[Federal Register Volume 60, Number 192 (Wednesday, October 4, 1995)]
[Proposed Rules]
[Pages 51936-51942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24689]



=======================================================================
-----------------------------------------------------------------------

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701


Federal Credit Union Field of Membership and Chartering Policy

AGENCY: National Credit Union Administration (``NCUA'').

ACTION: Proposed Amendments to Interpretive Ruling and Policy Statement 
94-1 (``IRPS 95-2'').

-----------------------------------------------------------------------

SUMMARY: The NCUA Board is proposing to amend its policies so that 
senior citizen and retiree groups will be required to meet the same 
conditions as other associational groups in order to qualify for a 
federal credit union charter or addition to an existing charter through 
a field of membership amendment. The Board is also proposing five 
technical amendments to clarify operational issues. The amendments 
clarify: The application of field of membership requirements to 
mergers; the streamlined expansion procedure; the documentation 
requirements for low-income communities; the use of surveys to support 
a community common bond; and appeal procedures.

DATES: Comments must be postmarked or received or posted on NCUA's 
electronic bulletin board by December 4, 1995. Do not fax and send by 
U.S. Mail.

ADDRESSES: Send comments to Becky Baker, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314 or via NCUA's electronic bulletin board to Becky Baker 
at 703-518-6480.

FOR FURTHER INFORMATION CONTACT: Michael J. McKenna, Staff Attorney, at 
the above address or telephone (703) 518-6540.

SUPPLEMENTARY INFORMATION:

The Senior Citizen and Retiree Association Policy

    In 1984, NCUA adopted a policy that encouraged federal credit 
unions (FCUs) to accept local senior citizens and retirees through the 
formation of associations. The only requirement for adding these 
associations to a credit union charter was a written request from the 
FCU to the NCUA; no request from the group or copy of the associations 
charter or bylaws was necessary. This policy resulted in many FCUs 
creating and adding senior citizen/retiree associations to their 
charters. Subsequent policy statements, including IRPS 94-1 (the 
Chartering Manual), continued this policy. 59 FR 29066 (June 3, 1994).
    In 1994, two bank trade associations and six Texas commercial banks 
filed suit against Communicators FCU, Houston, Texas, as a result of 
several additions to the FCUs field of membership. The suit challenged, 
among other additions, the 1994 addition of a senior citizen/retiree 
group formed solely for the purpose of acquiring credit union service. 
While upholding the other additions, the court vacated the addition of 
the senior citizen/retiree association and permanently enjoined NCUA 
from adding any similar associations to the FCU. Texas Bankers 
Association, et al. v. NCUA, et al., 1995 WL 328319 (D.D.C., May 31, 
1995) (the ``Communicators FCU'' decision).
    An informal survey of credit unions with Communicators FCU-like 
senior citizen/retiree associations in their charters conducted by 
NCUAs regional office in Austin, Texas found that only a small 
percentage of potential members of such associations actually join the 
credit unions. The Board believes that the current policy may not 
sufficiently promote NCUAs goal of making quality credit union service 
available to all persons who wish to have it. It is also apparent that 
continuing the current policy may leave some FCUs exposed to costly 
litigation. Although the court's order applies only to Communicators 
FCU, the Board is reviewing the senior citizen/retiree policy and is 
now proposing to change that policy after considering public comment.

Proposed Policy

    The Board is proposing to modify its senior citizen/retiree policy 
to require such groups to meet normal associational common bond 
requirements before seeking to join or charter an FCU. In determining 
whether 

