[Federal Register Volume 65, Number 209 (Friday, October 27, 2000)]
[Rules and Regulations]
[Pages 64512-64528]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-27361]



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Part III





National Credit Union Administration





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12 CFR Part 701



Organization and Operations of Federal Credit Unions; Final Rule

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

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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: Final rule.

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SUMMARY: The NCUA Board is amending its chartering and field of 
membership manual to update chartering policies and further streamline 
the select group application process. These amendments result from 
NCUA's experience addressing field of membership issues and concerns 
that surfaced after the adoption of the current chartering and field of 
membership policies.

EFFECTIVE DATE: November 27, 2000.

ADDRESSES: National Credit Union Administration, 1775 Duke Street, 
Alexandria, Virginia 22314-3428.

FOR FURTHER INFORMATION CONTACT: J. Leonard Skiles, Chairman, Field of 
Membership Task Force, 4807 Spicewood Springs Road, Suite 5200, Austin, 
Texas 78759 or telephone (512) 231-7900; Michael J. McKenna, Senior 
Staff Attorney, Office of General Counsel, 1775 Duke Street, 
Alexandria, Virginia 22314 or telephone (703) 518-6540; Lynn K. 
McLaughlin, Program Officer, Office of Examination and Insurance, 1775 
Duke Street, Alexandria, Virginia 22314 or telephone (703) 518-6360.

SUPPLEMENTARY INFORMATION: In 1998, Congress revised the laws on field 
of membership with the passage of the Credit Union Membership Access 
Act (``CUMAA''). On August 31, 1998, the NCUA Board issued a proposed 
rule updating NCUA's chartering and field of membership policies. 62 FR 
49164 (September 14, 1998). On December 17, 1998, the NCUA Board issued 
a final rule with an effective date of January 1, 1999. When the NCUA 
Board issued its final rule it instructed the Field of Membership 
Taskforce to coordinate and monitor implementation of the new 
chartering policies and make necessary recommendations for policy 
clarifications and amendments to IRPS 99-1.
    Over the past twenty-two months, NCUA's Field of Membership 
Taskforce has monitored and reviewed the implementation of IRPS 99-1 in 
an effort to improve consistency and provide a basis, if necessary, for 
further clarifications and modifications. As a result of this continued 
oversight, the Field of Membership Taskforce made a number of 
recommendations to clarify and update field of membership policies and 
address the issues that arose during the oversight period.
    On June 6, 2000, the NCUA Board issued proposed amendments to its 
chartering and field of membership policies with a sixty-day comment 
period. 65 FR 37065 (June 13, 2000). The comment period ended on August 
14, 2000.
    Four hundred and forty-nine comments were received. Comments were 
received from two hundred and eighty-seven federal credit unions, one 
hundred and seventeen state chartered credit unions, one United States 
Senator, four United States Congressmen, twenty-one state leagues, six 
national credit union trade associations, two bank trade associations, 
two state representatives, one shared service cooperative, one 
technical support specialist, and seven credit union members.
    Generally, with the exception of the proposed addition of a 
community action plan requirement (CAP) for community chartered credit 
unions, most commenters were supportive of the proposed revisions to 
NCUA's chartering policies. As a result of those comments, a number of 
modifications to the proposed rule have been incorporated into the 
final rule. An overwhelming majority of the commenters concentrated on 
the CAP provision and recommended that it be deleted. The final rule, 
while not deleting the CAP concept, has been modified from the proposed 
rule.

A. Final Amendments

1. Occupational Common Bond

    The NCUA Board proposed to amend the language in the section on 
occupational common bonds so that in situations where multiple 
contractors who qualify based on a strong dependency relationship are 
sole proprietors (for example, there may be hundreds of independent 
drivers for a particular taxi company), the regional director may use 
generalized wording in the credit union's charter. Seven commenters 
agreed with this proposed change. One commenter opposed the change. One 
commenter stated the more generalized language should be used in all 
cases of sole proprietors. The NCUA Board believes that the regions 
will, in most cases, use the generalized wording for most sole 
proprietors, but there may be cases when the generalized wording would 
not be appropriate. Therefore, the final rule incorporates the 
amendment as proposed.

2. Associational Common Bond

    Students Groups. The NCUA Board believes that students are a unique 
group that can be considered either occupational or associational 
depending on the circumstances. A student group, by itself or when 
combined with school employees, can be or constitute part of an 
occupational common bond. Similarly, when part of a faith-based group, 
the student group can be treated as part of an associational common 
bond. Therefore the NCUA Board proposed to amend Chapter 2, Section 
III. A.1. of IRPS 99-1 to reflect this view. Nine commenters agreed 
with this change. One commenter believes this proposal is too 
expansive. For the reasons stated in the proposed rule, the NCUA Board 
is adopting the amendment as proposed.
    Two commenters stated that alumni of a school should not have to 
join the alumni association before being eligible for credit union 
service. The Board does not agree. Eligibility for credit union 
membership based on an alumni associational common bond requires that 
an alumnus be a member of the association. Additionally, the alumni 
association must meet the requirements of an association. Those 
requirements include consideration of the payment of dues, voting 
rights, sponsored activities, etc. These commenters also stated that, 
in some cases, alumni of a college or a university were automatically 
members of their alumni association and, in some cases, alumni 
associations do not charge dues to belong to the alumni association. To 
clarify current policy, if an alumnus is automatically a member of the 
alumni association as a result of graduation, and there are no other 
membership requirements, then the membership requirement is satisfied 
provided the other indicia of membership in an association are met. 
Graduates of a college or university would not be a legitimate 
associational common bond.
    One commenter stated that Chapter 2, Section IV.A.1 should be 
amended to demonstrate that a multiple common bond credit union can add 
students as either an associational group or occupational group. The 
Board believes that since this is addressed in both the occupational 
and associational sections, this revision is not necessary.

3. Multiple Common Bond Credit Unions

    Expedited Process for Groups of 500 or Less. In the chartering 
process, as well as the addition of select groups to a multiple common 
bond credit union, economic advisability is critically

[[Page 64513]]

important. It is the responsibility of NCUA to ensure that if a credit 
union is chartered, it has, at a minimum, a reasonable opportunity to 
succeed in today's financial marketplace.
    In addressing these responsibilities in relation to the historical 
data related to chartering new credit unions, the NCUA Board 
established an expedited process in IRPS 99-1 for groups of 200 or less 
primary potential members. Although a written determination regarding 
the various statutory criteria was still required, the expedited 
process allowed for the streamlined processing of groups of 200 or less 
since the Board found that such groups, in almost all cases, would not 
be economically viable. Thus, in the past 21 months, applicant credit 
unions applying to add a group of 200 or less simply had to complete 
the Form 4015-EZ. Additionally, no overlap analysis was required for 
these small groups.
    Based on the historical experience since the promulgation of IRPS 
99-1, plus other chartering data since 1990, the NCUA Board proposed to 
raise the expedited processing number for adding groups to 500. In 
conjunction with this proposal, the NCUA Board also proposed raising 
the number of members in a group requiring an overlap analysis from 200 
to 500.
    Two commenters opposed increasing the expedited processing number 
to 500. Fourteen commenters agreed with the proposed amendment that the 
expedited processing number for adding select groups should be 
increased to 500, and that no overlap analysis should be required of 
groups of 500 or less. Eleven commenters recommended raising the 
expedited processing number above 500. Of those eleven commenters, one 
commenter suggested increasing the threshold to 1,000, one to 1,500, 
two to 2,000, and seven commenters suggested raising the number to 
3,000.
    The NCUA Board believes that historical experience and other data 
support raising the number to 500. The Board will consider a further 
increase to the expedited processing number when more historical data 
is accumulated. If subsequent evidence demonstrates a higher number is 
justified, the Board will revisit the issue. The Board is also 
restating its position that desire and initiative to form a credit 
union are critical factors in evaluating economic advisability.
    One commenter asked if a credit union could appeal an overlap when 
a group in its field of membership is added to another credit union. A 
credit union can appeal any decision by the regional director, but an 
overlapped credit union is not provided written notification and appeal 
rights.
    Adequate Capitalization for Multiple Common Bond Credit Union 
Expansions. One of the statutory requirements for the addition of a 
select group to a multiple common bond credit union is that the credit 
union be adequately capitalized. However, the statute did not define 
adequate capitalization. Consequently, the Board stated in IRPS 99-1 
that six percent capitalization for a credit union in existence more 
than 10 years should be considered adequate for field of membership 
expansion purposes. Since the adoption of that standard, the NCUA Board 
has come to believe that for reasons totally outside the control of the 
credit union, such as sponsor problems, temporary asset fluctuations or 
economic downturns, a credit union may temporarily drop below or not be 
able to achieve or sustain a six percent capitalization level. 
Therefore, the NCUA Board proposed giving the regional director 
latitude to determine that any credit union with less than six percent 
net worth is adequately capitalized for field of membership purposes if 
the credit union is making reasonable progress toward meeting the 
requirement.
    Twelve commenters agreed with providing the regional director with 
this discretionary authority, although one of these commenters would 
reduce the number to five percent. One commenter believes that the 
regional director should not have discretionary authority and that a 
minimum level of capital should be maintained. Two commenters suggested 
that all expanding credit unions should maintain a six percent 
capitalization level. One commenter opposed this policy change. The 
NCUA Board is adopting the proposed amendment in the final rule. The 
NCUA Board was provided no compelling rationale for lowering the 
standard for adequately capitalized or for not providing the regional 
director with this discretionary authority.
    Reasonable Proximity for Select Group Expansions. Since the 
adoption of IRPS 99-1, an issue has been raised regarding the policies 
affecting the addition of groups that are within reasonable proximity 
of a service facility (this term includes a service center, branch or 
shared branch or any offsite credit union location that meets the 
definition of a service facility.) In defining reasonable proximity, 
the NCUA Board stated in IRPS 99-1 that the group to be added must be 
within the ``service area'' of a ``service facility'' of the credit 
union. Service facility was defined to mean a place where shares are 
accepted for members' accounts, loan applications are accepted, and 
loans are disbursed. This definition included a credit union owned 
branch, a shared branch, a mobile branch, an office operated on a 
regularly scheduled weekly basis, or a credit union owned electronic 
facility that meets, at a minimum, these requirements. This definition 
did not include an ATM. Most importantly, the Board articulated the 
position that in order to expand around a service facility, the credit 
union must have ownership in the service facility, but the degree of 
ownership was not defined. Participation in a service facility, without 
ownership, was not an allowable basis for adding a select group and 
otherwise satisfy the requirement of the statute that the credit union 
must be within reasonable proximity to the location of the group.
    In reviewing this issue, the Board determined that the current 
policy was overly restrictive and that the threshold for allowing the 
addition of groups around a service facility should be modified. The 
proposed amendment would provide greater flexibility to credit unions 
to add select groups around service facilities if either (1) the credit 
union owns directly or through a CUSO or similar organization, at least 
a 5 percent interest in the service facility or (2) the service 
facility is local to the credit union and the credit union is an 
authorized participant in the service center.
    A total of twenty-six commenters addressed this issue, most of whom 
recommended greater flexibility than that proposed. Five commenters 
approved of the expansion requirements for shared branches. Two 
commenters stated that any ownership interest should be sufficient. One 
commenter stated that a five percent ownership interest is too high. 
Three commenters stated that NCUA should not allow expansions around 
shared service centers.
    Nine commenters stated that shared branches should be treated like 
any other credit union branch for expansion purposes, without any 
requirement of ownership interest or that it be local. Two commenters 
suggested that instead of a specific ownership amount, the agency 
should define ownership as that which conveys or allows a voting right 
in the partnership, corporation or organization, regardless of its size 
relative to other owners. These commenters stated that a voting right 
demonstrates the ability of the credit union to participate in the 
direction of the partnership, corporation or organization and should 
resolve NCUA's concern as to ownership and its relationship to FOM 
expansions. Many

