[Federal Register Volume 61, Number 227 (Friday, November 22, 1996)]
[Rules and Regulations]
[Pages 59305-59311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29886]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
Organization and Operations of Federal Credit Unions
AGENCY: National Credit Union Administration.
ACTION: Interim final rule with request for comments and Interpretive
Ruling and Policy Statement 96-2 (IRPS 96-2).
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SUMMARY: The purpose of this interim Interpretive Ruling and Policy
Statement is to permit federal credit unions to restructure their
fields of membership consistent with the recent Court of Appeals
decision (``the Decision'') and District Court order (``the Order'')
limiting federal credit unions' ability to serve eligible credit union
members and new select groups. NCUA recognizes that this interim policy
will not provide complete relief to all multiple group federal credit
unions, since any interim policy must meet the requirements set forth
in the Decision and the Order. Similarly, this interim policy does not
assist
[[Page 59306]]
individuals who wish to obtain, but do not currently have, access to
federal credit unions as a result of the Decision. This interim policy
is intended to provide limited and temporary relief until the legal
issues with respect to the Decision are finally resolved. NCUA is also
issuing a final amendment to update its rules entitled ``Organization
and Operations of Federal Credit Unions.''
DATES: The interim rule is effective November 14, 1996. Comments must
be received on or before February 1, 1997.
ADDRESSES: Comments should be directed to Becky Baker, Secretary of the
Board. Mail or hand deliver comments to: National Credit Union
Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. Fax
comments to (703) 518-6319. Post comments on NCUA's electronic bulletin
board by dialing (703) 518-6480. Please send comments by one method
only.
FOR FURTHER INFORMATION CONTACT: J. Leonard Skiles, President, Asset
Management and Assistance Center, 4807 Spicewood Springs Road, Suite
5100, Austin, Texas 78759, or telephone (512) 795-0999; Stephen E.
Austin, Director of Supervision, Office of Examination and Insurance,
1775 Duke Street, Alexandria, Virginia, or telephone (703) 518-6360,
Lynn K. McLaughlin, Program Officer, at the above address and telephone
number, Michael J. McKenna, Acting Associate General Counsel, Office of
General Counsel, at the above address or telephone (703) 518-6540.
SUPPLEMENTARY INFORMATION: In 1982, safety and soundness concerns
prompted the NCUA Board to revise chartering policy consistent with the
Federal Credit Union Act to permit the combination of multiple groups
with unlike common bonds. Such combinations could be accomplished
through the chartering process, amendment of the charter, or by way of
merger to form a single credit union. Another primary reason for the
policy change was to provide small groups of people who did not have
the resources to charter their own credit unions access to credit union
service.
In First National Bank and Trust Co., et al. v. NCUA, the U.S.
Court of Appeals for the District of Columbia Circuit invalidated
certain select group additions to the field of membership of a North
Carolina credit union (``the Decision''). In the context of that case,
the Court ruled that groups with unlike common bonds could not be
joined to form a single credit union. Furthermore, in the consolidated
cases of First National Bank and Trust Co., et al. v. NCUA and the
American Bankers Association v. NCUA, et al., the District Judge issued
a nationwide injunction ordering that federal credit unions are
immediately barred from adding select groups without the same common
bond to their fields of membership (``the Order''). The District Court
further ordered that federal credit unions are prohibited from adding
any new members to select groups which were added pursuant to the
multiple group policy. The Order adversely impacts approximately
158,000 select groups in 3,586 multiple group federal credit unions.
NCUA has analyzed the impact of the Order and has determined that it
has created and will continue to create disruption in the operations of
credit unions. Equally important, a significant number of persons in
small groups will be denied access to credit union services. This is
particularly burdensome and harmful to persons in low to moderate
income communities.