[[Page 51937]]
a group satisfies this common bond requirement, NCUA will consider the 
totality of the circumstances, such as whether the members pay dues, 
have voting rights, hold office, hold meetings, whether there is 
interaction among members and whether the group has its own bylaws. 
See, Chapter 1, Section II.B. of the Chartering Manual, 59 FR at 29076. 
Provided operational area requirements are met, senior citizen/retiree 
associations formed for purposes other than seeking credit union 
service will then qualify to join an existing FCU. An FCU may still 
assist a senior citizen group to form an association that will qualify 
under the Chartering Manual. Accordingly, the Board is proposing to 
eliminate the section of IRPS 94-1 which permits Communicator FCU-like 
senior citizen/retiree associations to join FCUs, Chapter 1, Section 
V.B of the Chartering Manual, 59 FR 29082.
    The Board is requesting comment on this proposal as well as how to 
address existing senior citizen/retiree groups in other FCU's fields of 
membership that do not meet the proposed characteristics of an 
association. The Board requests comment on the following proposed 
treatment of existing groups. First, FCUs that currently have a senior 
citizen/retiree group in their field of membership and wish to continue 
to add members from this group must ensure that the group meets the 
normal associational common bond requirements. Many of these groups may 
already meet the proposed requirements. The examination program will 
monitor compliance. Second, no new group members may join an FCU that 
does not have the characteristics of an association. In this case, the 
group should be deleted from the FCUs charter. This will also be 
monitored through the exam process. However, if the FCU has adopted the 
once a member, always a member bylaw, it could continue to serve 
members that had joined based on their membership in the senior 
citizen/retiree group.
    Until the Board approves a final policy, it is continuing its 
moratorium on FCUs adding self-created senior citizen/retiree groups to 
their field of membership. The moratorium has no effect on groups that 
are already in an FCU's field of membership and it does not apply to 
the addition of senior citizen groups that have the characteristics of 
an association as defined in the Chartering Manual. 59 FR at 29076.

Low-Income Associations

    The Board is also considering the possible effects of the 
Communicators FCU decision on low-income group additions. Congress and 
the Board have long recognized that special efforts must be made for 
those who are attempting to serve the needs of persons of limited 
means. IRPS 94-1 provided new methods for credit unions to serve low-
income persons with the establishment of two new policies. The first 
policy permitted any occupational, associational, multiple group or 
community FCU to include in its field of membership, without regard to 
location, communities satisfying the low-income definition of 
Sec. 701.32 of NCUA's Regulations. The second policy allowed any FCU to 
add associational groups of low-income persons to their fields of 
membership. Current policy allows low-income groups to be formed solely 
for the purpose of obtaining credit union service without meeting the 
standard characteristics of an association.
    The Board proposes that FCUs continue to be allowed to add low-
income groups formed solely for the purpose of seeking credit union 
service. NCUA defines as ``low-income'' persons earning less than 80 
percent of the average for all wage earners and persons whose annual 
household income falls at or below 80 percent of the median household 
income for the nation. 12 CFR 701.32(d)(2). The FCU Act was enacted 
``to make more available to people of small means credit for provident 
purposes through a national system of cooperative credit.'' 12 U.S.C. 
1751. Congress established a special segment of credit unions serving 
predominantly low-income members. 12 U.S.C. 1752(5). Congress also 
established and funded a Community Development Revolving Loan Fund for 
Credit Unions, designed to help, through loans to credit unions serving 
predominantly low-income persons, in providing ``basic financial and 
related services'' to low-income persons and in ``stimulating economic 
activities * * * which will result in increased income, ownership and 
employment opportunities for low-income residents.'' 12 CFR 705.2(a). 
See also, 12 U.S.C. 1766(k) (giving the Board authority over the 
Community Development Revolving Loan Fund for Credit Unions). The Board 
believes that the current low income credit union program continues to 
serve an important governmental purpose and is not proposing any 
changes to its low-income association policy.

Technical Changes

    The Board is proposing five technical amendments to its policy to 
clarify operational issues. The amendments address: (1) The application 
of field of membership rules to credit union mergers; (2) the use of 
streamlined expansion procedure; (3) the documentation requirements for 
low-income community credit unions as well as low-income additions; (4) 
the use of surveys to support a community charter; and (5) appeal 
procedures.

Mergers

    A. Operational Area. The Board wishes to clarify how it applies 
operational area and field of membership requirements to mergers. 
NCUA's field of membership expansion rules apply to mergers where the 
continuing credit union is a federal charter. If the merging credit 
union is state chartered, the field of membership rules for conversions 
from state to federal charter also apply. Chapter 2, Section III.A, 
Chartering Manual. 59 FR at 29086. The following is an explanation of 
how field of membership expansion, and particularly operational area, 
requirements apply in the merger context.
    For each group in the merging credit union's field of membership, 
there are two means of merging into an occupational, associational or 
multiple group FCU. First, if the merging group is part of an 
occupational or associational common bond which constitutes a majority 
of the continuing credit union's field of membership, the group may be 
added regardless of location. These are called ``common bond 
additions.'' For any other occupational or associational common bond, 
the group must be within the credit union's operational area. These are 
commonly called ``select group additions.'' A ``select group'' can also 
be added if it is within the operational area of a planned service 
facility of the continuing credit union provided:

    * The planned facility begins operation shortly after the group 
- is added; and
    * The current field of membership constitutes a significant 
portion of - the total field of membership to be served initially by 
the proposed - facility. Although the addition of a new select group 
is not enough to justify a planned service facility, it is 
permissible to include new groups as partial justification for such 
a facility.