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of the commenters who opposed the ownership interest requirement 
believed that the proposal would hurt small credit unions.
    Three commenters stated that NCUA should give a regional director 
discretionary authority concerning the five percent limitation, with 
one of these commenters providing the following test for an expansion: 
(1) The circumstances are such that less than a five percent ownership 
level is achieved because the number of owners makes it difficult or 
impossible to own more than five percent; or (2) the applicant credit 
union is serving at least one group of greater than 500 potential 
members within a reasonable proximity of the shared facility. One 
commenter believed NCUA should consider items other than ownership 
including the availability of other credit union services, the location 
of other select groups presently in the credit union's field of 
membership, the presence of branch offices or other locations of 
existing select groups, and the usage statistics of shared branches by 
current members of the requesting credit union.
    The Board notes that the Federal Credit Union Act clearly states 
that if the formation of a separate credit union is not practicable or 
consistent with the standards set forth in the statute, then a select 
group can be included in the ``field of membership of a credit union 
that is within reasonable proximity to the location of the group.'' The 
statutory standard, therefore, is that if the group cannot form a 
credit union, then it can be added to the field of membership of 
another credit union if it is reasonably proximate to the expanding 
credit union. In addressing this issue, therefore, it is necessary to 
determine what is meant by credit union and reasonable proximity.
    The second of these two issues is easily addressed. NCUA has 
consistently held that the group being added must be within the 
expanding credit union's geographic service area. The House Committee 
Report for CUMAA addressed the reasonable proximity requirement and 
offered valuable guidance on how NCUA ultimately viewed the statutory 
language. H.R. Rep. No. 104-472, 105th Cong., 2nd Sess. 19 (1998). On 
page 20 of the Report it is stated that the statute ``articulates a 
strong policy towards placing groups which cannot form their own credit 
unions with a local credit union.'' (Emphasis added.)
    The definition of a credit union, therefore, is crucial to 
determining how flexible NCUA can be in allowing expansions around 
service facilities. Can it be reasonably determined that a service 
facility constitutes a credit union in the context of the statute, if 
the expanding credit union has little or no ownership interest in the 
service facility? In other words, can a credit union that is simply 
linked to the service facility through a state or national network use 
that linkage, without ownership, to expand its field of membership by 
adding groups within the service area of the service facility?
    Prior to CUMAA, NCUA's policy did not permit the addition of select 
groups around shared branches. Additionally, a branch could not be 
established without an existing membership base. With the passage of 
CUMAA and the adoption of IRPS 99-1, the only change in this policy was 
that a credit union could establish a branch office in any location 
regardless of membership location. This policy allowed greater 
expansion opportunities, but it required a capital commitment.
    The proposed amendment would allow greater flexibility for credit 
unions to add new groups, but it would not permit credit unions that 
are simply linked to a service facility through a state or national 
network use that linkage, without ownership, to expand by adding select 
groups located within the service area of those service facilities? It 
is the Board's view that a service facility is not a credit union for 
the purposes of field of membership expansion unless the credit union 
has an ownership interest in that service facility, or the service 
facility is otherwise local to the credit union and already serves an 
existing membership base.
    The question then becomes, what degree of ownership interest is 
appropriate? A number of commenters suggested various levels of 
ownership interest or alternatives to ownership, such as voting rights; 
however, the Board continues to believe that a 5 percent level of 
ownership interest is reasonable and satisfies the intent of the 
statute. It is important to note that this interpretation does not 
limit service to members through a service facility not owned by a 
credit union. It simply prescribes certain ownership requirements that 
must be met before a credit union can expand around a service facility.
    The amendment, as proposed, is adopted in the final rule.
    Multiple Common Bond Documentation Requirements. Since the 
implementation of IRPS 99-1, a number of questions and issues have been 
raised related to the documentation requirements that must be satisfied 
before adding select groups. To clarify this issue, the NCUA Board 
proposed adding language to Chapter II, IV.B.3 as follows:
    Why the formation of a separate credit union for the group is not 
practical or consistent with safety and soundness standards. Some of 
the areas the credit union may consider include:
     Member location--whether the membership is widely 
dispersed or concentrated in a central location.
     Demographics--the employee turnover rate, economic status 
of the group's members, and whether the group is more apt to consist of 
savers and/or borrowers.
     Market competition--the availability of other financial 
services.
     Desired services and products--the type of services the 
group desires in comparison to the type of services a new credit union 
could offer.
     Sponsor subsidies--the availability of operating 
subsidies.
     Employee interest--the extent of the employees' interest 
in obtaining a credit union charter.
     Evidence of past failure--whether the group previously had 
its own credit union or previously filed for a credit union charter.
     Administrative capacity to provide services--will the 
group have the management expertise to provide the services requested.
    Eight commenters approved of adding the clarifying language for why 
it may not be practical for a group to form its own credit union. Five 
commenters suggested that the desire of the sponsor should be added to 
the list. The NCUA Board agrees with this suggestion and has added the 
desire of the sponsor as a factor to be considered in determining why a 
group may not wish to form its own credit union.
    One commenter stated that the ``availability of other financial 
services'' is not relevant and recommended deleting it from the list of 
factors to be considered. This commenter would also delete ``the 
availability of operating subsidies,'' and suggested consideration of 
operating subsidies may discourage potential sponsors. The NCUA Board 
disagrees with these comments and believes both factors could be 
important in determining economic viability.
    Two commenters recommended that NCUA not contact the group when 
trying to determine economic advisability. Although direct contact with 
a group seeking credit union service is infrequent, occasionally it is 
necessary in order to obtain additional information in support of the 
request. Most often the direct contact is related to obtaining more 
documentation on economic advisability criteria or obtaining 
clarification on assertions

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made by the group. Generally, directly contacting a group that has 
submitted incomplete information has expedited the field of membership 
expansion request. As a result, NCUA reserves the right to contact the 
group when additional information is needed to process an application.
    Two commenters stated that the manual should specifically state, as 
the preamble did, that a ``credit union need not address every item on 
the list, simply those issues that are relevant to its particular 
request.'' The NCUA Board agrees with this suggestion since it will 
provide clarification and has incorporated it into the final rule.
    Two commenters stated that the economic advisability list should 
state that widely dispersed groups do not meet the criteria for the 
formation of a separate credit union. The NCUA Board does not agree 
with these commenters. Although rare, widely dispersed members of 
groups may still have the ability to form their own credit union; 
however, it is recognized that membership dispersion is a critical 
consideration in determining economic advisability.
    Voluntary Mergers. Consistent with current policy, two single 
common bond credit unions that share the same common bond (same field 
of membership) can voluntarily merge. For example, corporation A is 
nationally based. As a result of being nationally based, it has several 
credit unions that are not geographically restricted serving its 
employees. These single common bond credit unions share the same common 
bond and field of membership. Accordingly, by policy, no analysis of 
the groups are required to determine if they can stand on their own and 
the credit unions can voluntarily merge.
    Similarly, if corporation A is served by a single common bond 
credit union and corporation B is served by a single common bond credit 
union, the two single common bond credit unions can merge if one 
corporation is acquired by the other. In other words, if corporation A 
purchases corporation B, then the two single common bond credit unions 
share the same common bond and there is no restriction on the two 
credit unions voluntarily merging. Again, no field of membership 
analysis is required, other than to determine they share the same 
common bond.
    The two situations described above have not presented a problem 
this past year. However, in the examples provided above, if one of the 
credit unions is a healthy multiple common bond credit union, the 
result can be entirely different. In some cases, this places an undue 
burden on the credit unions and often presents potential long-term 
supervisory concerns. To illustrate, if in the second example the 
credit union serving corporation B is a multiple common bond credit 
union, and corporation A purchases corporation B, under current policy, 
if the primary field of membership in corporation B's credit union has 
more than 3,000 primary potential members and every other group has 
less than 3,000 primary potential members, then NCUA still must analyze 
each group of 3,000 or more potential members to determine whether the 
formation of a separate credit union is practical. This is a harsh 
result when both credit unions essentially share the same common bond.
    The NCUA Board believes that if two credit unions have a 
substantial overlap of their fields of membership, then the two credit 
unions should be allowed to voluntarily merge without analyzing that 
group's ability to form its own credit union.
    Therefore, the NCUA Board proposed a modification to its merger 
policy to permit the voluntary merger of credit unions with fields of 
membership that substantially overlap. That is, if two or more credit 
unions share the same primary fields of membership, and each of the 
remaining select groups have primary potential members less than 3,000, 
then the remaining groups will be considered incidental and the credit 
unions should be allowed to merge.
    Eleven commenters approved of the change to the voluntary merger 
section. Two of these commenters suggested that NCUA consider expanding 
this interpretation to also allow voluntary mergers of credit unions 
sharing similar fields of membership without an intervening corporate 
event. The NCUA Board agrees, but believes that the proposed revision 
reflects this position; therefore, no additional change is necessary.
    Two commenters opposed the change in policy. Three commenters 
stated that even this proposed voluntary merger policy is overly 
restrictive. One commenter stated that NCUA should approve voluntary 
mergers with little or no restrictions in the case of corporate 
acquisitions or restructuring. Six commenters, notwithstanding the law, 
stated that any voluntary merger should be permitted. For the reasons 
cited above, the NCUA Board is changing its voluntary merger policy. 
However, unrestricted voluntary mergers of multiple common bond credit 
unions cannot be permitted due to the statutory restrictions contained 
in CUMAA.
    Supervisory Mergers. When safety and soundness concerns are 
present, NCUA may approve the merger of any federally insured credit 
union. The NCUA Board proposed to amend Chapter II, Section IV.D.2 of 
the Chartering Manual to clarify that abandonment by the management 
and/or officials and an inability to find replacements, loss of sponsor 
support, serious and persistent record keeping problems, sustained 
material decline in financial condition, or other serious or persistent 
circumstances are examples that may constitute grounds for merging a 
credit union due to supervisory concerns. These are just examples and 
not an all-inclusive list.
    Seven commenters approved of this amendment to this section. Two 
commenters objected to the restriction that a financially healthy, 
single common bond credit union with potential members in excess of 
3,000 may not merge with a multiple group credit union unless there are 
supervisory reasons. The NCUA Board is bound by the merger provision in 
CUMAA and is adopting the amendment as proposed.
    Common Bond Charter Conversions. The NCUA Board proposed to permit 
a credit union to continue to serve any group included in or added to 
its single common bond field of membership at the time of conversion to 
a single common bond credit union for a period of three years from the 
date of conversion, even if the group is later sold, spun-off, or 
otherwise divested as a result of a corporate reorganization/
restructuring. If the credit union elects to continue to serve any 
sold, spun-off or otherwise divested group, then the credit union must 
convert back to a multiple common bond credit union on the third 
anniversary of the date of conversion. During this three-year period, 
it will continue to be treated as a single common bond credit union.
    Ten commenters approved of this policy change. Three commenters 
stated this policy change is still overly restrictive. One commenter 
opposed the policy change. One commenter suggested that NCUA allow 
single common bond credit unions to continue in a single common bond 
status, consistent with the new corporate restructuring policy, if the 
credit union is still serving only its single sponsor and groups spun-
off by the single sponsor and/or groups related to the single sponsor. 
The Board does not agree that additional changes, beyond those 
proposed, are necessary.
    One commenter stated that NCUA should apply this same three-year 
provision to a credit union that converts to a community charter and 
has groups outside the community boundaries.