The Court of Appeals, in its Decision, recognized that NCUA may
identify and approve interpretations that provide broader common bonds
than NCUA's current ``single employer'' policy. This interim policy,
therefore, affords some relief to the federal credit unions affected by
the Order by allowing them to restructure their existing fields of
membership within the limits of the Federal Credit Union Act as
construed in the Decision. NCUA will continue to pursue all available
legal means to seek reversal of the Decision and Order. The interim
policy is not intended to exhaust NCUA's authority to interpret the
common bond provisions. NCUA will continue to review possible
chartering and field of membership policy changes in an effort to
permit federal credit unions to exercise to the fullest extent possible
their ability to serve those who want or need credit union service.
This interim policy takes effect immediately upon adoption by the
NCUA Board and is effective until further notice. To the degree this
policy is inconsistent with IRPS 94-1, as amended by IRPS 96-1, those
policies are superseded and this policy statement is controlling. More
specifically, the select group policies and those procedures related to
the select group polices, such as the Streamlined Expansion Procedure,
are superseded. To the extent any action taken pursuant to this interim
policy is more restrictive than any future revision of this interim
rule requires, then the more restrictive provisions adopted by the
credit unions can be modified. To the extent any action taken pursuant
to this interim rule is less restrictive than any future revision of
this interim rule requires, then the less restrictive provisions
adopted by credit unions will not be unilaterally revoked by NCUA.
The NCUA Board has adopted three basic substantive changes to
current chartering and field of membership policy as set forth in IRPS
94-1 as amended by IRPS 96-1. These changes include adding a fourth
definition of occupational common bond, streamlining the documentation
requirements for a community charter, and adding a subset to the
community charter option.
Occupational Common Bond
IRPS 94-1, and previous policy statements by NCUA since 1982,
allowed the combination of unlike common bond groups. Federal credit
unions that utilized the multiple group policy and now have select
groups within their fields of membership must now designate a core
common bond. This designation of a core common bond is extremely
important and must be completed by March 1, 1997. New field of
membership expansions will not be permitted unless a core common bond
has been designated. Those groups that are not within the core common
bond cannot be served, except that members of record as of October 25,
1996, can still receive service from the credit union. New members can
only be added from the core common bond.
Consistent with the Decision in First National Bank and Trust
Company, et al. v. NCUA, the NCUA Board is adding a fourth definition
of occupational common bond. Under previous policy, an occupational
common bond was based on:
Employment (or a long-term contractural relationship
equivalent to employment) in a single corporation or other legal
entity;
Employment in a corporation or other legal entity with an
ownership interest in or by another legal entity; and
Employment in a corporation or other legal entity which is
related to another legal entity (such as a company under contract and
possessing a strong dependency relationship with another company).
Pursuant to this interim policy, an occupational common bond
incorporates any charter based on employment in a trade, industry, or
profession. This type of common bond can include employment at any
number of corporations or other legal entities, that while not under
common ownership, share a common bond by
[[Page 59307]]
virtue of producing similar products or providing similar services.
While there is some latitude in defining trade, industry, or
profession, the groups must have a close nexus. NCUA will evaluate such
factors as the nature, size and diversity of the trade, industry, or
profession and the geographic limits associated with the proposed
charter. For example, all manufacturing enterprises in Seattle,
Washington, would not qualify since manufacturing, in and of itself, is
overly broad and would include manufacturing of all types of products.
However, all computer software manufacturers in Seattle would qualify,
since it relates to a specific type of manufactured product. This type
of common bond charter can be similar to, but distinguishable from, a
common bond based on a single corporation. For example, all Navy
personnel would qualify as a single corporation (employer), but all
teachers would not. The latter would be a profession and subject to
certain limitations as discussed below. NCUA will interpret the
industry standard in a manner consistent with the Act and Congressional
purpose.
Further examples of this type of occupational common bond include
all textile workers, all coal miners, or the medical profession.
Federal credit unions with this type of occupational common bond can
only provide credit union service to those qualifying groups within the
credit union's operational area. For example, a credit union located in
California may serve the oil industry, but such groups must be within
the operational area of the credit union's service facilities.