    Chapter 2, Section II.A.1 of the Chartering Manual, 59 FR at 29085. 
Mergers will usually fall into either the common bond addition or 
select group addition categories, but some may fall into both. Field of 
membership requirements are met for each merging group only if the 
group could have been added to the continuing credit union without the 
benefit of the merger. The continuing credit union must analyze 

[[Page 51938]]
each group in the merging credit union's field of membership as if the 
continuing credit union was expanding its own field of membership 
without a merger. For those groups from the merging credit union that 
do not meet operational area requirements, only the members of record 
will be transferred to the continuing credit union. Merger applicants 
must provide NCUA with their own analysis of how the proposed field of 
membership conforms to the requirements set forth in the Chartering 
Manual.
    The Board is seeking comment on the application of operational area 
requirements to mergers involving select group additions. Specifically, 
in addition to welcoming comment on the above analysis, the Board 
requests comment on whether mergers should be further limited to credit 
unions which primarily serve groups in the same geographic location. If 
so, the continuing credit union would only be permitted to continue to 
serve groups in that geographic location.
    B. Views of Overlapped Credit Unions. The Chartering Manual does 
not require the Region when it reviews the merger plan to apply an 
overlap analysis to a group in a discontinuing credit union's field of 
membership that has service available from another credit union. The 
Board requests comment on whether such an analysis is necessary and 
whether an affected credit union should be notified of the merger and 
be given an opportunity to object to the continuing credit union 
retaining the overlapped group in its field of membership.
    The Board also requests comment on whether credit unions that may 
be adversely affected by the merger should have the right to appeal the 
Regional Director's determination. An appeal after the merger is 
approved may pose administrative and procedural difficulties. Because 
of these potential problems, the Board is requesting comment on whether 
it should establish a formal process for credit unions to comment on a 
merger prior to the Regional Director making a determination. One 
procedure would be to require the merging credit unions to notify all 
affected credit unions of the proposed merger. Credit unions would have 
30 days from receipt of the notification to send written comments 
regarding their views to the Regional Director. Only after 
consideration of the comments would the Regional Director make a 
determination.
    C. Waivers. An operational area waiver procedure is available when 
a state-chartered credit union is merged into an FCU ``on a proper 
showing that the [continuing] credit union will continue to be able to 
provide quality service to its current field of membership as a federal 
credit union.'' Chapter 2, Section III.A, 59 FR at 29086. A waiver is 
discretionary on the part of NCUA and permits groups already receiving 
quality credit union services, who are located outside of the credit 
union's operational area, to continue to have credit union service 
after the merger. It is the responsibility of the merger applicants, 
not NCUA, to provide an adequate basis for a waiver. Absent any 
waivers, only members of record of those groups that do not meet 
operational area requirements may be transferred to the continuing 
credit union. Finally, operational areas requirements do not apply in 
emergency mergers. 12 U.S.C. 1785(h).

Streamlined Expansion Procedure (``SEP'')

    SEP was adopted by the Board in IRPS 94-1 and permits well operated 
FCUs to add small groups of less than 100 persons with an occupational 
common bond without prior NCUA approval. The group must be located 
within 25 miles of one of the FCU's service facilities and have made a 
written request to the FCU for service. In general, the group must not 
have credit union service currently available. The Board is proposing 
three clarifications to the SEP program. First, an FCU may use SEP if 
the only other credit union service available is from a community 
credit union. NCUA does not afford overlap protection to a community 
credit union when it is being overlapped by an occupational group. 
Chapter I, IV.B.1, Chartering Manual, 59 FR at 29080. Second, 
consistent with standard field of membership expansions, the group as a 
whole will be considered to be within a credit union's 25 mile limit 
when: a majority of the group's members live, work, or gather regularly 
within the 25 mile limit; the group's headquarters is located within 
the 25 mile limit; or the group's ``paid from'' or ``supervised from'' 
location is within the 25 mile limit. Third, if an FCU has SEP in its 
charter and merges into a credit union without SEP, the continuing 
credit union must submit a charter amendment and receive NCUA approval 
if it wishes to use SEP. This can be accomplished as part of the merger 
process. The Board is proposing to amend the Chartering Manual to 
incorporate all three clarifications.