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That is, the credit union should be able to serve new members of these 
select groups for three years after the conversion. The NCUA Board 
believes that when a credit union converts to a community charter, it 
should serve the community and not select groups. The only exception is 
for groups obtained through an emergency merger or emergency purchase 
and assumption. The grandfather provision in CUMAA is not applicable 
since the credit union has changed its charter type. Therefore, the 
NCUA Board is not adopting this commenter's suggestion.
    Conversions of Multiple Common Bond Credit Unions. The NCUA Board 
proposed a clarification that a state-chartered multiple common bond 
credit union that converts to a federal charter may retain in its field 
of membership any group that it was serving at the time of conversion. 
Any subsequent additions or amendments to the field of membership would 
have to comply with federal field of membership policies. Additionally, 
the NCUA Board clarified that if any state chartered credit union that 
was considered under state law to be a single common bond credit union, 
but under federal rules would be classified a multiple common bond 
credit union, converts to a federal charter, the charter type must be 
changed to reflect federal policy.
    Six commenters approved of the amendment regarding state multiple 
group credit union conversions to federal multiple group charters. Two 
commenters stated that NCUA should make this policy more expansive. One 
commenter opposed this policy change.
    The NCUA Board believes that the proposed change is proper and is 
adopting the proposed amendment.
    The NCUA Board also proposed an amendment to Chapter IV, Section 
III.A of the Chartering Manual to clarify that a federal credit union 
converting to a state charter remains responsible for the operating fee 
for the year in which it converts. Four commenters opposed this 
clarification and requested that the fee be pro-rated. Currently, the 
operating fee is not pro-rated and the clarification does not change 
existing policy.

4. Corporate Restructuring for Occupational Common Bond Credit Unions 
and Multiple Common Bond Credit Unions

    The most challenging and complex field of membership issues have 
involved the loss or dilution of a field of membership as a result of 
corporate reorganization or restructuring. Although IRPS 99-1 addressed 
this issue, the current policy does not completely set forth the 
resolution to various, and sometime numerous, consequences of a 
corporate restructuring/reorganization, particularly when the credit 
unions involved are reluctant and, in some cases, refuse to mutually 
address the problem. Therefore, the NCUA Board proposed amendments 
regarding corporate restructuring for both single bond credit unions 
and multiple common bond credit unions.
    For single common bond credit unions, the NCUA Board proposed an 
amendment to clarify that if the group comprising the single common 
bond of a credit union merges with, or is acquired by, another group, 
the credit unions originally serving both groups can serve the new 
group resulting from the merger or acquisition after receiving a 
housekeeping amendment. In other words, it will be permissible for both 
credit unions to serve the same single common bond group. However, the 
credit unions may agree to divide the field of membership in some way. 
To clarify this practice, additional language was proposed to state 
that unless an agreement is reached limiting the overlap resulting from 
the corporate restructuring, NCUA will permit a complete overlap of the 
credit unions' fields of membership.
    For multiple common bond credit unions, the NCUA Board proposed an 
amendment to clarify that when two groups merge, or one group is 
acquired by the other, and each is in the field of membership of a 
credit union, then both (or all affected) credit unions can serve the 
resulting merged or acquired group, subject to any existing geographic 
limitation and without regard to any overlap provisions by a 
housekeeping amendment to its charter. As with single common bond 
credit unions, both credit unions will be allowed to serve the new 
group resulting from the merger, buyout or acquisition, and the credit 
unions can mutually divide the new field of membership. If they do not 
agree to a division of the field of membership, then a total overlap 
will be permitted, subject to any existing geographic limitation. The 
NCUA Board believes this to be in the best interests of the credit 
unions and the members due to the safety and soundness concerns that 
evolve when a credit union loses its field of membership.
    Seventeen commenters strongly approved of all of the amendments 
regarding corporate restructuring. Many of these commenters commended 
NCUA for how it proposed to address this complex issue. One commenter 
stated the changes to this section are not appropriate. This commenter 
states that the desire of the corporate sponsor should have a 
significant bearing on which credit union will serve the employees. 
Although the desires of the sponsor are important, from a safety and 
soundness perspective, as well as consumer choice, it would not be 
advisable to allow a sponsor to control the fate of a credit union. 
Therefore, the NCUA Board is adopting the proposed amendments on 
corporate restructuring in final as proposed. The corporate 
restructuring policy is applicable in any situation where two or more 
credit unions, regardless of their charter type, acquire a group as a 
result of a merger or corporate restructuring/acquisition.
    One commenter requested that single common bond credit unions 
should not have to list their subsidiaries. The Board does not agree. 
New groups, whether added as a result of an expansion or a housekeeping 
amendment, should be included in the field of membership to allow NCUA 
to monitor overlaps. It is important to note, however, that a credit 
union may have language in its field of membership as follows: `` XYZ 
Corporation and its subsidiaries.'' If such language exists or is added 
to the field of membership of a single common bond credit union, then 
the credit union can legitimately serve any new subsidiary acquired by 
the sponsor through a housekeeping amendment provided the ownership 
requirements are met. In this instance, no overlap analysis would be 
required.

5. Community Charters

    Although the NCUA Board did not propose any changes to its 
definition of a local community, one commenter suggested that any 
county or equivalent political jurisdiction, regardless of size, should 
be deemed a local community where residents interact or have common 
interests. Three commenters stated that they agree with NCUA that there 
is no negative presumption that arises with populations larger than 
300,000 in chartering a community credit union. One commenter stated 
that NCUA should consider defining a local community as one or more 
metropolitan statistical areas, as defined by the Office of Management 
and Budget, or one or more contiguous political subdivisions, such as 
counties, cities or towns. One commenter believes NCUA's definition of 
a local community is overly broad. Although the NCUA Board is not 
making any changes to the definition of local community, it does wish 
to note that areas larger than 300,000, such as Reno, Nevada, and San 
Francisco, California, qualify as a local community. Although not every 
large city will qualify as a local community, many

[[Page 64517]]

cities and/or metropolitan areas may have the indicia of a local 
community.
    Community Action Plan (CAP). The Board recommended amending IRPS 
99-1 to require all community credit unions to develop a CAP. The 
intent of the CAP provision is to supplement a community credit union's 
marketing plan by specifically addressing how the credit union plans to 
market its services to the entire community, including any underserved 
or low-income areas, if applicable. The proposed amendment also 
included a provision to require the board of community credit unions to 
periodically review and update their CAP to determine if all segments 
of the community were being served. If a credit union failed to make 
reasonable efforts to follow its CAP, then NCUA could initiate 
appropriate supervisory actions to require compliance.
    The rationale for CAP is relatively simple. Since service to the 
entire community is an essential consideration for community charters, 
then NCUA can and should set forth its expectation in this regard. Most 
importantly, a fundamental premise underlying the granting of any 
community charter is that the entire defined community area will be 
served. It has been, and continues to be, the intent of this Board that 
all segments of a community will be served, particularly members that 
reside in underserved areas. To this end, the CAP was proposed, 
notwithstanding the absence of tangible evidence regarding the manner 
in which credit unions attempt to meet this important goal.
    While the overwhelming majority of the responses opposed the 
proposed CAP provision, it is noteworthy that only 99 of the commenters 
would be directly affected by the provision as it was proposed. Also, 
one comment letter received from a trade association in favor of the 
provision counts 110 community charters among its members. Six other 
commenters favored CAP and four hundred and twenty-three commenters 
opposed CAP, some in very strong terms. However, in raising those 
concerns, it was evident that most commenters would agree that 
community credit unions should serve the entire community. The method 
by which this should be accomplished was the focal point of 
disagreement since most commenters relayed their belief that community 
credit unions were, in fact, meeting the goal highlighted by the CAP 
provision.
    Of those who approved of CAP, one recommended amending the proposal 
as follows: (a) Credit unions with less than $10 million in assets 
should be exempted; (b) NCUA should specify appropriate sanctions 
rather than reserving broad discretionary supervisory powers; and (c) 
NCUA should require that credit unions expanding into low-income 
communities submit regular service status reports. Another commenter 
recommended that CAP should extend to all federal credit unions.
    The commenters who objected primarily made the following points: 
(1) They believe the proposal is similar to Community Reinvestment Act 
(CRA) requirements; (2) it is unnecessary since there is no evidence 
that community credit unions are not serving their entire field of 
membership adequately; (3) NCUA's legal authority to promulgate this 
requirement is doubtful; (4) meaningful comment is impossible because 
the guidance to examiners in reviewing the CAP is not part of the 
proposal (also examiners are not qualified to review such a plan); (5) 
implementation of CAP will encourage more conversions to state charters 
or thrifts and eventually destroy the dual chartering system; (6) 
community charters naturally serve their entire communities; (7) the 
CAP provision is not safety and soundness related; (8) CAP increases 
regulatory burden; and (9) CAP harms small credit unions by making them 
develop unnecessary paperwork. Some commenters were also concerned that 
NCUA will extend this proposal to all federal and state chartered 
credit unions. One commenter stated it would take close to 40 hours to 
prepare a CAP and not the two hours estimated by NCUA.
    In opposing CAP, many commenters raised concerns tangential to the 
intent of CAP. In view of the objections raised, some observations 
relative to the CAP provision are appropriate.
    CAP is not the same as the Community Reinvestment Act (CRA), nor 
was it intended to be ``like CRA.'' CRA and its implementing 
regulations (12 U.S.C. 2901 et seq. and 12 CFR 228) set forth lending 
tests, investment tests, service tests, standards and assessments to 
assess an institution's record of helping the needs of the local 
communities in which the institution is chartered, regardless of 
whether the people in some of these communities are customers or 
affiliated with the institution. Conversely, the CAP provision is 
intended to serve as a tool to ensure that a community credit union has 
a plan to serve all segments of the community it is chartered to serve.
    Although there is only anecdotal evidence regarding community 
credit unions, as a group, serving their entire fields of membership, a 
CAP underscores the importance of this underlying principle for 
community charters. In fact, some federal credit union commenters sent 
in their business plans and marketing plans showing that they already 
had a plan in place to serve the entire community. Based on the 
comments of community credit unions and the submissions some of them 
provided, many community credit unions already have adopted plans and 
offer products and services designed to serve the entire community. 
Therefore, imposing this requirement on community credit unions should 
be minimally burdensome, if at all.
    Many commenters suggested that their community credit unions are 
already serving the entire community and that their credit unions are 
accomplishing the intent of the CAP provision. To suggest, as some did, 
that addressing the issue of serving the entire community is 
unnecessary overlooks the fact that many credit unions already 
recognize the importance of this issue. Additionally, any new community 
credit union, or a credit union converting to a community charter, must 
have addressed this issue under IRPS 99-1. For example, in this year 
alone, over 75 credit unions have converted to community charters and 
another 20 community credit unions have expanded their community 
boundaries.
    In recognition of the concerns raised by the commenters, the Board 
modified the proposed language requiring a separate CAP document. 
Rather, a community credit union must address in some form how it is 
going to serve the community it was granted, whether it is in their 
business or marketing plan, or other appropriate documentation. This 
revision to the proposed rule accommodates those community credit 
unions that already have found an appropriate method of setting forth 
how they intend to serve the entire community.
    The Board does not agree with the proposition that the CAP 
provision cannot be legally imposed. The Board has broad general 
authority to prescribe rules and regulations for the administration of 
the Federal Credit Union Act. 12 U.S.C. 1766(a); 12 U.S.C. 1789(a)(11). 
The Supreme Court has recognized that regulations promulgated under 
such broad empowering provisions of a statute ``will be sustained so 
long as *** [the regulation] is reasonably related to the purposes of 
the enabling legislation.'' Mourning v. Family Publications Service, 
Inc., 411 U.S. 356, 369 (1973) quoting Thorpe v. Housing Authority of 
the City of Durham, 393 U.S. 268, 280-81 (1969).
    The Board also has specific regulatory authority in connection with 
its