As defined in IRPS 94-1, operational area is that area which, as
determined by NCUA, in its sole discretion, may reasonably be served by
the service facilities that will be accessible to the groups in the
field of membership. The operational area will vary depending on the
location of the credit union. For example, the operational area for a
credit union in an urban area may be smaller than the operational area
for a credit union in a sparsely populated rural district.
An existing credit union that wishes to serve a trade, industry, or
profession must first designate its occupational common bond. This
requirement does not apply to a new charter. This could be the original
core common bond group or another group within its field of membership.
For example, a credit union that serves primarily teachers, but whose
original core common bond was municipal employees, could designate
teachers or ``education'' as it occupational common bond. It would then
be able to add new members from that occupational group. However, the
designation must come from an existing group within its current field
of membership. For example, a credit union that serves primarily
teachers, could not be redesignated as a credit union serving the auto
industry if the auto industry is not already included in the field of
membership.
To designate its common bond, the credit union must submit a
request to the appropriate regional director. If the request is
approved, the credit union may immediately begin serving all groups
within its previously existing field of membership meeting this
occupational common bond definition. Credit unions that have groups
within their fields of membership that do not meet this new definition,
cannot add new members from those groups. For these groups, credit
unions can only serve members of record as of October 25, 1996.
To add new groups from within the new occupational common bond, the
credit union must apply and obtain written approval of the regional
director. The application letter must demonstrate that the group is
within the common bond, the group has provided a written request for
service, the group presently does not have service available, and the
group is within the operational area of one of the credit union's
service facilities. If the group to be added was previously served by
another credit union but has lost service as a result of the court
decisions, the credit union wishing to add the group must consult with
the other credit union prior to submitting its application to NCUA.
Community Chartering Policy
NCUA's community chartering policy is not affected by the ongoing
litigation. However, the NCUA Board is making two changes to the
community chartering policy that are consistent with the Federal Credit
Union Act in order to provide all federal credit unions with further
options in restructuring their fields of membership.
First, the documentation requirements for a community charter have
been streamlined. A credit union that wants to serve anyone who lives,
works, worships, or goes to school in a community area must still meet
the long-standing community criteria. For example, the community must
have clearly defined geographic boundaries that are recognized as a
distinct neighborhood, community, or rural district. However, the
documentation required to demonstrate that the proposed service area is
a well-defined community has been streamlined. This will greatly
facilitate the expeditious processing of community charters.
The ``well defined neighborhood, community or rural district''
requirement will automatically be met if the area to be served is in a
single political jurisdiction or portion thereof, and if the population
of the requested political jurisdiction does not exceed 1,000,000. If
the area to be served is not contained within a single political
jurisdiction or if the population of the area exceeds 1,000,000, then
more detailed documentation is necessary to support that the proposed
area is a well-defined community. Generally, the political subdivision
will most often coincide with a ``county'', or its political
equivalent, and any portion thereof.
Except as noted below, a credit union seeking a community charter
must contact all the credit unions with a service facility in the
proposed service area. The applicant credit union should provide the
comments of any overlapped credit unions in the area, and the regional
director will conduct a standard overlap analysis. An overlap analysis
may result in denial of the charter, change in the community
boundaries, or use of exclusionary clauses. Documentation reflecting
support for the charter application is still required, except as noted
below.
Second, while NCUA traditionally has interpreted the field of
membership authority for ``groups within a well-defined neighborhood,
community, or rural district'' to encompass all groups within that
community, a subset of a community charter credit union (called ``group
community'') is now authorized. This type of community charter is
available to those wishing to serve specific occupational,
associational, and community groups within a well-defined neighborhood,
community, or rural district. The requirements for a group community
parallel those required of a community charter. However, if a multiple
group credit union is converting to a group community, then a business
plan, overlap analysis, and evidence of community support is not
required.