Documentation Requirements to Establish Low-Income Services

    Generally, a low-income credit union is chartered as a community or 
associational credit union. To further the interest of making credit 
union service available to persons in low-income communities, NCUA also 
permits any occupational, associational, multiple group, or community 
FCU to include in its field of membership, without regard to location, 
communities satisfying the low-income definition of Sec. 701.32 of 
NCUA's Regulation. The Board believes that any low-income community 
requesting either a new charter or inclusion in an existing field of 
membership expansion must meet the requirements of the Chartering 
Manual for demonstrating a community common bond, i.e., the geographic 
area's boundaries must be clearly defined; and the charter applicant 
must establish that the area is recognized as a distinct 
``neighborhood, community or rural district.'' Chapter 1, Section 
II.C.1, 59 FR at 29077. In many cases, a low-income community already 
has the common interest and characteristic by lacking the basic 
financial services found in more affluent communities. The Board is 
proposing that for new low-income charters or community expansions, the 
Regional Director will decide what documentation satisfies the 
community common bond requirement. Such documentation must clearly 
define the area's geographic boundaries and whether the area is 
recognized as a distinct neighborhood, community or rural district.

Community Charters

    Many credit unions use surveys to demonstrate the need for a 
community charter. A survey of the residents and employees of the area 
often indicates whether there is interest in credit union service. 
Although surveys are useful in demonstrating whether a community 
exists, they are not required if other evidence is more relevant or 
demonstrates the sentiment of the community. Consequently, the Board is 
proposing to amend the IRPS to clarify that surveys are not always 
required to demonstrate a community charter.

Procedures for Appealing Chartering and Field of Membership 
Determinations

    IRPS 94-1 did not articulate any timeframes for an appeal of a 
Regional Director's decision. In order to deal with appeals 
expeditiously, the Board is proposing that all appeals of the Regional 
Director's determination be made within 60 days of his/her 

[[Page 51939]]
decision. The Board is also requesting comment on whether there should 
be a time limit on the Board to render a decision on an appeal.

Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires the NCUA to prepare an 
analysis to describe any significant economic impact a proposed 
regulation may have on a substantial number of small credit unions 
(primarily those under $1 million in assets). The changes to NCUA 
policy resulting from the adoption of these proposed amendments to the 
IRPS would not have a significant economic impact on a substantial 
number of small credit unions. The changes are either legally required 
or simply clarify existing policy. Accordingly, the Board determines 
and certifies that this proposed rule does not have a significant 
economic impact on a substantial number of small credit unions and that 
a Regulatory Flexibility Act analysis is not required.

Paperwork Reduction Act

    The proposed amendments to IRPS 94-1 do not impose any additional 
paperwork requirements.

Executive Order 12612

    Executive Order 12612 requires NCUA to consider the effect of its 
actions on state interests. The proposed amendments apply to federal 
credit unions as well as state chartered credit unions that seek to 
become federal credit unions. Therefore, the actions will not affect 
state interests.

List of Subjects in 12 CFR Part 701

    Chartering, Conversions, Credit union, Field of membership 
addition, Mergers.

    By the National Credit Union Administration Board on September 
28, 1995.-------
Becky Baker,
Secretary of the Board.

    Accordingly, NCUA proposes to amend 12 CFR part 701, by amending 
IRPS 94-1 as follows:

PART 701--ORGANIZATION AND OPERATIONS OF FEDERAL CREDIT UNIONS

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

    Authority: 12 U.S.C. 1755, 1756, 1757, 1759, 1761a, 1761b, 1766, 
1767, 1782, 1784, 1787, 1789, and 1798.

    2. Section 701.1 is revised to read as follows:


Sec. 701.1  Federal credit union chartering, field of membership 
modifications, and conversions.

    National Credit Union Administration practice and procedure 
concerning chartering, field of membership modifications, and 
conversions are set forth in Interpretive Ruling and Policy Statement 
94-1--Chartering and Field of Membership Policy (IRPS 94-1), as amended 
by IRPS 95-2. Both IRPS are incorporated into this regulation.

