Chapter 2, Section

IV.A.1):

lllllllllllllllllllll

lllllllllllllllllllll

(b) What is the address of this service

facility:

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

(c) Describe the service area 2 primarily

served by the above service facility:

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

6. Is the group in the field of membership

of any other credit union? Yesll Noll If

yes, and the overlapped credit union is not

a community credit union or a non-federally

insured credit union, please address the

following:

b Provide the name and location of the other

servicing credit union:

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

b Include a letter from the overlapped credit

union indicating whether it concurs or

objects to the overlap. If the overlapped

credit union objects or fails to respond,

document attempts to resolve the issue:

lllllllllllllllllllll

lllllllllllllllllllll

b Explain how the expansion’s beneficial

effect in meeting the convenience and

needs of the members of the group

clearly outweighs any adverse effect on

the overlapped credit union:

lllllllllllllllllllll

lllllllllllllllllllll

7. Attach a letter, on letterhead stationery

if possible, from the group requesting credit

union service. This letter must indicate:

b how the group shares the occupational or

associational common bond (for single

common bond additions only);

b that the group wants to be added to the

federal credit union’s field of

membership;

b whether the group presently has other

credit union service available;

b the number of persons currently included

within the group to be added and the

group’s location(s);

b the group’s proximity to the credit union’s

nearest service facility (for multiple

common bond additions only); and

b why the formation of a separate credit

union for the group is not practical or

consistent with safety and soundness

standards (for multiple common bond

additions only). The formation of a

separate credit union may not be

practical if the group lacks sufficient

volunteers or resources to support the

operation of a credit union or does not

meet the economic advisability criteria

outlined in Chapter 1 of NCUA’s

Chartering and Field of Membership

Manual.

8. Other comments:

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

Name and title of credit union boardauthorized representative (e.g., President/

CEO):

lllllllllllllllllllll

(Typed/Printed Name)

lllllllllllllllllllll

(Signature)

lllllllllllllllllllll

(Date)

[FR Doc. 00–27361 Filed 10–26–00; 8:45 am]

BILLING CODE 7535–01–P