Upon converting to a group community charter, the credit union will
immediately recover the ability to add new members from all groups that
were previously served by the credit union (i.e., at the time of the
Order) and that are located within the community. New members from
existing groups outside the community cannot be served by the group
community. To add new groups from within the community, the credit
union must receive prior approval by submitting an application to the
[[Page 59308]]
regional director documenting that the group is within the community,
the group has provided a written request for service, and whether the
group presently has credit union service available.
If the credit union wishes to add a group that was previously
served by another credit union, but has lost service as a result of the
court decisions concerning common bond, the federal credit union
wishing to add the group must consult with the other credit union and
provide the results of that consultation in its application to NCUA. A
determination as to whether that group can be added will be made based
on a review of any safety and soundness concerns and the needs of the
group.
Associational Common Bonds
No amendments to the associational common bond requirements are
included in this interim policy. After review of the associational
common bond requirements in IRPS 94-1 as amended by IRPS 96-1, the
Board determined that the policy allows for many types of associations
to qualify as eligible groups. However, any associational credit union
with multiple groups must designate a core common bond.
Emergency Mergers
NCUA is issuing clarifying amendments to the provisions concerning
emergency mergers and purchase and assumptions consistent with the
Order and Decision. Further, NCUA is removing the 12 month insolvency
limitation since it is not required by the Federal Credit Union Act.
Regional Action
This policy is not self-executing. Credit Unions must receive the
approval of NCUA before restructuring their fields of membership to
serve either specified groups within a single common bond of ``trade,
industry, or profession'' or specified groups within a ``well-defined
community.'' Once approval is granted by NCUA, a federal credit union
can serve new members from all of its previously approved groups that
fall within the newly defined field of membership.
Effective Date; Interim Rule; Comment Period
Although this amendment is being issued as an interim final rule
and is effective immediately, the NCUA Board encourages interested
parties to submit comments. Comments may be submitted on or before
February 1, 1997.
Federal credit unions are suffering irreparable injury due to the
injunction issued in the consolidated cases of First National Bank and
Trust Co., et al. and the American Bankers Association v. NCUA, et al.
Since 1982, federal credit unions have been permitted to diversify
their membership base through the addition of select groups. This
ability has strengthened federal credit unions and reduced losses to
the NCUSIF and extended credit union service to millions of persons who
would not otherwise be eligible to join a credit union.
The inability to add new members from existing select groups
effectively begins the process of divesting those groups from the
credit union. This has an immediate effect of cutting off service to
millions of potential members and adversely affecting credit unions.
This adverse effect on credit unions poses potential safety and
soundness concerns with respect to the National Credit Union Share
Insurance Fund.
Therefore, the Board finds it is necessary and appropriate to act
expeditiously in this matter in order to allow credit unions to
partially restructure their fields of membership. If this rule is not
effective immediately, credit unions and their members will continue to
be adversely impacted. Accordingly, the Board for good cause finds that
(i) pursuant to 5 U.S.C. 553(b)(3)(B), notice and public procedure are
impracticable, unnecessary, and contrary to the public interest, and
(ii) pursuant to 5 U.S.C. 553(d)(3), the rule shall be effective
immediately and without 30 days advance notice or publication. Further,
NCUA has determined that this is not a major rule under 5 U.S.C.
Chapter 8, and shall be effective immediately.
Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
to describe any significant economic impact a regulation may have on a
substantial number of small credit unions (primarily those under $1
million in assets). This interim rule will not have a significant
economic impact on a substantial number of small credit unions and
therefore a regulatory flexibility analysis is not required.
Paperwork Reduction Act
NCUA has determined that the amendments do not increase paperwork
requirements under the Paperwork Reduction Act of 1995 and regulations
of the Office of Management and Budget (OMB). 60 FR 44978 (August 29,
1995).
Executive Order 12612
Executive Order 12612 requires NCUA to consider the effect of its
actions on state interests. This interim regulation makes no
significant changes with respect to state credit unions and therefore,
will not materially affect state interests.