    Note: Neither the amendments nor the interpretive ruling and 
policy statement will appear in the Code of Federal Regulations.

    3. Chapter 1, Section II.C.2 is revised to read as follows:

II.C.2--Special Documentation Requirements

    Information to support that the area chosen represents one well-
defined area, distinguishable from the immediate surrounding areas, 
includes: -
     Political jurisdictions.
     Major trade areas (shopping patterns).
     Traffic flows.
     Shared/common facilities (for example, educational, 
medical, police and fire protection, school district, water, etc.).
     Organizations/clubs whose membership is made up 
exclusively of persons within the area.
     Newspapers or other periodicals published for and about 
the area.
     Census tracts.
     Common characteristics and background of residents (for 
example, income, religious beliefs, primary ethnic groups, similarity 
of occupations, household types, primary age group, etc.).
     History of area.
     In general, what causes the chosen area and its residents 
to be distinguishable from the immediate surrounding areas and 
residents--some examples are old, well-established ethnic 
neighborhoods, planned communities and small/rural towns or rural 
counties.
    The following information must be provided to support a need for a 
community credit union or community field of membership expansion:
     A list of credit unions presently in the area and those 
credit union's positions regarding a new charter or field of membership 
expansion; and
     A list of other financial institutions (for example, 
banks, savings and loan associations) that service the area.
     Written documentation reflecting support for the 
application for the charter, field of membership expansion or 
conversion to a community credit union may be in the form of letters, 
surveys, studies, pledges, or a petition. Other types of evidence may 
also be acceptable. If a survey is used it should reflect the 
following:
     For the residents of the community:

Approximate number contacted
Number in favor of the credit union
Number against the credit union
Number who will join the credit union
Number who have pledged initial and/or systematic savings and amount of 
pledges

     For the employers in the community:

Number of area employers and number of employees
Number contacted
Number in favor of the credit union
Number against the credit union
Number willing to provide payroll deductions to the credit union
Number willing to provide other type(s) of support to the credit union

     For community organizations (including churches):

Number in area and number of members
Number contacted
Number in favor of the credit union
Number against the credit union
Number willing to provide some type of support to the credit union, 
i.e., advertising facilities, etc.
Letters of support from area civic leaders

    If the community is also a recognized legal entity, it may be 
served as, or be included in, the field of membership--for example, 
``DEF Township, Kansas'' or ``GHI County, Minnesota.''
    4. Chapter 1, Section V.A.2 is revised to read as follows:

V.A.2--Special Common Bond Rules for Low-Income Federal Credit Unions

    Generally, a low-income credit union is chartered as a community or 
associational credit union. The Regional Director will determine 
whether the applicants have provided sufficient evidence to demonstrate 
the need for a low-income community charter. Such evidence must 
establish that the geographic area's boundaries are clearly defined and 
that the area is recognized as a distinct neighborhood, community, or 
rural district. A low-income credit union that has a community common 
bond may include the following language in its field of membership:
    ``Persons who live in (the target area); persons who regularly 
work, worship, perform volunteer services, or participate in 
associations headquartered in (the target area); persons participating 
in programs to alleviate poverty or distress which are located in (the 
target area); incorporated 

[[Page 51940]]
and unincorporated organizations located in (the target area) or 
maintaining a facility in (the target area); and organizations of such 
persons.''
    In recognition of the special efforts needed to help make credit 
union service available to persons in low-income communities, NCUA 
permits credit union chartering and field of membership amendments 
based on associational groups formed for the sole purpose of making 
credit union service available to low-income persons. The association 
must be defined so that all its members will meet the low-income 
definition of Sec. 701.32 of NCUA's Regulations. The association, in 
documenting its low-income membership, may use the same types of 
documentation as are currently permitted for determining whether a 
community is low-income under Sec. 701.32 of NCUA's Regulations.
    In addition, a proposed or existing low-income federal credit union 
whether community or associationally based, may include in its field of 
membership, without regard to location, one or more groups constituting 
an occupational, associational or community common bond. Except for the 
operational area requirements, the proposed or existing credit union 
must meet all the requisites for including the group in its charter. 
Moreover, the proposed or existing credit union must take care to 
ensure that it will continue to meet the requirements for low-income 
status.
    5. Chapter 1, Section V.A.3 is revised to read as follows:

