11778 Federal Register / Vol. 62, No. 49 / Thursday, March 13, 1997 / Proposed Rules

1 60 FR 58502 (November 28, 1995).

2Revised 12/87.

3Revised 10/91.

4An unpublished opinion, Madias v. Dearborn

FCU, Civ. Act. No. 96–40043, (E.D. MI, So. Div.

1996).

to their relevant CFR Part? If not, do you

think that the IRPS NCUA proposes to

maintain should be renumbered?

By the National Credit Union Board on

March 7, 1997.

Becky Baker,

Secretary to the Board.

[FR Doc. 97–6381 Filed 3–12–97; 8:45 am]

BILLING CODE 7535–01–P

12 CFR Chapter VII

Federal Credit Union Bylaws

AGENCY: National Credit Union

Administration (NCUA).

ACTION: Request for comments.

SUMMARY: The NCUA Board proposes to

revise and reorganize its Federal Credit

Union Bylaws and Federal Credit Union

Standard Bylaw Amendments in

connection with its Regulation Review

Program (Program). This proposal is one

component of the Program to update

and streamline NCUA regulations, focus

regulations on key safety and soundness

concerns and agency objectives, and

eliminate requirements that impose

inefficient and costly regulatory burdens

on federally insured credit unions. The

purpose of this notice is to solicit

comments to help guide the preparation

of a proposed rule which would clarify,

revise and reorganize existing FCU

Bylaws and eliminate bylaws that are

obsolete. This notice presents only a

general description of the bylaw

changes being considered and includes

no regulatory text. Comments will again

be solicited when a proposed rule is

issued with regulatory text.

DATES: Comments must be received by

May 12, 1997.

ADDRESSES: Comments should be

directed to Becky Baker, Secretary of the

Board. Mail or hand-deliver comments

to: National Credit Union

Administration, 1775 Duke Street,

Alexandria, Virginia 22314–3428. Fax

comments to (703) 518–6319. E-mail

comments to boardmail@ncua.gov.

Please send comments by one method

only.

FOR FURTHER INFORMATION CONTACT:

Mary F. Rupp, Staff Attorney, Office of

General Counsel, National Credit Union

Administration, 1775 Duke Street,

Alexandria, Virginia 22314–3428 or

telephone: (703) 518–6540.

SUPPLEMENTARY INFORMATION:

Background

Section 303 of the Riegle Community

Development and Regulatory

Improvement Act of 1994 (CDRI)(12

U.S.C. § 4803(a)) requires the

Comptroller of the Currency, the Federal

Reserve Board, the Federal Deposit

Insurance Corporation and the Office of

Thrift Supervision to review their

regulations in order to streamline and

modify their regulations to improve

efficiency, reduce unnecessary costs,

eliminate unwarranted constraints on

credit availability and to work jointly to

make uniform all regulations and

guidelines implementing common

statutory or supervisory policy.

Although not statutorily mandated to

engage in the review, the NCUA Board

agrees with the policies and goals set

forth in the CDRI and has voluntarily set

up its own Program.

The goal of the Program is to review

all of the NCUA’s rules and regulations

to eliminate regulatory requirements

that impose inefficient and costly

regulatory burdens on federally insured

credit unions, to eliminate requirements

that do not contribute significantly to

maintaining safety and soundness, and

to revise rules that do not effectively

advance the NCUA’s other goals and

statutory responsibilities. This review

process will be ongoing. It began in

1995 with a complete revision of part

741, Requirements for Insurance.1

FCU Bylaws

Section 108 of the FCU Act, 12 U.S.C.

1758, requires the NCUA Board to

prepare bylaws which shall be used by

all FCUs. Currently, the bylaws are

approved by the NCUA Board and

published in two manuals, Federal

Credit Union Bylaws 2 (FCU Bylaws)

and Federal Credit Union Standard

Bylaw Amendments and Guidelines 3

(Standard Bylaw Amendments). The

manuals are made available to FCUs

upon request. The bylaws contained in

the two manuals may be adopted by an

FCU without approval from NCUA. An

FCU must request approval to adopt a

bylaw not contained in the manuals

(nonstandard bylaw amendment) from

its Regional Director. The Regional

Director reviews all of the requests.