List of Subjects in 12 CFR Part 701
Credit, Credit unions, Reporting and recordkeeping requirements.
By the National Credit Union Administration Board on November
14, 1996.
Becky Baker,
Secretary of the Board.
Accordingly, NCUA amends 12 CFR part 701 as follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
1. The authority citation for part 701 continues to read as
follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a,
1761b, 1766, 1767, 1782, 1784, 1787, 1789. Section 701.6 is also
authorized by 31 U.S.C. 3717. Section 701.31 is also authorized by
12 U.S.C. 1601, et seq., 42 U.S.C. 1981 and 3601-3610. Section
701.35 is also authorized by 12 U.S.C. 4311-4312.
2. Section 701.1 is revised to read as follows:
Sec. 701.1 Federal credit union chartering, field of membership
modifications, and conversions.
National Credit Union Administration practice and procedure
concerning chartering, field of membership modifications, and
conversions are set forth in Interpretive Ruling and Policy Statement
94-1 Chartering and Field of Membership Policy (IRPS 94-1) as amended
by IRPS 96-1 and IRPS 96-2. Copies may be obtained by contacting NCUA
at the address found in Sec. 792.2(g)(1) of this chapter. The combined
IRPS are incorporated into this section.
(Approved by the Office of Management and Budget under control
number 3133-0015.)
Note: The text of the Interpretive Ruling and Policy Statement
(IRPS 94-1) does not and the following amendments will not appear in
the Code of Federal Regulations.
3. In IRPS 94-1, Chapter 1, Section II.A is revised to read as
follows:
II.A.--Occupational Common Bonds
II.A.1--General
A federal credit union may include in a single occupational
common bond, any and all persons who share that common bond. NCUA
permits a person's membership eligibility in an occupational common
bond to be established in four ways:
[[Page 59309]]
Employment (or a long-term contractual relationship
equivalent to employment) in a single corporation or other legal
entity makes that person part of an occupational common bond of
employees of the entity;
Employment in a corporation or other legal entity with
an ownership interest in or by another legal entity makes that
person part of occupational common bond of employees of the two
legal entities;
Employment in a corporation or other legal entity which
is related to another legal entity (such as a company under contract
and possessing a strong dependency relationship with another
company) makes that person part of an occupational common bond of
employees of the two entities; or
Employment based on a trade, industry, or profession.
An occupational common bond based on a trade, industry, or
profession must include a geographic limitation. This limitation
does not apply to any other occupational common bonds. However, a
proposed or existing federal credit union may limit its field of
membership to a specific geographic area.
So that NCUA may monitor any potential field of membership
overlaps, each group to be served (e.g., employees of subsidiaries,
franchisees, and contractors) must be separately listed in Section 5
of the charter.
The corporate or other legal entity (i.e., the employer) may
also be included in the common bond--e.g., ``ABC Corporation and its
subsidiaries.'' The corporation or legal entity will be defined in
the last clause in Section 5 of the credit union's charter.
Some examples of single occupational common bonds are:
Employees of the Scott Manufacturing Company who work
in Chester, Pennsylvania. (common bond--same employer);
Employees of the Scott Manufacturing Company. (common
bond--same employer without geographic limitation);
Employees, elected and appointed officials of municipal
government in Parma, Ohio. (common bond--same employer with
geographic limitation);
Employees of the federal government. (common bond--
single sponsor);
Employees of Johnson Soap Company and its subsidiary,
Johnson Toothpaste Company, who work in Augusta and Portland, Maine.
(common bond--parent and subsidiary company with geographic
limitation);
Employees of the Department of Defense--civilian and
U.S. Army. (common bond--same employer without geographic
limitation);
Employees of those contractors who work regularly at
the U.S. Naval Shipyard in Bremerton, Washington. (common bond--
employees of contractors with geographic limitation);
Employees, doctors, medical staff, technicians, medical
and nursing students who work in or are paid from Boston Medical
Center. (single corporation); or
Employees of JKL, Incorporated and STU, Incorporated
working for the XYZ Joint Venture Company in Los Gatos, California.