V.A.3--Special Common Bond Rules for Other Federal Credit Unions 
Seeking to Serve Low-Income Persons

    In the interest of making credit union service available to persons 
in low-income communities, NCUA also permits any occupational, 
associational, multiple group, or community federal credit union to 
include in its field of membership, without regard to location, 
communities and associational groups satisfying the low-income 
definition of Sec. 701.32 of NCUA's Regulations. The associational 
group may be formed for the sole purpose of providing eligibility for 
federal credit union service, but must comprise only persons meeting 
NCUA's low-income definition.
    The federal credit union adding the low-income community or 
association must document that the community or association meets the 
low income definition in Sec. 701.32 of NCUA's Regulations, just as is 
required for a designated low-income credit union. The Regional 
Director will ensure that the proposed low-income community addition is 
sufficient to establish a community common bond. A federal credit union 
adding such a community or association, however, would not be able to 
receive the benefits, such as expanded use of non member deposits and 
access to the Community Development Revolving Loan Program for Credit 
Unions, offered to low-income credit unions.
    A federal credit union that desires to include a low-income 
community or association in its field of membership must first develop 
a business plan specifying how it will serve the entire low-income 
community. The business plan, at a minimum, must identify the credit 
and depository needs of the low-income community or association and 
detail how the credit union plans to serve those needs. The credit 
union will be expected to regularly review the business plan as well as 
loan penetration rates in the community to determine if the community 
is being adequately served. NCUA will require periodic service status 
reports on its service to the low-income community and may review the 
credit union's service to low-income persons during examinations.
    6. Chapter 1, Section V.B is deleted and Sections V.C. and V.D. are 
redesignated V.B and V.C, respectively.
    7. Chapter 1, Section VIII.D is revised to read as follows:

VIII.D--Appeal of Regional Director's Decision

    If the Regional Director denies a charter application, the group 
may appeal the decision to the NCUA Board. If not included with the 
denial notice, a copy of these procedures may be obtained from the 
regional director who made the decision. An appeal will be sent to the 
appropriate regional office within sixty days of the denial. The 
Regional Director will then forward the appeal to the NCUA Board. NCUA 
central office staff will make an independent review of the facts and 
present the appeal to the Board.
    Before appealing, the prospective group may, within thirty days of 
the denial, provide supplemental information to the regional director 
for reconsideration. In these cases, the request will not be considered 
as an appeal but as a request for reconsideration by the regional 
director. If the request is again denied, the group may proceed with 
the appeal process.
    8. Chapter 2, Section II.A.3.a is revised to read as follows:

II.A.3.a--General

    The special rules for credit unions serving low-income persons and 
serving employees at industrial parks, shopping centers and similar 
facilities apply equally to field of membership additions. However, 
there are two special situations unique to existing federal credit 
unions: (1) Corporate restructurings and (2) plant or base closings, 
and other kinds of distress to a substantial portion of a credit 
union's membership.
    9. Chapter 2, Section III.A is revised to read as follows:

III.A--Mergers

    Generally, the standards applicable to field of membership 
amendments apply to mergers where the continuing credit union is a 
federal charter. This requires analyzing each group in the merging 
credit union's field of membership as if the continuing credit union 
was proposing to expand its own field of membership without a merger. 
This analysis may include the use of the planned service facility 
concept. Merger applicants must provide NCUA with their own analysis of 
how the proposed field of membership conforms to this policy. For those 
groups from the merging credit union that do not meet operational area 
requirements, only the members of record will be transferred to the 
continuing credit union.
    Where the merging credit union is state chartered, the field of 
membership rules for a credit union converting to a federal charter 
apply with the following differences:
     As to a merger involving a common bond addition, the 
requirements to provide a request for credit union service from the 
corporate, associational, or other unit to be added is not required, 
since the unit already has credit union service.
     As to a merger involving a select group addition:
    For the same reason, the requirement for a letter from each group 
included in the credit union's field of membership is not required.
    Where a state credit union is merging into a federal credit union, 
the operational area requirement may be waived if it can demonstrate 
that it will continue to be able to provide quality credit union 
service to its current field of membership as a federal credit union. 
The waiver is discretionary on the part of NCUA. Absent any waivers, 
only members of record of groups that do not meet operational area 
requirements will be transferred to the continuing credit union. Upon 
merging, the state credit union's field of membership will be 