[[Page 64518]]

chartering and supervision of community credit unions, 12 U.S.C. 
1759(g), and general statutory responsibility, 12 U.S.C. 1781(c)(1)(D), 
to assure that the convenience and needs of the members to be served 
are being met by any credit union to which it provides federal share 
insurance. Consequently, the CAP provision is intended to underscore 
this responsibility.
    Failure to adequately serve the entire membership is a safety and 
soundness issue for a community credit union. A community credit union 
is frequently more susceptible to competition from other local 
financial institutions, sometimes lacks the ability to adequately 
implement payroll deduction and does not have support from any single 
sponsoring company or association. The long-term success of a community 
credit union is based on its ability to serve its entire community. 
Financial health and steady growth stem from a community credit union 
having an adequate plan to serve its entire membership and its entire 
community. Consequently, the failure to adequately serve the entire 
membership and/or the lack of an adequate plan to serve the entire 
community may ultimately become a safety and soundness issue for a 
community credit union.
    Generally, the remainder of the commenter's primary reasons for 
opposing CAP were based on philosophical positions or on speculation of 
what may or may not happen if CAP is implemented. Those concerns have 
been carefully considered. Briefly, the Board is not convinced, based 
on the evidence to date, that a plan devised by credit union management 
on how they intend to serve the entire community, the basis upon which 
the community charter was granted, will be harmful to small credit 
unions or decrease the value of a federal charter. In view of the 
modified approach, the issue of examiner guidance is moot since the 
examiner will review the document in the context of safety and 
soundness in the same manner they review a credit union's business plan 
or marketing plan.
    It is the Board's view that the underlying goals for proposing a 
CAP should not be abandoned. In light of the comments received, 
however, a modified approach to accomplish the goal of ensuring service 
to all segments of a community, and with less regulatory burden, can 
still be accomplished.
    The final rule requires that a community credit union address in 
either its marketing or business plan or other appropriate separate 
documentation, such as the strategic plan, project differentiation, 
etc, how it plans on serving the entire community, including how the 
credit union will market to the community and what products and 
services will be offered by the credit union to assist underserved 
members in the community. A separate document is not necessarily 
required. It will be the responsibility of credit union management to 
periodically review its business, marketing or other plans to evaluate 
all aspects of its annual and strategic goals, including service to all 
within the community. A credit union's use of its business or marketing 
plan is a factor that has been and will continue to be considered in 
the overall assessment of management. Included in this assessment will 
be the absence of any plan addressing how the credit union will serve 
the entire community. As stated in the preamble to the proposed rule, 
existing credit unions will have until December 31, 2001 to have a plan 
in place addressing how the credit union will serve the entire 
community. Finally, pursuant to this regulation, as well as Section 
741.6 of NCUA's Rules and Regulations, the regional director may 
request periodic service status reports from a community credit union 
to ensure that the needs of the community are being met.

6. Underserved Areas

    Three criteria must be met before an underserved area can be added 
to any federal credit union's field of membership. First, the area must 
be a local community. Second, the area must also be classified as an 
investment area as defined in section 103(16) of the Community 
Development Banking and Financial Institutions Act of 1994 (12 U.S.C. 
4703 (16)) and meet any additional requirements the Board may impose 
(the Board has not imposed any additional requirements). Third, the 
credit union adding the underserved area must establish and maintain an 
office or facility in the local community, neighborhood, or rural 
district.
    After reviewing the statutory intent of service to underserved 
areas and the overall goal of improving credit union service to these 
areas, the NCUA Board proposed to modify the current polices relating 
to each of the three criteria in order to encourage further development 
of credit union activities in underserved areas and thereby improve 
financial services to those most in need.
    First, the NCUA Board proposed that if a geographic area meets the 
requirements for an investment area, and the size of the investment 
area, whether contained wholly or in part of a single political 
jurisdiction or multiple political jurisdictions, meets the presumptive 
criteria established in IRPS 99-1, then the credit union will not have 
to demonstrate common interests or interaction among the residents. 
Accordingly, the NCUA Board proposed that Chapter III, Section III, 
should be amended to state that the ``well-defined local community, 
neighborhood, or rural district'' requirement will be met if:

    (1) the underserved area to be served is in a recognized single 
political jurisdiction, i.e., a county or its political equivalent 
or any contiguous political subdivisions contained therein, and if 
the population of the requested well-defined area does not exceed 
300,000, or
    (2) the underserved area to be served is in multiple contiguous 
political jurisdictions, i.e., a county or its political equivalent 
or any political subdivisions contained therein and if the 
population of the requested well-defined area does not exceed 
200,000.

    Second, the NCUA Board proposed that if the area meets the poverty, 
median family income, unemployment, distressed housing, or population 
loss criteria as set forth in the Community Development Banking and 
Financial Institutions Act of 1994, then the Board will presume that 
there are significant unmet needs for loans or equity investments.
    Third, the NCUA Board proposed that at the time the underserved 
area is added to the credit union's field of membership, a plan must be 
in place to establish and maintain an office or facility within two 
years. In addition to a permanent office or facility, this requirement 
may also be satisfied through periodic service to the underserved area 
through the use of a mobile office, an office open at select times each 
week, a service facility or shared service facilities. A credit union 
that has multiple underserved areas in its field of membership must 
meet the statutory requirement for each underserved area unless the 
underserved areas are contiguous. In addition, the NCUA Board proposed 
that if a credit union has a preexisting service facility within close 
proximity to the underserved area(s), then it will not be required to 
maintain a service facility within the underserved area. Close 
proximity will be determined on a case-by-case basis. However, the 
service facility must be readily accessible to the residents and the 
distance from the underserved area to the service facility should not 
be an impediment to a majority of the residents to transact credit 
union business.
    Twelve commenters approved of the amendments regarding underserved 
areas. One of these commenters stated

[[Page 64519]]

that a service facility is close to an underserved area if it is 
accessible by public transportation or within walking distance. Another 
commenter suggested a service facility is not necessary and a credit 
union could use electronic means to serve the underserved community. 
Two commenters opposed the change on the location of the service 
facility stating that it is contrary to statute.
    The NCUA Board is adopting the changes as proposed in the final 
rule. To clarify, the credit union adding the underserved area must 
establish a service facility within the underserved area within a two-
year period, or the credit union's service facility must be reasonably 
proximate to the underserved area. The key to the reasonably proximate 
concept is that the availability of products and services be easily 
accessible to community residents.
    In addition to the amendments discussed above, the Board requested 
comment on providing incentives for credit unions to add underserved 
communities if the underserved community is a minimum population size. 
Comments were specifically requested on what the population size of the 
underserved area should be in order for the credit union to qualify for 
one or more of the following incentives:
     The asset base used to compute the credit union's 
operating fee will be frozen for a two-year period.
     The operating fee will be reduced by ten percent or more 
per year until the total reduction equals $20,000 over a maximum five-
year period.
     The assets of the underserved area will not be included in 
the calculation of the credit union's operating fee for five years.
     Fixed assets in the underserved area will not be counted 
toward the fixed asset limitation of Sec. 701.35 of NCUA's Rules and 
Regulations. In addition, the credit union would be exempt from the 
charitable donation regulation, Sec. 701.25, and would be allowed to 
increase the dollar threshold from $100,000 to $250,000 when an 
appraisal is required, Sec. 722.3(a)(1).
    Two commenters stated that the final rule should provide incentives 
for adding underserved areas, but did not suggest any specific 
incentive. One commenter appeared to approve of all the incentives, but 
suggested a minimum size for the underserved area for the incentives to 
be applicable. Another commenter stated that there should be no minimum 
size. One commenter believes that incentives to encourage the addition 
of underserved areas should be geared to performance. This commenter 
further stated that no credit union should receive any incentive if it 
simply adds an underserved area, but fails to serve the low-income 
population therein. Assuming that NCUA links incentives to performance, 
this commenter would support the regulatory waivers set forth above.
    One commenter stated that providing incentives for adding 
underserved areas needs further study before any of them are 
implemented. One commenter specifically opposed the operating fee 
incentive. One commenter specifically opposed exempting credit unions 
from certain regulations simply because they added an underserved area. 
One commenter believes NCUA should encourage and support credit unions 
that serve underserved groups but did not approve of the cited 
incentives. Three commenters did not approve of having incentives to 
add underserved areas.
    One commenter stated that credit unions adding underserved areas 
should get special consideration of loan delinquency or loss experience 
in connection with serving an underserved community. One commenter 
suggested that NCUA consider allowing credit unions that serve 
underserved areas to accept some form of secondary capital account or 
nonmember deposit that would be considered regulatory net worth.
    One commenter suggested that, instead of incentives, NCUA establish 
a grant program wherein credit unions could apply for monetary awards 
based on the extent of their operations in underserved communities. One 
commenter did not approve of the incentives, but suggested deleting a 
regional director's ability to request a credit union's service status 
report on serving an underserved area. One commenter requested NCUA 
always request periodic service status reports on serving underserved 
areas.
    At this time, the NCUA Board is deferring any immediate action 
regarding providing incentives to credit union's adding underserved 
areas. As a result of the changes adopted in this final regulation, it 
would appear that additional incentives may not be necessary. Further, 
the Board is encouraged that as of September 30, 2000, thirty credit 
unions have added underserved areas, as opposed to nine in 1999. The 
Board will continue to monitor this issue, and if more incentives are 
required to increase service to underserved areas, it will again be 
reviewed. The NCUA Board is also intrigued by the idea of a grant 
program and will further consider this idea.
    The NCUA Board still believes that it is important for the regional 
director to have the discretion to ask for service status reports to 
determine if the underserved areas are being adequately served by the 
credit union. This data is especially important if the credit union 
seeks to add additional underserved areas. In addition, this 
information may prove useful in determining what type of problems 
credit unions may encounter in serving underserved areas.

7. Miscellaneous

    One commenter stated that the unavailability of credit union 
service should not factor into reasonable proximity. Two commenters 
requested that NCUA add the following sentence in the preamble to the 
proposed rule to the final rule: ``the non-availability of other credit 
unions is a factor to be considered in determining whether the group is 
within reasonable proximity * * * '' of a credit union wishing to add 
the group to its field of membership. The NCUA Board agrees with these 
two commenters and has incorporated this statement with an additional 
clarification in the final rule.
    One commenter encouraged NCUA to continue to consider the 
``reasonable proximity'' issue on a case-by-case basis to enable credit 
unions with the greatest opportunity to reach out to consumers, 
especially those living in underserved communities. One commenter 
stated that NCUA should avoid mileage limitations in defining 
reasonable proximity. To restate current policy, the NCUA Board does 
not have any mileage limitations for adding select groups and defines 
reasonable proximity on a case-by-case basis as was previously 
discussed in the preamble to IRPS 99-1. 63 FR 71988, 72002-72003 
(December 30, 1998).
    One commenter stated that NCUA's interpretation of ``single common 
bond credit union'' should include credit unions that can demonstrate 
meaningful affinity and bonds of groups other than on the basis of the 
employer entity or the association entity. One commenter requested that 
the definition of occupational common bond include trade, industry and 
professional designations. Although both of these suggestions would 
meet the legal requirements of CUMAA, the Board has operational 
concerns with such an approach and does not believe a broader 
definition is currently necessary.
    One commenter asked that NCUA clarify that, for single common bond 
credit unions, additional sponsor-related groups can be added after the 
enactment of CUMAA, but that no unrelated groups can be added to single

[[Page 64520]]

common bond credit unions. This commenter's statement is correct. One 
commenter suggested that credit unions should be allowed to serve the 
customers of select groups that have been approved in their fields of 
membership. The NCUA Board disagrees and does not believe such an 
approach is legal under CUMAA.
    One commenter requested that NCUA no longer require a letter from 
the group desiring credit union service in regard to a multiple group 
field of membership expansion. The NCUA Board disagrees with this 
commenter's suggestion. It should be a group's decision to affiliate 
with a credit union. Additionally, there are legal requirements in 
adding a group that a letter from the group may satisfy.