(common bond--same employer--ongoing dependent relationship).
Some examples of insufficiently defined single occupational
groups are:
Employees of manufacturing firms in Seattle,
Washington. (no defined sponsor or industry);
Persons employed or working in Chicago, Illinois. (no
occupational common bond); or
Employees of all colleges and universities in the State
of Texas. (not a single occupational common bond; although this may
qualify as an occupational common bond based on trade).
II.A.2--Trade, Industry, or Profession
A common bond based on employment in a trade, industry, or
profession can include employment at any number of corporations or
other legal entities that--while not under common ownership--have a
common bond by virtue of producing similar products or providing
similar services. Because this type of common bond is the most
expansive and has overlap implications, a geographic limitation is
required. In general, a geographic limitation corresponds to the
credit union's operational area. Also, each employee group to be
served must be separately listed in Section 5 of the credit union
charter.
While proposed or existing credit unions have some latitude in
defining a trade, industry, or profession occupational common bond,
it can not be defined so broadly as to include groups in fields
which are not closely related. For example, all textile workers or
all government employees in a limited geographic area (including
federal, state, and local) may qualify under this category. However,
employees of all manufacturing companies would not. The common bond
relationship must be one that demonstrates a commonality of
interests within a specific trade, industry, or profession. More
than one federal credit union may serve the same trade, industry, or
profession.
Some examples of trade, industry, or profession common bonds
are:
Employees and teachers who work for universities and
colleges in Austin, Texas. (same profession; acceptable if within
the credit union's operational area);
All persons working in the educational system in
Atlanta, Georgia. (same trade, acceptable if within the credit
union's operational area);
Employees of the federal, state, and municipal
governments in Fairfax County, Virginia. (same industry; acceptable
with a geographic limitation, i.e., within the credit union's
operational area);
Employees of the coal mining industry in Erie County,
Pennsylvania. (same industry; acceptable if within the credit
union's operational area); or
Persons working as Certified Public Accountants in Los
Angeles, California. (same profession; acceptable if within the
credit union's operational area).
Some examples of insufficiently defined trade, industry, or
profession common bonds are:
Employees and teachers who work for public schools.
(same trade, but no geographic limitation); or
Employed persons in Maryland. (no common bond--no
specified trade).
II.A.3--Common Bond Amendments
II.A.3.a--Designation of Common Bond
The chartering and field of membership policies effective prior
to the implementation of this interim policy statement allowed for
the combination of multiple select groups that did not share the
same common endeavor, purpose or interest to form a single credit
union. These policies have been suspended. Accordingly, It is now
necessary for those federal credit unions that were chartered, or
expanded their field of membership pursuant to the multiple select
group policies, to designate a core field of membership, i.e., a
common bond. Credit unions must designate a core common bond by
March 1, 1997. If a credit union fails to designate its core common
bond, NCUA will designate the original core group as its common
bond.
The core common bond can be defined as the employee group that
constituted the field of membership, i.e., its core group, at the
time of charter. The core common bond can also be defined as any
group in the credit union's field of membership, including a common
bond of trade, industry, or profession. If a group other than the
one that constituted the core common bond at the time of charter is
designated as the core common bond, then the newly designated core
common bond must receive NCUA's concurrence. To change the core
common bond the credit union must submit a written request to NCUA
for approval. The designation of a core common bond does not apply
to community charters.
The designation of a core common bond is critical for the
following reasons:
New members can be accepted only from the designated
core common bond;
Future field of membership expansions will be based on
the designated core common bond;
Only members of record, as of October 25, 1996, of
select groups that do not have the same designated core common bond
can continue to be served; and
Once a core common bond has been designated, it can not
be changed. However, in those cases where there is a valid safety
and soundness concern or a different common bond group is acquired
as a result of an emergency merger, the credit union may request a
new designation.