[[Page 51941]]
worded to conform to the NCUA standards set forth in Chapter 1. Any 
subsequent field of membership amendments must comply with applicable 
amendment procedures.
     As to a merger of a community credit union into a federal 
credit union of any type, the continuing credit union may be permitted 
to continue to provide service to the merging credit union's members of 
record as of the merger date where the operational area requirement is 
satisfied. Except in the case of an emergency merger or where the 
continuing credit union is low-income, the continuing federal credit 
union can obtain only the members of record of the merging community 
credit union.
    Where both credit unions are community charters, the continuing 
credit union is a federal credit union, and the criteria for expanding 
the service area of a community federal credit union (as discussed 
previously in this Chapter) are satisfied, the entire field of 
membership of the merging credit union may be added to the continuing 
federal credit union's charter.
    -Mergers must be approved by all affected NCUA regional directors, 
and, as applicable, the state regulators.
    10. Chapter 2, Section III.B. is revised to read as follows:

III.B--Emergency Mergers

    A specifically designated emergency merger may be approved by NCUA 
without regard to field of membership or other legal constraints. An 
emergency merger involves NCUA's direct intervention. The credit union 
to be merged must either be insolvent or be likely to become insolvent 
within 12 months and NCUA must determine that:
     An emergency requiring expeditious action exists.
     Other alternatives are not reasonably available.
     The public interest would best be served by approving the 
merger.
    In an emergency merger situation, NCUA takes an active role in 
finding a suitable merger partner (continuing credit union). NCUA is 
primarily concerned that the continuing credit union has the financial 
strength and management expertise to absorb the troubled credit union 
without adversely affecting its own financial condition and stability.
    As a stipulated condition to an emergency merger, the field of 
membership of the merging credit union may be transferred intact to the 
continuing federal credit union without regard to any field of 
membership restrictions and without changing the character of the 
continuing federal credit union for future amendments. Under this 
authority, therefore, a federal credit union may take into its field of 
membership a group defined by a community or associational common bond 
permitted under state law, regardless of whether that common bond 
definition could be approved under the Federal Credit Union Act. If a 
federal credit union which has added groups or communities under an 
emergency merger later proposes to merge with another federal credit 
union, the groups or communities added pursuant to the emergency merger 
will not be subject to operational area or field of membership 
analysis.
    11. Chapter 2, Section VIII.B is revised to read as follows:

VIII.B--Streamlined Expansion Procedure (SEP) for Small Occupational 
Groups

    In keeping with the goals of NCUA chartering policy to provide 
service to all eligible groups desiring credit union service, well 
operated federal credit unions except those designated as 
``distressed'' may take advantage of the SEP for adding occupational 
groups to their fields of membership.
    To use this procedure, the federal credit union's board of 
directors must first apply to their respective NCUA regional director 
for a charter amendment. The charter amendment request must be signed 
by the presiding officer of the board of directors.
    The following is a sample amendment for permitting a federal credit 
union to use the SEP authority:
    Groups of persons with occupational common bonds which are located 
within 25 miles of one of the credit union's service facilities, which 
have provided a written request for service to the credit union, which 
do not presently have credit union service available, other than 
through a community credit union, which have no more members in the 
group than the maximum number established by the NCUA Board for 
additions under this provision: Provided, however, that the National 
Credit Union Administration may permanently or temporarily revoke the 
power to add groups under this provision upon a finding, in the 
Agency's discretion, that permitting additions under this provision are 
not in the best interests of the credit union, its members, or the 
National Credit Union Share Insurance Fund.
    Once NCUA has approved the amendment and the credit union board has 
adopted it, the SEP authority may be implemented. The charter amendment 
permits approved federal credit unions to immediately begin serving 
employee groups meeting criteria set forth in this section. Under this 
procedure, there is no formal NCUA action necessary on each group being 
added.
    The maximum number of persons for each group of employees which may 
be added under SEP will be established by the NCUA Board from time to 
time. The number will be based on potential primary members--that is, 
the persons sharing the basic occupational affinity to each sponsor 
group; family members and other derivative members are not included in 
the SEP limit. Several groups may be simultaneously added using these 
procedures; however, the maximum number of persons for each group must 
fall within the SEP limit.
    The SEP does not apply to associational groups since NCUA must 
review membership requirements and geographical area prior to these 
groups being added to a field of membership. The procedure also does 
not apply to community charter expansions, because of the more 
individualized analysis required.
    The following SEP steps and documentation requirements must be 
adhered to:
     The federal credit union must complete, for each group to 
be added, an Application for Field of Membership Amendment form, NCUA 
4015, shown in Appendix D.
     The federal credit union must obtain a letter, on the 
group's letterhead where possible, signed by an official representative 
identified by title, requesting credit union service and stating that 
the group does not have any other credit union service available from 
any associational, occupational or multiple group credit union.
     The group must be located within 25 miles of one of the 
federal credit union's service facilities. The group will be considered 
to be within the 25 mile limit when: (1) a majority of the groups 
members live, work or gather regularly within the 25 mile limit; or (2) 
the groups headquarters is located within the 25 mile limit; or (3) the 
group's ``paid from'' or ''supervised from'' location is within the 25 
mile limit.
     The group must indicate the number of potential members--
the number of employees--seeking service.
     The federal credit union must maintain the above 
documentation permanently with its charter.
     The federal credit union must maintain a control log of 
groups added to its field of membership under the SEP procedure. The 
control log must include the date the group obtained service, the name 
and location of the sponsor group, the number of potential primary 
members added, the number of miles to 