After consulting with the other Regional

Directors and the Office of General

Counsel, the Regional Director advises

the FCU whether its nonstandard bylaw

amendment has been approved. As the

requests for nonstandard amendments

continue to increase, the process has

become burdensome for FCUs and

NCUA staff.

Request for Comments

There are several problems associated

with the current FCU Bylaws and

Standard Bylaw Amendments. Below is

a general discussion of some of the

problem areas and a request for

comment.

1. FCU Bylaws and Standard Bylaw

Amendments are not published in the

Federal Register or codified in NCUA’s

Regulations. This is problematic for two

reasons. First, the bylaws are not easily

accessible to the general public, to the

same extent as they would be if they

were incorporated into NCUA’s

Regulations and published in the CFR.

Second, a federal court 4 held that

NCUA’s interpretation of its bylaws is

accorded deference only if issued as a

regulation. In order to ensure that its

bylaws are enforceable, the Board is

considering publishing them as a

regulation. However, this would limit

the Board’s flexibility. Notice and

comment rulemaking would be required

to effect changes. The Board suggests a

process where annually a proposal is

submitted to the Board to adopt changes

to the bylaws. The proposal will be

based upon the requests received by the

six Regions for bylaw amendments

throughout the prior year. Under this

model, there would no longer be

nonstandard amendments. This may

create a hardship for an FCU with

unique circumstances. The Board is

interested in receiving comments on

alternative ways to deal with this issue.

2. Permissible bylaws for FCUs are

currently contained in two publications.

In order to simplify the selection

procedure for FCUs the Board believes

that all FCU bylaws should be

published in one place, either the

regulations or one manual. It is

envisioned that the revised bylaws will

be more flexible by having more fill in

the blanks, so that one bylaw can be

modified to suit the needs of FCUs with

vastly different operations. In the event

alternative bylaws are necessary, they

will be published side by side and an

FCU will choose the one most suited to

its operation.

3. Many of the current FCU Bylaws

and Standard Bylaw Amendments are

duplicative and outdated. The bylaws

have not been thoroughly updated for

many years. By eliminating unnecessary

bylaws, NCUA hopes to reduce

regulatory compliance costs.

Some obvious examples of outdated

or duplicative provisions that can be

deleted are:

• Article III, Section 3—Delete the 6

month time requirement allowed to pay

one share (outdated);
Federal Register / Vol. 62, No. 49 / Thursday, March 13, 1997 / Proposed Rules 11779

• Article III, Section 4—Delete the $1

transfer fee (outdated);

• Article IV—Delete the reference to

passbook accounts (outdated);

• Article XIII—Delete this section on

reserves (duplicative of the regulations);

and

• Article XX—Delete this section on

operation following an attack on the

United States (outdated).

In conjunction with deleting the

outdated provisions, NCUA is

committed to ensuring that FCUs

operate under state-of-the-art corporate

governance procedures. Wherever

possible, consistent with safety and

soundness and fairness to members, we

are seeking to move toward greater

flexibility. Some of the areas that we

have identified for modernization and

flexibility are Article V, Meeting of

Members; Article VI, Elections; Article

VII, Board of Directors; and Article VIII,

Board Officers, Management Officials

and Executive Committee. Comments on

how to modernize these provisions, as

well as other areas in need of

modernization, are requested.

4. Upon revision of the bylaws,

should FCUs be required to adopt the

revised FCU Bylaws? The Board is

grappling with the issue of whether

FCUs should be required to adopt the

revised bylaws. On the one hand, the

Board believes that consistent bylaws

among FCUs is preferable. On the other

hand, the Board recognizes that a

complete revision of an FCU’s bylaws

may create a hardship for some FCUs.

The Board requests comment on

whether all FCUs should be required to

adopt the new bylaws and if so, what

would be a reasonable time-frame for

compliance.

The NCUA Board is seeking

comments on all of the above mentioned

possible means of simplifying and

modernizing the bylaws, including the

likely effect of such changes on the

FCUs and their members. The Board is

also seeking suggestions on any other

ways that the bylaws might be

streamlined, simplified and clarified.

Based upon the comments, the Board

will issue a proposed rule with

proposed bylaws and another request

for comments. Based upon those

comments, the Board will issue a final

rule.

By the National Credit Union

Administration Board on March 7, 1997.

Becky Baker,

Secretary of the Board.