II.A.3.b--Documentation Requirements
A charter applicant or existing occupational federal credit
union that submits a request to amend its charter to add new groups
must provide documentation to establish that the occupational common
bond requirement has been met.
All amendments to an occupational common bond credit union's
field of membership, except the designation of the original core
common bond, must be approved by the regional director. The regional
director may approve an amendment to expand the field of membership
if:
The common bond requirements of this section are
satisfied;
[[Page 59310]]
The group to be added has provided a written request
for service to the credit union;
The group presently does not have credit union service
available (if credit union service is available, the region must
conduct an overlap analysis), other than through a community credit
union; and
The occupational common bond is based on a trade,
industry, or profession only if the group is within the operational
area of one of the credit union's service facilities.
If the credit union wishes to add a group that was previously
served by another credit union, but has lost service as a result of
the court decisions concerning common bond, the federal credit union
wishing to add the group must consult with the other credit union
and provide the results of that consultation in its application to
NCUA. A determination as to whether that group can be added will be
made based on a review of any safety and soundness concerns and the
needs of the group.
4. In IRPS 94-1, Chapter 1, Section II.C is revised to read as
follows:
II.C--Community Charters
II.C.1--General
A community credit union is permitted to serve persons who live
in, worship in, go to school in, or work in a ``well-defined
neighborhood, community or rural district.'' A subset of a community
charter is a group community, which permits a credit union to serve
specific occupational, associational, and community groups within
that same well defined area. Although there are differences in
documentation requirements for a group community charter, the
definition of a ``well defined neighborhood, community or rural
district'' is the same.
II.C.2--General Community Charter Criteria
NCUA policy is to limit a community to a single, geographically
well-defined area where residents have common interests or interact.
NCUA recognizes four types of affinity on which a community common
bond can be based--persons who live in, worship in, go to school in,
or work in the community. Businesses and other legal entities within
the community boundaries may also qualify for membership. More than
one community credit union may serve the same community area.
Given the diversity of community characteristics throughout the
country and NCUA's goal of making credit union service available to
all eligible groups, NCUA has established the following requirements
for community charters:
The geographic area's boundaries must be clearly
defined; and
The charter applicant must establish that the area is
recognized as a well defined ``neighborhood, community, or rural
district.''
Some examples of community charter definitions are:
Persons who live, work, worship, or go to school in,
and businesses located in the area of XYZ City bounded by Fern
Street on the north, Long Street on the east, Fourth Street on the
south, and Elm Avenue on the west.
Persons who live or work in Green County, Maine.
Persons who live, worship, go to school in, or work in
and businesses and other legal entities located in Independent
School District No. 1, DuPage County, Illinois.
Some examples of insufficiently defined community charter
definitions are:
Persons who live or work within and businesses located
within a ten-mile radius of Washington, D.C. (Not a recognized
neighborhood, community, or rural district).
Persons who live or work in the industrial section of
New York, New York. (No clearly defined boundaries).
II.C.3--Documentation Requirements for a Community Charter
For a community charter, any political jurisdiction or portion
thereof, excluding state boundaries, automatically qualifies as a
well-defined community, if the population of the requested political
jurisdiction does not exceed 1,000,000. If the area to be served is
not contained within a single political jurisdiction, or if the
population of the area to be served exceeds 1,000,000, the credit
union should provide to NCUA for approval, if available, the
following documentation to support that it is a well-defined
community:
The defined political jurisdictions;
Major trade areas (shopping patterns and traffic
flows);
Shared/common facilities (for example, educational,
medical, police and fire protection, school district, water, etc.);
Organizations and clubs within the community area;
Newspapers or other periodicals published for and about
the area;
Maps designating the areas to be served;
Common characteristics and background of residents (for
example, income, religious beliefs, primary ethnic groups,
similarity of occupations, household types, primary age group,
etc.); and
History of area.