[[Page 51942]]
the nearest main or branch office, the federal credit union board of 
director's approval of the group and the date approved. See Appendix D 
for the SEP Control Log, NCUA 4016.
     The groups added under SEP must be reported to the federal 
credit union's board at the next regular board meeting and made a part 
of the meeting minutes.
     The control log and other SEP documentation must be made 
available to NCUA upon request.-
    The regional director may from time to time request service status 
reports on groups added under SEP. It is advisable to use some method, 
such as a sponsor prefix added to the member account number, to readily 
access data for such groups.
    Should a federal credit union fail to provide quality credit union 
service, as determined by the group's members or employees, to a group 
added under SEP, NCUA may subsequently permit dual membership with 
another credit union.
    Should a federal credit union fail to follow the above procedures 
or deteriorate financially or operationally, NCUA, at its discretion, 
may revoke the SEP privilege.
    If a federal credit union that has SEP in its charter merges with 
another federal credit union that does not have SEP, the continuing 
credit union, if it desires to have SEP, must submit a charter 
amendment and receive approval from NCUA to implement SEP. Otherwise, 
the groups obtained by the merging credit union through SEP must be 
listed specifically in the continuing credit union's field of 
membership or a reference to the merging credit union's SEP log must be 
made in the continuing credit union's field of membership as of the 
date of the merger.
    12. Chapter 2, Section VIII.G is revised to read as follows:

VIII.G--Appeal of Regional Director Decision

    If a field of membership expansion, merger, or spin-off is denied 
by the Regional Director, the federal credit union may appeal the 
decision to the NCUA Board. If not included with the denial notice, a 
copy of these procedures may be obtained from the Regional Director who 
made the decision. An appeal must be sent to the appropriate regional 
office within sixty days of the denial. The Regional Director will then 
forward the appeal to the NCUA Board. NCUA central office staff will 
make an independent review of the facts and present the appeal to the 
Board with a recommendation.
    The federal credit union may, within thirty days of the denial, 
request reconsideration and provide supplemental information to the 
regional director. The request for reconsideration will not be 
considered an appeal but will toll the sixty day requirement to file an 
appeal until a ruling is received on the request for reconsideration.
    13. Chapter 3, Section 3.H, is added as follows:

III.H--Appeal of Regional Director Decision

    If a conversion to a state charter is denied by the Regional 
Director, the credit union may appeal the decision to the NCUA Board. 
If not included with the denial notice, a copy of these procedures may 
be obtained from the Regional Director who made the decision. An appeal 
must be sent to the appropriate regional office within sixty days of 
the denial. The Regional Director will then forward the appeal to the 
NCUA Board. NCUA central office staff will make an independent review 
of the facts and present the appeal to the Board with a recommendation.
    The federal credit union may, within thirty days of the denial, 
request reconsideration and provide supplemental information to the 
regional director. The request for reconsideration will not be 
considered an appeal but will toll the sixty day requirement to file an 
appeal until a ruling is received on the request for reconsideration.
* * * * *
[FR Doc. 95-24689 Filed 10-3-95; 8:45 am]
BILLING CODE 7535-01-P