8. Technical Amendment on the Title of the Section Regarding Immediate 
Family Members

    The Board proposed to change the titles of Chapter 2, Section II.H, 
Chapter II, Section III.H. and Chapter II, Section IV.H. to ``Other 
Persons Eligible for Credit Union Membership.'' The NCUA Board received 
no comment on this change and is adopting this amendment in final as 
proposed.

9. Express Chartering Program

    The Field of Membership Taskforce and the Office of Examination and 
Insurance have developed and are ready to implement an express 
chartering program (ECP). The ECP utilizes standardized forms, NCUA on-
site assistance, and certain restrictions on the initial services that 
may be offered. The ECP will be periodically reviewed by the Office of 
Examination and Insurance to determine whether it is achieving its 
intended purpose without creating additional risks to the National 
Credit Union Share Insurance Fund.
    The ECP will use, to the greatest extent possible, standardized 
forms to facilitate the issuance of a charter early during the 
chartering process. They include:
     Model business plan for limited services;
     Standard member survey format;
     Policy guidelines (shares, lending, investments, etc.); 
and
     Sample letters for sponsor support, grants, and nonmember 
deposits (where applicable).
    Initially, credit unions using ECP will only be able to offer basic 
services, some of which include regular shares, signature loans not 
exceeding predetermined amounts, and the sale of money orders and 
travelers checks. This will enable the officials to familiarize 
themselves with basic credit union operations and cash management 
skills. The Letter of Understanding and Agreement that always 
accompanies a new charter will include this restriction. An applicant 
credit union can elect not to use ECP; however, standard chartering 
procedures must then be used.
    Once a credit union demonstrates it can manage these limited 
responsibilities, the officials can submit a new credit union prepared 
business plan to expand services (e.g., share drafts, credit cards, 
etc.). This further refinement of the business plan can be accomplished 
in stages with increased responsibilities and services offered 
commensurate with the approved business plan.
    The advantage of the ECP is that once the credit union is 
chartered, some services can be offered, and the officials will gain 
experience and knowledge in the operation of a credit union as they 
prepare a more detailed business plan to implement additional services. 
It is also believed that the importance of a business plan will be 
better understood if the officials are actually engaged in operating 
the credit union.
    While NCUA's resources are limited, judicious use of NCUA staff to 
work with qualifying groups will be beneficial. The ECP will make use 
of the regional economic development specialists (EDS) to guide the 
group through the application process. Once the group is chartered, the 
EDS and examiner will work with the credit union, as they do now.

Internet Expansion Requests

    The Field of Membership Taskforce and the Office of the Chief 
Information Officer have developed an internet select group expansion 
form, which is expected to be implemented when testing is completed. 
This process allows credit unions to submit requests for occupational 
groups of 500 or less primary potential members online with an 
expedited approval by NCUA. The regional directors can provide credit 
unions with specific details on how to do an expansion through the 
internet.

B. Regulatory Procedures

Regulatory Flexibility Act

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

Paperwork Reduction Act

    The reporting requirements in IRPS 00-1 have been approved by the 
Office of Management and Budget. The OMB number is 3133-0015 and will 
be displayed in the table at 12 CFR 795.

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their regulatory actions on state and local 
interests. In adherence to fundamental federalism principles, NCUA, an 
independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the executive order. This final rule only 
applies to federal credit unions. It will not have substantial direct 
effects on the states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. NCUA has 
determined that the final rule does not constitute a policy that has 
federalism implications for purposes of the executive order.

Congressional Review

    OMB has determined that the provisions of IRPS 00-1 do not 
constitute a major rule.

C. Agency Regulatory Goal

    NCUA's goal is clear, understandable regulations that impose a 
minimal regulatory burden. We requested comments on whether the 
proposed amendments are understandable and minimally intrusive if 
implemented as proposed. No commenters addressed this issue, except in 
regard to CAP, which was previously addressed.

List of Subjects in 12 CFR Part 701

    Credit, Credit unions, Reporting and recordkeeping requirements.

    By the National Credit Union Administration Board on October 19, 
2000.
Becky Baker,
Secretary of the Board.

    Accordingly, NCUA amends 12 CFR part 701 as follows:

PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

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


    Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a, 
1761b, 1766, 1767, 1782, 1784, 1787, 1789.

    Section 701.6 is also authorized by 15 U.S.C. 3717.

[[Page 64521]]

    Section 701.31 is also authorized by 15 U.S.C. 1601, et seq., 42 
U.S.C. 1981 and 3601-3610.
    Section 701.35 is also authorized by 12 U.S.C. 4311-4312.


    2. Section 701.1 is revised to read as follows:


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

    National Credit Union Administration policies concerning 
chartering, field of membership modifications, and conversions are set 
forth in Interpretive Ruling and Policy Statement 99-1, Chartering and 
Field of Membership Policy (IRPS 99-1), as amended by IRPS 00-1. Copies 
may be obtained by contacting NCUA at the address found in 
Sec. 790.2(b) of this chapter. The combined IRPS are incorporated into 
this section.


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

    Note: The text of the Interpretive Ruling and Policy Statement 
(IRPS 99-1) does not, and the following amendments will not, appear 
in the Code of Federal Regulations.



    3. In IRPS 99-1, Chapter 2, Section II.A is revised to read as 
follows:

    A single occupational common bond federal credit union may 
include in its field of membership all persons and entities who 
share that common bond. NCUA permits a person's membership 
eligibility in a single occupational common bond group to be 
established in four ways:
     Employment (or a long-term contractual relationship 
equivalent to employment) in a single corporation or other legal 
entity makes that person part of an single occupational common bond;
     Employment in a corporation or other legal entity with 
a controlling ownership interest (which shall not be less than 10 
percent) in or by another legal entity makes that person part of a 
single occupational common bond;
     Employment in a corporation or other legal entity which 
is related to another legal entity (such as a company under contract 
and possessing a strong dependency relationship with another 
company) makes that person part of a single occupational common 
bond; or
     Employment or attendance at a school makes that person 
part of a single occupational common bond (see Chapter 2, III.A.1).
    A geographic limitation is not a requirement for a single 
occupational common bond. However, for purposes of describing the 
field of membership, the geographic areas being served will be 
included in the charter. For example:
     Employees, officials, and persons who work regularly 
under contract in Miami, Florida for ABC Corporation or the 
subsidiaries listed below;
     Employees of ABC Corporation who are paid from * * *;
     Employees of ABC Corporation who are supervised from * 
* *;
     Employees of ABC Corporation who are headquartered in * 
* *; and/or
     Employees of ABC Corporation who work in the United 
States.
    So that NCUA may monitor any potential field of membership 
overlaps, each group to be served (e.g., new employees of 
subsidiaries, franchisees, and contractors) should be separately 
listed in Section 5 of the charter. However, in situations where 
multiple contractors, who qualify based on a strong dependency 
relationship, are sole proprietors, the regional director may 
determine that more generalized wording is acceptable (e.g., ``non-
incorporated owner-operators who work regularly under contract to 
AJM Industries, Inc. in Glenville, New York''). In addition, it is 
permissible to simply state in a single common bond charter the 
following: ``AJM Industries, Inc. and its subsidiaries.'' If AJM 
Industries, Inc. adds new subsidiaries the charter can be amended 
with a simple housekeeping amendment and no overlap analysis is 
required.
    The corporate or other legal entity (i.e., the employer) may 
also be included in the common bond--e.g., ``ABC Corporation.'' The 
corporation or legal entity will be defined in the last clause in 
Section 5 of the credit union's charter.
    A charter applicant must provide documentation to establish that 
the single occupational common bond requirement has been met.
    Some examples of a single occupational common bond are:
     Employees of the Hunt Manufacturing Company who work in 
West Chester, Pennsylvania. (common bond--same employer with 
geographic definition);
     Employees of the Buffalo Manufacturing Company who work 
in the United States. (common bond--same employer with geographic 
definition);
     Employees, elected and appointed officials of municipal 
government in Parma, Ohio. (common bond--same employer with 
geographic definition);
     Employees of Johnson Soap Company and its majority 
owned subsidiary, Johnson Toothpaste Company, who work in, are paid 
from, are supervised from, or are headquartered in Augusta and 
Portland, Maine. (common bond--parent and subsidiary company with 
geographic definition);
     Employees of MMLLJS contractor who work regularly at 
the U.S. Naval Shipyard in Bremerton, Washington. (common bond--
employees of contractors with geographic definition);
     Employees, doctors, medical staff, technicians, medical 
and nursing students who work in or are paid from the Newport Beach 
Medical Center, Newport Beach, California. (single corporation with 
geographic definition);
     Employees of JLS, Incorporated and MJM, Incorporated 
working for the LKM Joint Venture Company in Catalina Island, 
California. (common bond--same employer--ongoing dependent 
relationship);
     Employees of and students attending Georgetown 
University. (common bond--same occupation); or
     Employees of all the schools supervised by the Timbrook 
Board of Education in Timbrook, Georgia. (common bond--same 
employer).
    Some examples of insufficiently defined single occupational 
common bonds are:
     Employees of manufacturing firms in Seattle, 
Washington. (no defined occupational sponsor);
     Persons employed or working in Chicago, Illinois. (no 
occupational common bond);
     Employees of all colleges and universities in the State 
of Texas. (not a single occupational common bond); or
     Employees of Timbrook School District and Swanbrook 
School District, in Burns, Georgia. (not a single occupational 
common bond).


    4. In IRPS 99-1, Chapter 2, Section III.A.1 is revised to read as 
follows:

    A single associational federal credit union may include in its 
field of membership, regardless of location, all members and 
employees of a recognized association. A single associational common 
bond consists of individuals (natural persons) and/or groups (non 
natural persons) whose members participate in activities developing 
common loyalties, mutual benefits, and mutual interests. Separately 
chartered associational groups can establish a single common bond 
relationship if they are integrally related and share common goals 
and purposes. For example, two or more churches of the same 
denomination, Knights of Columbus Councils, or locals of the same 
union can qualify as a single associational common bond.
    Individuals and groups eligible for membership in a single 
associational credit union can include the following:
     Natural person members of the association (for example, 
members of a union or church members);
     Non-natural person members of the association;
     Employees of the association (for example, employees of 
the labor union or employees of the church); and
     The association.
    Generally, a single associational common bond does not include a 
geographic definition. However, a proposed or existing federal 
credit union may limit its field of membership to a single 
association or geographic area. NCUA may impose a geographic 
limitation if it is determined that the applicant credit union does 
not have the ability to serve a larger group or there are other 
operational concerns. All single associational common bonds will 
include a definition of the group that may be served based on the 
effective date of the association's charter, bylaws, and any other 
equivalent documentation. If the associational charter crosses NCUA 
regional boundaries, each of the affected regional directors must be 
consulted prior to NCUA action on the charter.
    Qualifying associational groups must hold meetings open to all 
members, must sponsor