Except for a group community, the following information must be
provided to support a need for a community credit union:
A list of credit unions presently in area and evidence
that these credit unions were contacted regarding the community
charter. If available, provide the opinion of the overlapped credit
unions; and
Written documentation reflecting support for the
charter application, field of membership expansion, or conversion to
a community credit union. This may be in the form of letters,
surveys, studies, pledges, or a petition. Other types of evidence
may also be acceptable.
II.C.4--Business Plan
Business plans are required of all credit unions expanding their
community boundaries or converting to a community charter (except
for a credit union converting to a group community). The business
plan for a community federal credit union should comply with the
requirements of Chapter 1, Section IV.A.4.b, except that a summary
of survey results is not required.
II.C.5--Community Service Area
The service area for a community federal credit union is the
area defined in its charter usually with north, south, east, and
west boundaries. If the community is a recognized political
jurisdiction, the service area may be defined by the applicable
political jurisdiction, such as ``DEF Township, Kansas'' or ``GHI
County, Minnesota.''
II.C.6--Group Community
A group community charter is available to those wishing to serve
specific occupational, associational, and community groups within a
well-defined neighborhood, community, or rural district.
An example of a group community common bond definition is:
The following groups within Smithson County,
Pennsylvania: Employees of HAC Corporation and Smith and Wesson
Firearms, who work in Smithson County, Pennsylvania; members of the
Greater Smithson County Ruritan Club who qualify for membership in
accordance with its bylaws in effect on November 9, 1996; members of
the First Amish Church in Smithson County, Pennsylvania; members of
the National Rifle Association in Smithson County, Pennsylvania, who
qualify for membership in accordance with its bylaws in effect on
November 9, 1996; and members of the Greystone Electric Membership
Cooperative in Smithson County, Pennsylvania.
A group community charter must receive regional director
approval to expand its field of membership to include new groups
within that community. The regional director may approve the
amendment if the request supports:
The group is within the defined geographical area;
The group has provided a written request for service to
the credit union; and
Whether the group presently has credit union service
available from an occupational or associational credit union.
If the credit union wishes to add a group that was previously
served by another credit union, but has lost service as a result of
the court decisions concerning common bond, the federal credit union
wishing to add the group must consult with the other credit union
and provide the results of that consultation in its application to
NCUA. A determination as to whether that group can be added will be
made based on a review of any safety and soundness concerns and the
needs of the group.
5. In IRPS 94-1, Chapter 2, Section III.B is amended by removing
the words ``within 12 months'' and adding a new paragraph at the end of
the section to read as follows:
III.B. * * *
If the continuing and merging credit union do not have the same
core common bond, then the continuing credit union's core common
bond will be controlling for future common bond expansions. However,
the continuing credit union may, at the time of the emergency
merger, request a redesignation to the merging credit union's core
common bond. Subsequent field of membership expansions must be based
on a single designated core common bond.
[[Page 59311]]
However, the continuing credit union may serve new members of the
merging credit union's core common bond and members of record as of
October 25, 1996, of the non-core common bond groups.
6. In IRPS 94-1, Chapter 2, Section III.C is amended by adding a
new paragraph at the end of the section to read as follows:
III.C. * * *
If the continuing and the purchased and assumed credit unions do
not have the same common bond, then the continuing credit union's
core common bond will be controlling for future common bond
expansions. However, the continuing credit union may, at the time of
the P&A, request a redesignation to the purchased and assumed credit
union's core common bond if the P&A meets the emergency merger
criteria. Subsequent field of membership expansions must be based on
a single designated common bond. However, the continuing credit
union may serve new members of the purchased and assumed credit
union's core common bond and members of record as of October 25,
1996, of the non-core common bond groups.
[FR Doc. 96-29886 Filed 11-21-96; 8:45 am]
BILLING CODE 7535-01-P