[FR Doc. 97–6380 Filed 3–12–97; 8:45 am]

BILLING CODE 7535–01–P

12 CFR Parts 701, 712 and 740

Organization and Operations of

Federal Credit Unions; Credit Union

Service Organizations; Advertising

AGENCY: National Credit Union

Administration (NCUA).

ACTION: Notice of Proposed Rulemaking.

SUMMARY: The NCUA is proposing to

update, clarify and streamline existing

rules concerning credit union service

organizations (CUSOs), a common

means of outside provision of services

to federal credit unions (FCUs) and to

credit union members. The intended

effect of the proposal is to reduce

regulatory burden, maintain safety and

soundness, and ensure the continuity

and growth of services to FCUs and

their members conducted through

CUSOs. Related conforming changes are

also proposed to amend NCUA’s rules

on credit union service contract and

credit union advertising requirements.

DATES: Comments must be received on

or before May 12, 1997.

ADDRESSES: Comments should be

directed to Becky Baker, Secretary of the

Board. Mail or hand-deliver comments

to: National Credit Union

Administration, 1775 Duke Street,

Alexandria, Virginia 22314–3428. Fax

comments to (703) 518–6319. Post

comments on NCUA’s electronic

bulletin board by dialing (703) 518–

6480 or to NCUA’s webpage on the

Internet at http.www@NCUA.gov.

Please send comments by one method

only.

FOR FURTHER INFORMATION CONTACT:

Martin ‘‘Sparky’’ Conrey, Staff Attorney,

Division of Operations, Office of

General Counsel, at the above address or

telephone: (703) 518–6540; or Linda

Groth, State Program Officer, Division of

Supervision, Office of Examination and

Insurance, at the above address or

telephone: (703) 518–6360.

SUPPLEMENTARY INFORMATION:

I. Background and Discussion

A. General

In 1977, Section 107 of the Federal

Credit Union Act (12 U.S.C. 1757) was

amended to authorize federal credit

unions (FCUs) to invest in, and make

loans to, CUSOs subject to certain

funding limits and other regulatory

restrictions. The first CUSO rule was

promulgated in 1979; the last major

revision of this rule was in 1986. In

general, the results of the 1986 revision

have been very positive. Nonetheless,

over ten years of experience with the

regulation indicates that there may be a

need for additional simplification,

clarification, and improvement.

In particular, NCUA is aware that

certain business and legal developments

make this a good time to review and

update the CUSO rule. NCUA staff

researched the relevant regulations,

guidance, legal interpretations and

reporting requirements of NCUA and

the other federal financial institution

regulators. In addition, NCUA is

conducting a review of its regulations

pursuant to the Regulatory Reinvention

Initiative of the Vice President’s

National Performance Review and the

NCUA Board’s Regulatory Relief Project.

The purpose of this notice of proposed

rulemaking is to identify and request

public comment on reducing regulatory

burden and increasing the flexibility

and usefulness of CUSOs, while

ensuring the safety and soundness of

FCUs and the National Credit Union

Share Insurance Fund (NCUSIF).

In providing comments upon the

proposed rule, commenters are

requested to keep in mind the needs of

small credit unions, especially

community development and lowincome designated credit unions and

their members. CUSOs provide an ideal

means for smaller credit unions to

expand the types of products and

services offered to their memberships,

offer economies of scale, enhance

members’ lives, and increase hours of

service and locations, through

automated teller machines (ATMs),

service centers, and other CUSO

services. CUSOs can result in more

favorable penetration rates of potential

members through availability of

financial services that might not

otherwise be available and can result in

a transfer of knowledge and expertise

from larger, full-service credit unions to

smaller, more limited service credit

unions, which can have long-term

positive implications upon safety and

soundness. Lately, NCUA has been

concerned over some reports that

smaller credit unions have been unable

to meet minimum investment or other

eligibility requirements in order to

partake of CUSO services. For this

reason, NCUA is weighing various

options to increase smaller credit union

utilization of CUSO services. One means

might be through informal guidance,

such as an NCUA Letter to Credit

Unions, regarding smaller credit union

participation in CUSOs. Another means

might be through informal

understandings with the CUSO industry

regarding possible incentives to be

offered to smaller credit unions, such as

a reduction in, or waiver of, ordinary

transaction charges, or a lowered

minimum investment or deposit amount