[[Page 64522]]

other activities which demonstrate that the members of the group 
meet to accomplish the objectives of the association, and must have 
an authoritative definition of who is eligible for membership. 
Usually, this will be found in the association's charter and bylaws.
    The common bond for an associational group cannot be established 
simply on the basis that the association exists. In determining 
whether a group satisfies associational common bond requirements for 
a federal credit union charter, NCUA will consider the totality of 
the circumstances, such as:
     Whether members pay dues;
     Whether members participate in the furtherance of the 
goals of the association;
     Whether the members have voting rights. To meet this 
requirement, members need not vote directly for an officer, but may 
vote for a delegate who in turn represents the members' interests;
     Whether the association maintains a membership list;
     The association's membership eligibility requirements; 
and
     The frequency of meetings.
    A support group whose members are continually changing or whose 
duration is temporary may not meet the single associational common 
bond criteria. Individuals or honorary members who only make 
donations to the association are not eligible to join the credit 
union. Other classes of membership that do not meet to accomplish 
the goals of the association would not qualify.
    Educational groups--for example, parent-teacher organizations, 
alumni associations, and student organizations in any school--and 
church groups constitute associational common bonds and may qualify 
for a federal credit union charter.
    Student groups (e.g., students enrolled at a public, private, or 
parochial school) may constitute either an associational or 
occupational common bond. For example, students enrolled at a church 
sponsored school could share a single associational common bond with 
the members of that church and may qualify for a federal credit 
union charter. Similarly, students enrolled at a university, as a 
group by itself, or in conjunction with the faculty and employees of 
the school, could share a single occupational common bond and may 
qualify for a federal credit union charter (see Charter 2, II.A).
    Homeowner associations, tenant groups, co-ops, consumer groups, 
and other groups of persons having an ``interest in'' a particular 
cause and certain consumer cooperatives may also qualify as an 
association.
    The terminology ``Alumni of Jacksonville State University'' is 
insufficient to demonstrate an associational common bond. To qualify 
as an association, the alumni association must meet the requirements 
for an associational common bond. The alumni of a school must first 
join the alumni association, and not merely be alumni of the school 
to be eligible for membership.
    Associations based primarily on a client-customer relationship 
do not meet associational common bond requirements. However, having 
an incidental client-customer relationship does not preclude an 
associational charter as long as the associational common bond 
requirements are met. For example, a fraternal association that 
offers insurance, which is not a condition of membership, may 
qualify as a valid associational common bond.
    Applicants for a single associational common bond federal credit 
union charter or a field of membership amendment to include an 
association must provide, at the request of the regional director, a 
copy of the association's charter, bylaws, or other equivalent 
documentation, including any legal documents required by the state 
or other governing authority.
    The associational sponsor itself may also be included in the 
field of membership--e.g., ``Sprocket Association''--and will be 
shown in the last clause of the field of membership.

    5. In IRPS 99-1, Chapter 2, Section II.B.4 and Section III.B.4 
replace the number ``200'' with the number ``500.'':

    6. In IRPS 99-1, Chapter 2, Section IV.B.3 is revised to read as 
follows:

    A multiple common bond credit union requesting a select group 
expansion must submit a formal written request, using the 
Application for Field of Membership Amendment (NCUA 4015) to the 
appropriate NCUA regional director. If a credit union is adding a 
group of 500 or less primary potential members, then the NCUA 4015-
EZ should be used. The request must be signed by an authorized 
credit union representative.
    The NCUA 4015 (for groups in excess of 500 primary potential 
members) must be accompanied by the following:
     A letter signed by an authorized representative of the 
group to be added. Wherever possible, this letter must be submitted 
on the group's letterhead stationery. The regional director may 
accept such other documentation or certification as deemed 
appropriate. This letter must indicate:

--The group's occupational or associational common bond;
--That the group wants to be added to the federal credit union's 
field of membership;
--Whether the group presently has other credit union service 
available;
--The number of persons currently included within the group to be 
added and their locations;
--The group's proximity to credit union's nearest service facility, 
and
--Why the formation of a separate credit union for the group is not 
practical or consistent with safety and soundness standards, and 
provide comments on as many of the following factors that are 
applicable (A credit union need not address every item on the list, 
simply those issues that are relevant to its particular request):

     Member location--whether the membership is widely 
dispersed or concentrated in a central location.
     Demographics--the employee turnover rate, economic 
status of the group's members, and whether the group is more apt to 
consist of savers and/or borrowers.
     Market competition--the availability of other financial 
services.
     Desired services and products--the type of services the 
group desires in comparison to the type of services a new credit 
union could offer.
     Sponsor subsidies--the availability of operating 
subsidies.
     The desire of the sponsor.
     Employee interest--the extent of the employees' 
interest in obtaining a credit union charter.
     Evidence of past failure--whether the group previously 
had its own credit union or previously filed for a credit union 
charter.
     Administrative capacity to provide services--will the 
group have the management expertise to provide the services 
requested.
     If the group is eligible for membership in any other 
credit union, documentation must be provided to support inclusion of 
the group under the overlap standards set forth in Section IV.E of 
this Chapter; and
     The most recent copy of the group's charter and bylaws 
or equivalent documentation (for associational groups).
    The NCUA 4015-EZ (for groups of 500 or less primary potential 
members) must be accompanied by the following:
     A letter signed by an authorized representative of the 
group to be added. Wherever possible, this letter must be submitted 
on the group's letterhead stationery. The regional director may 
accept such other documentation or certification as deemed 
appropriate. This letter must indicate:

--How the group shares the credit union's occupational or 
associational common bond;
--That the group wants to be added to the applicant federal credit 
union's field of membership;
--The number of persons currently included within the group to be 
added and their locations; and
     The group's proximity to credit union's nearest service 
facility.

     The most recent copy of the group's charter and bylaws 
or equivalent documentation (for associational groups).


    7. In IRPS 99-1, Chapter 2, Section II.E.1 is revised to read as 
follows:

    An overlap exists when a group of persons is eligible for 
membership in two or more credit unions. As a general rule, NCUA 
will not charter two or more credit unions to serve the same single 
occupational group. An overlap is permitted when the expansion's 
beneficial effect in meeting the convenience and needs of the 
members of the group proposed to be included in the field of 
membership clearly outweighs any adverse effect on the overlapped 
credit union. However, when two or more credit unions are attempting 
to serve the same occupational group, an overlap can be permitted.
    Proposed or existing credit unions must investigate the 
possibility of an overlap with federally insured credit unions prior 
to submitting an application for a proposed charter or expansion if 
the group(s) is greater than 500 primary potential members.
    When an overlap situation does arise, officials of the involved 
credit unions must

[[Page 64523]]

attempt to resolve the overlap issue. If the matter is resolved 
between the affected credit unions, the applicant must submit a 
letter to that effect from the credit union whose field of 
membership already includes the subject group.
    If no resolution is possible or the overlapped credit union 
fails to provide a letter, an application for a new charter or field 
of membership expansion may still be submitted, but must also 
include information regarding the overlap and documented attempts at 
resolution. Documentation on the interests of the group, such as a 
petition signed by a majority of the group's members, will be 
strongly considered.
    An overlap will not be considered adverse to the overlapped 
credit union if:
     The group has 500 or less primary potential members or 
the overlap is otherwise incidental in nature--i.e., the group of 
persons in question is so small as to have no material effect on the 
original credit union;
     The overlapped credit union does not object to the 
overlap; or
     There is limited participation by members or employees 
of the group in the original credit union after the expiration of a 
reasonable period of time.
    In reviewing the overlap, the regional director will consider:
     The nature of the issue;
     Efforts made to resolve the matter;
     Financial effect on the overlapped credit union;
     The desires of the group(s);
     Whether the original credit union fails to provide 
requested service;
     The desire of the sponsor organization; and
     The best interests of the affected group and the credit 
union members involved.
    Potential overlaps of a federally insured state credit union's 
field of membership by a federal credit union will generally be 
analyzed in the same way as if two federal credit unions were 
involved. Where a federally insured state credit union's field of 
membership is broadly stated, NCUA will exclude its field of 
membership from any overlap protection.
    New charter applicants and every single occupational common bond 
group which comes before the regional director for affiliation with 
an existing federal credit union must advise the regional director 
in writing whether the group is included within the field of 
membership of any other credit union except a community charter. 
This notification requirement is not applicable to groups with 500 
or less primary potential members. If cases arise where the 
assurance given to a regional director concerning unavailability of 
credit union service is inaccurate, the misinformation is grounds 
for removal of the group from the federal credit union's charter.
    NCUA will permit single occupational federal credit unions to 
overlap community charters without performing an overlap analysis.

    8. In IRPS 99-1, Chapter 2, Section II.E.2 is revised to read as 
follows:

    A federal credit union's field of membership will always be 
governed by the common bond descriptions contained in Section 5 of 
its charter. Where a sponsor organization expands its operations 
internally, by acquisition or otherwise, the credit union may serve 
these new entrants to its field of membership if they are part of 
the common bond described in Section 5. Where acquisitions are made 
which add a new subsidiary, the group cannot be served until the 
subsidiary is included in the field of membership through a 
housekeeping amendment.
    Overlaps may occur as a result of restructuring or merger of the 
parent organization. Credit unions affected by organizational 
restructuring or merger should attempt to resolve overlap issues 
among themselves. If an agreement is reached, they must apply to 
NCUA for a modification of their fields of membership to reflect the 
groups each will serve. Unless an agreement is reached limiting the 
overlap resulting from the corporate restructuring, NCUA will permit 
a complete overlap of the credit unions' fields of membership.
    In addition, credit unions must submit to NCUA documentation 
explaining the restructuring and providing information regarding the 
new organizational structure. The credit union must identify 
divisions and subsidiaries and the locations of each. Where the 
sponsor and its employees desire to continue service, NCUA may use 
wording such as the following:
     Employees of Lucky Corporation, formerly a subsidiary 
of Tool, Incorporated, located in Charleston, South Carolina.


    9. In IRPS 99-1, Chapter 2, Section III.E.1 is revised to read as 
follows:

    An overlap exists when a group of persons is eligible for 
membership in two or more credit unions. As a general rule, NCUA 
will not charter two or more credit unions to serve the same single 
associational group. An overlap is permitted when the expansion's 
beneficial effect in meeting the convenience and needs of the 
members of the group proposed to be included in the field of 
membership clearly outweighs any adverse effect on the overlapped 
credit union. However, when two or more credit unions are attempting 
to serve the same associational group, an overlap can be permitted.
    Proposed or existing credit unions must investigate the 
possibility of an overlap with federally insured credit unions prior 
to submitting an application for a proposed charter or expansion if 
the group(s) is greater than 500 primary potential members.
    When an overlap situation does arise, officials of the involved 
credit unions must attempt to resolve the overlap issue. If the 
matter is resolved between the credit unions, the applicant must 
submit a letter to that effect from the credit union whose field of 
membership already includes the subject group.
    If no resolution is possible or the overlapped credit union 
fails to provide a letter, an application for a new charter or field 
of membership expansion may still be submitted, but must also 
include information regarding the overlap and documented attempts at 
resolution. Documentation on the interests of the group, such as a 
petition signed by a majority of the group's members, will be 
strongly considered.
    An overlap will not be considered adverse to the overlapped 
credit union if:
     The group has 500 or less primary potential members or 
the overlap is otherwise incidental in nature--i.e., the group of 
persons in question is so small as to have no material effect on the 
original credit union;
     The overlapped credit union does not object to the 
overlap;
     There is limited participation by members of the group 
in the original credit union after the expiration of a reasonable 
period of time; or
     The field of membership is broadly stated, such as a 
national association.
    In reviewing the overlap, the regional director will consider:
     The nature of the issue;
     Efforts made to resolve the matter;
     Financial effect on the overlapped credit union;
     The desires of the group(s);
     Whether the original credit union fails to provide 
requested service;
     The desire of the sponsor organization; and
     The best interests of the affected group and the credit 
union members involved.
    Potential overlaps of a federally insured state credit union's 
field of membership by a federal credit union will generally be 
analyzed in the same way as if two federal credit unions were 
involved. Where a federally insured state credit union's field of 
membership is broadly stated, NCUA will exclude its field of 
membership from any overlap protection.
    New charter applicants and every single associational common 
bond group which comes before the regional director for affiliation 
with an existing federal credit union must advise the regional 
director in writing whether the group is included within the field 
of membership of any other credit union except a community charter. 
This notification requirement is not applicable to groups with 500 
or less primary potential members. If cases arise where the 
assurance given to a regional director concerning unavailability of 
credit union service is inaccurate, the misinformation is grounds 
for removal of the group from the federal credit union's charter.
    NCUA will permit single associational federal credit unions to 
overlap community charters without performing an overlap analysis.


    10. In IRPS 99-1, Chapter 2, Section III.E.2 is revised to read as 
follows:

    A federal credit union's field of membership will always be 
governed by the common bond descriptions contained in Section 5 of 
its charter. Where a sponsor organization expands its operations 
internally, by acquisition or otherwise, the credit union may serve 
these new entrants to its field of membership if they are part of 
the common bond described in Section 5.
    Overlaps may occur as a result of restructuring or merger of the 
parent organization. Credit unions affected by organizational 
restructuring or merger should

[[Page 64524]]

attempt to resolve overlap issues among themselves. If an agreement 
is reached, they must apply to NCUA for a modification of their 
fields of membership to reflect the groups each will serve. Unless 
an agreement is reached limiting the overlap resulting from the 
corporate restructuring, NCUA will permit a complete overlap of the 
credit unions' fields of membership.


    11. In IRPS 99-1, Chapter 2, Section IV.E.2 is revised to read as 
follows:

    A federal credit union's field of membership will always be 
governed by the field of membership descriptions contained in 
Section 5 of its charter. Where a sponsor organization expands its 
operations internally, by acquisition or otherwise, the credit union 
may serve these new entrants to its field of membership if they are 
part of any select group listed in Section 5. Where acquisitions are 
made which add a new subsidiary, the group cannot be served until 
the subsidiary is included in the field of membership through a 
housekeeping amendment.
    Overlaps may occur as a result of restructuring or merger of the 
parent organization. When such overlaps occur, each credit union 
must request a field of membership amendment to reflect the new 
groups each wishes to serve. The credit union can continue to serve 
any current group in its field of membership that is acquiring a new 
group or has been acquired by a new group. The new group cannot be 
served by the credit union until the field of membership amendment 
is approved by NCUA.
    Credit unions affected by organizational restructuring or merger 
should attempt to resolve overlap issues among themselves. Unless an 
agreement is reached limiting the overlap resulting from the 
corporate restructuring, NCUA will permit a complete overlap of the 
credit unions' fields of membership. When two groups merge, or one 
group is acquired by the other, and each is in the field of 
membership of a credit union, both (or all affected) credit unions 
can serve the resulting merged or acquired group, subject to any 
existing geographic limitation and without regard to any overlap 
provisions. This can be accomplished through a housekeeping 
amendment.
    In addition, credit unions must submit to NCUA documentation 
explaining the restructuring and providing information regarding the 
new organizational structure. The credit union must identify 
divisions and subsidiaries and the locations of each. Where the 
sponsor and its employees desire to continue service, NCUA may use 
wording such as the following:
     Employees of MHS Corporation, formerly a subsidiary of 
Tool, Incorporated, located in Charleston, South Carolina.


    12. In IRPS 99-1, Chapter 2, Section IV.A.1 is revised to read as 
follows:

    A federal credit union may be chartered to serve a combination 
of distinct, definable single occupational and/or associational 
common bonds. This type of credit union is called a multiple common 
bond credit union. Each group in the field of membership must have 
its own occupational or associational common bond. For example, a 
multiple common bond credit union may include two unrelated 
employers, or two unrelated associations, or a combination of two or 
more employers or associations. Additionally, these groups must be 
within reasonable geographic proximity of the credit union. That is, 
the groups must be within the service area of one of the credit 
union's service facilities. These groups are referred to as select 
groups. A multiple common bond credit union cannot expand using 
single common bond criteria.
    A federal credit union's service area is the area that can 
reasonably be served by the service facilities accessible to the 
groups within the field of membership. The service area will most 
often coincide with that geographic area primarily served by the 
service facility. Additionally, the groups served by the credit 
union must have access to the service facility. The non-availability 
of other credit union service is a factor to be considered in 
determining whether the group is within reasonable proximity of a 
credit union wishing to add the group to its field of membership.
    A service facility is defined as a place where shares are 
accepted for members' accounts, loan applications are accepted, and 
loans are disbursed. This definition includes a credit union owned 
branch, a mobile branch, an office operated on a regularly scheduled 
weekly basis, or a credit union owned electronic facility that 
meets, at a minimum, these requirements. A service facility also 
includes a shared branch if the credit union either (1) owns 
directly or through a CUSO or similar organization at least a 5 
percent interest in the service facility, or (2) the service 
facility is local to the credit union and the credit union is an 
authorized participant in the service center. This definition does 
not include an ATM.
    The select group as a whole will be considered to be within a 
credit union's service area when:
     A majority of the persons in a select group live, work, 
or gather regularly within the service area;
     The group's headquarters is located within the service 
area; or
     The group's ``paid from'' or ``supervised from'' 
location is within the service area.

    13. In IRPS 99-1, Chapter 2, Section IV.B.2 is revised to read as 
follows:

    An existing multiple common bond federal credit union that 
submits a request to amend its charter must provide documentation to 
establish that the multiple common bond requirements have been met. 
All amendments to a multiple common bond credit union's field of 
membership must be approved by the regional director.
    NCUA will approve groups to a credit union's field of 
membership, if the agency determines in writing that the following 
criteria are met:
     The credit union has not engaged in any unsafe or 
unsound practice, as determined by the regional director, which is 
material during the one year period preceding the filing to add the 
group;
     The credit union is ``adequately capitalized.'' NCUA 
defines adequately capitalized to mean the credit union has a net 
worth ratio of not less than 6 percent. For low-income credit unions 
or credit unions chartered less than ten years, the regional 
director may determine that a net worth ratio of less than 6 percent 
is adequate if the credit union is making reasonable progress toward 
meeting the 6 percent net worth requirement. For any other credit 
union, the regional director may determine that a net worth ratio of 
less than 6 percent is adequate if the credit union is making 
reasonable progress toward meeting the 6 percent net worth 
requirement, and the addition of the group would not adversely 
affect the credit union's capitalization level.
     The credit union has the administrative capability to 
serve the proposed group and the financial resources to meet the 
need for additional staff and assets to serve the new group;
     Any potential harm the expansion may have on any other 
credit union and its members is clearly outweighed by the probable 
beneficial effect of the expansion. With respect to a proposed 
expansion's effect on other credit unions, the requirements on 
overlapping fields of membership set forth in Section IV.E of this 
Chapter are also applicable; and
     If the formation of a separate credit union by such 
group is not practical and consistent with reasonable standards for 
the safe and sound operation of a credit union.
    A more detailed analysis is required for groups of 3,000 or more 
primary potential members requesting to be added to a multiple 
common bond credit union; however, only groups over 500 must address 
why they cannot form their own credit union. It is incumbent upon 
the credit union to demonstrate that the formation of a separate 
credit union by such a group is not practical. The group must 
provide evidence that it lacks sufficient volunteer and other 
resources to support the efficient and effective operations of a 
credit union or does not meet the economic advisability criteria 
outlined in Chapter 1. If this can be demonstrated, the group may be 
added to a multiple common bond credit union's field of membership.


    14. In IRPS 99-1, Chapter 2, Section IV.E.1 is revised to read as 
follows:

    An overlap exists when a group of persons is eligible for 
membership in two or more credit unions, including state charters. 
An overlap is permitted when the expansion's beneficial effect in 
meeting the convenience and needs of the members of the group 
proposed to be included in the field of membership clearly outweighs 
any adverse effect on the overlapped credit union.
    Proposed or existing credit unions must investigate the 
possibility of an overlap with federally insured credit unions prior 
to submitting an application for a proposed charter or expansion if 
the group(s) is greater than 500 primary potential members. An 
overlap analysis is not required for groups with 500 or less primary 
potential members.
    When an overlap situation requiring analysis does arise, 
officials of the expanding credit union must ascertain the views of 
the overlapped credit union. If the overlapped credit union does not 
object, the applicant

[[Page 64525]]

must submit a letter or other documentation to that effect. If the 
overlapped credit union does not respond, the expanding credit union 
must notify NCUA in writing of its attempt to obtain the overlapped 
credit union's comments.
    NCUA will generally not approve an overlap unless the 
expansion's beneficial effect in meeting the convenience and needs 
of the members of the group proposed to be included in field of 
membership clearly outweighs any adverse effect on the overlapped 
credit union.
    In reviewing the overlap, the regional director will consider:
     The view of the overlapped credit union(s);
     Whether the overlap is incidental in nature--the group 
of persons in question is so small as to have no material effect on 
the original credit union;
     Whether there is limited participation by members or 
employees of the group in the original credit union after the 
expiration of a reasonable period of time;
     Whether the original credit union fails to provide 
requested service;
     Financial effect on the overlapped credit union;
     The desires of the group(s);
     The desire of the sponsor organization; and
     The best interests of the affected group and the credit 
union members involved.
    Generally, if the overlapped credit union does not object, and 
NCUA determines that there is no safety and soundness problem, the 
overlap will be permitted.
    Potential overlaps of a federally insured state credit union's 
field of membership by a federal credit union will generally be 
analyzed in the same way as if two federal credit unions were 
involved. Where a federally insured state credit union's field of 
membership is broadly stated, NCUA will exclude its field of 
membership from any overlap protection.
    New charter applicants and every select group which comes before 
the regional director for affiliation with an existing federal 
credit union must advise the regional director in writing whether 
the group is included within the field of membership of any other 
credit union. This requirement is not applicable to groups with 500 
or less primary potential members. If cases arise where the 
assurance given to a regional director concerning unavailability of 
credit union service is inaccurate, the misinformation is grounds 
for removal of the group from the federal credit union's charter.
    NCUA will permit multiple common bond federal credit unions to 
overlap community charters without performing an overlap analysis.


    15. In IRPS 99-1, Chapter 2, Section IV.D.1 is revised to read as 
follows:

a. All Select Groups in the Merging Credit Union's Field of 
Membership Have Less Than 3,000 Primary Potential Members

    A voluntary merger of two or more federal credit unions is 
permissible as long as each select group in the merging credit union's 
field of membership has less than 3,000 primary potential members. 
While the merger requirements outlined in Section 205 of the Federal 
Credit Union Act must still be met, the requirements of Chapter 2, 
Section IV.B.2 of this manual are not applicable.

b. One or More Select Groups in the Merging Credit Union's Field of 
Membership Has 3,000 or More Primary Potential Members

    If the merging credit unions serve the same group, and the group 
consists of 3,000 or more primary potential members, then the ability 
to form analysis is not required for that group. If the merging credit 
union has any other groups consisting of 3,000 or more primary 
potential members, special requirements apply. NCUA will analyze each 
group of 3,000 or more primary potential members, except as noted 
above, to determine whether the formation of a separate credit union by 
such a group is practical. If the formation of a separate credit union 
by such a group is not practical because the group lacks sufficient 
volunteer and other resources to support the efficient and effective 
operations of a credit union or does not meet the economic advisable 
criteria outlined in Chapter 1, the group may be merged into a multiple 
common bond credit union. If the formation of a separate credit union 
is practical, the group must be spun-off before the merger can be 
approved.

c. Merger of a Single Common Bond Credit Union into a Multiple 
Common Bond Credit Union

    A financially healthy single common bond credit union with a 
primary potential membership in excess of 3,000 primary potential 
members cannot merge into a multiple common bond credit union, absent 
supervisory reasons.

d. Merger Approval

    If the merger is approved, the qualifying groups within the merging 
credit union's field of membership will be transferred intact to the 
continuing credit union and can continue to be served.
    Where the merging credit union is state-chartered, the field of 
membership rules applicable to a federal credit union apply.
    Mergers must be approved by the NCUA regional director where the 
continuing credit union is headquartered, with the concurrence of the 
regional director of the merging credit union, and, as applicable, the 
state regulators.

    16. In IRPS 99-1, Chapter 2, Section IV.D.2 is revised to read as 
follows:

    The NCUA may approve the merger of any federally insured credit 
union when safety and soundness concerns are present without regard 
to the 3,000 numerical limitation. The credit union need not be 
insolvent or in danger of insolvency for NCUA to use this statutory 
authority. Examples constituting appropriate reasons for using this 
authority are: abandonment of the management and/or officials and an 
inability to find replacements, loss of sponsor support, serious and 
persistent record keeping problems, sustained material decline in 
financial condition, or other serious or persistent circumstances.


    17. In IRPS 99-1, Chapter 2, Section IV.F is revised to read as 
follows:

    A multiple common bond federal credit union may apply to convert 
to a community charter provided the field of membership requirements 
of the community charter are met. Groups within the existing charter 
which cannot qualify in the new charter cannot be served except for 
members of record, or groups or communities obtained in an emergency 
merger or P&A. A credit union must notify all groups that will be 
removed from the field of membership as a result of conversion. 
Members of record can continue to be served. Also, in order to 
support a case for a conversion, the applicant federal credit union 
may be required to develop a detailed business plan as specified in 
Chapter 1, Section IV.D.
    A multiple common bond federal credit union may apply to convert 
to a single occupational or associational common bond charter 
provided the field of membership requirements of the new charter are 
met. Groups within the existing charter which cannot qualify in the 
new charter cannot be served except for members of record, or groups 
or communities obtained in an emergency merger or P&A. A credit 
union must notify all groups that will be removed from the field of 
membership as a result of conversion. However, a credit union can 
continue to serve any group included in, or added to, its single 
common bond field of membership at the time of conversion to a 
single common bond credit union for a period of three years from the 
date of conversion if the group is later sold, spun-off or otherwise 
divested as a result of a corporate reorganization/restructuring. If 
the credit union elects to continue to serve any sold, spun-off or 
otherwise divested group after three years from the date of 
conversion, then it must convert back to a multiple common bond 
credit union. During this three-year period, it will continue to be 
treated as a single common bond credit union.
    Once a multiple common bond credit union converts to a single 
occupational or assocational credit union, it cannot convert back to 
a multiple common bond credit union for a period of three years, 
unless there are safety and soundness concerns.


    18. In IRPS 99-1, Chapter 2, Section II.B.2 is revised to read as 
follows:


[[Page 64526]]


    If the single common bond group that comprises a federal credit 
union's field of membership undergoes a substantial restructuring, 
the result is often that portions of the group are sold or spun off. 
This is an event which requires a change to the credit union's field 
of membership. NCUA will not permit a single common bond credit 
union to maintain in its field of membership a sold or spun-off 
group to which it has been providing service unless the group 
otherwise qualifies for membership in the credit union or if the 
credit union converts to a multiple common bond credit union.
    If the group comprising the single common bond of the credit 
union merges with, or is acquired by, another group, the credit 
union can serve the new group resulting from the merger or 
acquisition after receiving a housekeeping amendment.


    19. In IRPS 99-1, Chapter 2, Section III.B.2 is revised to read as 
follows:

    If the single common bond group that comprises a federal credit 
union's field of membership undergoes a substantial restructuring, 
the result is often that portions of the group are sold or spun off. 
This is an event which requires a change to the credit union's field 
of membership. NCUA may not permit a single associational credit 
union to maintain in its field of membership a sold or spun-off 
group to which it has been providing service unless the group 
otherwise qualifies for membership in the credit union or the credit 
union converts to a multiple common bond credit union.
    If the group comprising the single common bond of the credit 
union merges with, or is acquired by, another group, the credit 
union can serve the new group resulting from the merger or 
acquisition after receiving a housekeeping amendment.


    20. In IRPS 99-1, Chapter 2, Section IV.B.4 is revised to read as 
follows:

    If a select group within a federal credit union's field of 
membership undergoes a substantial restructuring, a change to the 
credit union's field of membership may be required if the credit 
union is to continue to provide service to the select group. NCUA 
permits a multiple common bond credit union to maintain in its field 
of membership a sold, spun-off, or merged select group to which it 
has been providing service. This type of amendment to the credit 
union's charter is not considered an expansion; therefore the 
criteria relating to adding new groups are not applicable.
    When two groups merge and each is in the field of membership of 
a credit union, then both (or all affected) credit unions can serve 
the resulting merged group, subject to any existing geographic 
limitation and without regard to any overlap provisions. However, 
the credit unions cannot serve the other multiple groups that may be 
in the field of membership of the other credit union.


    21. In IRPS 99-1, Chapter 2, Section V.A.2 is revised to read as 
follows:

    In addition to the documentation requirements set forth in 
Chapter 1 to charter a credit union, a community credit union 
applicant must provide additional documentation addressing the 
proposed area to be served and community service policies.
    A community credit union is unique in that it must meet the 
statutory requirements that the proposed community area is (1) well-
defined, and (2) a local community, neighborhood, or rural district.
    ``Well-defined'' means the proposed area has specific geographic 
boundaries. Geographic boundaries may include a city, township, 
county (or its political equivalent), or clearly identifiable 
neighborhood. Although congressional districts or other political 
boundaries which are subject to occasional change, and state 
boundaries are well-defined areas, they do not meet the second 
requirement that the proposed area be a local community, 
neighborhood, or rural district.
    The meaning of local community, neighborhood, or rural district 
includes a variety of factors. Most prominent is the requirement 
that the residents of the proposed community area interact or have 
common interests. In determining interaction and/or common 
interests, a number of factors become relevant. For example, the 
existence of a single major trade area, shared governmental or civic 
facilities, or area newspaper is significant evidence of community 
interaction and/or common interests. Conversely, numerous trade 
areas, multiple taxing authorities, and multiple political 
jurisdictions, tend to diminish the characteristics of a local area.
    Population and geographic size are also significant factors in 
determining whether the area is local in nature. A large population 
in a small geographic area or a small population in a large 
geographic area may meet NCUA community chartering requirements. For 
example, an ethnic neighborhood, a rural area, a city, and a county 
with 300,000 or less residents will generally have sufficient 
interaction and/or common interests to meet community charter 
requirements. While this may most often be true, it does not 
preclude community charters consisting of multiple counties or local 
areas with populations of any size from meeting community charter 
requirements.
    Conversely, a larger population in a large geographic area may 
not meet NCUA community chartering requirements. It is more 
difficult for a major metropolitan city, a densely populated county, 
or an area covering multiple counties with significant population to 
have sufficient interaction and/or common interests, and to 
therefore demonstrate that these areas meet the requirement of being 
``local.'' In such cases, documentation supporting the interaction 
and/or common interests will be greater than the evidence necessary 
for a smaller and less densely populated area.
    In most cases, the ``well-defined local community, neighborhood, 
or rural district'' requirement will be met if (1) the area to be 
served is in a recognized single political jurisdiction, i.e., a 
county or its political equivalent or any contiguous political 
subdivisions contained therein, and if the population of the 
requested well-defined area does not exceed 300,000, or (2) the area 
to be served is in multiple contiguous political jurisdictions, i.e. 
a county or its political equivalent or any political subdivisions 
contained therein and if the population of the requested well-
defined area does not exceed 200,000. If the proposed area meets 
either of these criteria, the credit union must only submit a letter 
describing how the area meets the standards for community 
interaction or common interests.
    If NCUA does not find sufficient evidence of community 
interaction or common interests, more detailed documentation will be 
necessary to support that the proposed area is a well-defined 
community. The credit union must also provide evidence of the 
political jurisdiction(s) and population. Evidence of the political 
jurisdiction(s) should include maps designating the area to be 
served. One map must be a regional or state map with the proposed 
community outlined. The other map must outline the proposed 
community and the identifying geographic characteristics of the 
surrounding areas.
    If the area to be served does not meet the political 
jurisdiction(s) and population requirements of the preceding 
paragraph, or if required by NCUA, the application must include 
documentation to support that it is a well-defined local community, 
neighborhood, or rural district. It is the applicant's 
responsibility to demonstrate the relevance of the documentation 
provided in support of the application. This must be provided in a 
narrative summary. The narrative summary must explain how the 
documentation demonstrates interaction or common interests. For 
example, simply listing newspapers and organizations in the area is 
not sufficient to demonstrate that the area is a local community, 
neighborhood, or rural district.
    Examples of acceptable documentation may include:
     The defined political jurisdictions;
     Major trade areas (shopping patterns and traffic 
flows);
     Shared/common facilities (for example, educational, 
medical, police and fire protection, school district, water, etc.);
     Organizations and clubs within the community area;
     Newspapers or other periodicals published for and about 
the area;
     Maps designating the area to be served. One map must be 
a regional or state map with the proposed community outlined. The 
other map must outline the proposed community and the identifying 
geographic characteristics of the surrounding areas;
     Common characteristics and background of residents (for 
example, income, religious beliefs, primary ethnic groups, 
similarity of occupations, household types, primary age group, 
etc.); or
     Other documentation that demonstrates that the area is 
a community where individuals have common interests or interact.
    A community credit union is frequently more susceptible to 
competition from other local financial institutions and generally 
does not have substantial support from any single sponsoring company 
or association. As a result, a community credit union will often 
encounter financial and operational factors

[[Page 64527]]

that differ from an occupational or associational charter. Its 
diverse membership may require special marketing programs targeted 
to different segments of the community. For example, the lack of 
payroll deduction creates special challenges in the development of 
savings promotional programs and in the collection of loans.
    Accordingly, it is essential for the proposed community credit 
union to develop a detailed and practical business and marketing 
plan for at least the first two years of operation. The proposed 
credit union must not only address the documentation requirements 
set forth in Chapter 1, but also focus on the accomplishment of the 
unique financial and operational factors of a community charter.
    An existing community credit union, and any applicant for a 
community charter must also specifically address in its business 
plan, marketing plan or other appropriate separate documentation how 
the credit union plans to market its products and services to the 
entire community, including any underserved or low-income areas, if 
applicable. This may include current or future delivery systems, 
such as ATMs, 24 hour voice response system, internet web sites, 
current or future customized programs to assist community residents 
such as credit counseling and budgeting, and current or future 
service facility locations. The community credit union will be 
expected to review its plan to serve the entire community to 
determine if the community is being adequately served. The regional 
director may request periodic service status reports from a 
community credit union to ensure that the needs of the community are 
being met.


    22. In IRPS 99-1, Chapter 3, Section III is revised to read as 
follows:

    All federal credit unions may include in their fields of 
membership, without regard to location, communities satisfying the 
definition for serving underserved areas in the Federal Credit Union 
Act. More than one federal credit union can serve the same 
underserved area. The Federal Credit Union Act defines an 
underserved area as a local community, neighborhood, or rural 
district that is an ``investment area'' as defined in Section 
103(16) of the Community Development Banking and Financial 
Institutions Act of 1994.
    The ``well-defined local community, neighborhood, or rural 
district'' requirement will be met if (1) the area to be served is 
in a recognized single political jurisdiction, i.e., a county or its 
political equivalent or any contiguous political subdivisions 
contained therein, and if the population of the requested well-
defined area does not exceed 300,000 or (2) the area to be served is 
in multiple contiguous political jurisdictions, i.e., a county or 
its political equivalent or any political subdivisions contained 
therein and if the population of the requested well-defined area 
does not exceed 200,000. If the proposed area meets either of these 
criteria and meets the definition of an investment area that is 
underserved, then it is presumed to be a local community, 
neighborhood, or rural district.
    An investment area includes any of the following:
     An area encompassed or located in an Empowerment Zone 
or Enterprise Community designated under section 1391 or the 
Internal Revenue Code of 1996 (26 U.S.C. 1391);
     An area where the percentage of the population living 
in poverty is at least 20 percent;
     An area in a Metropolitan Area where the median family 
income is at or below 80 percent of the Metropolitan Area median 
family income or the national Metropolitan Area median family 
income, whichever is greater;
     An area outside of a Metropolitan Area, where the 
median family income is at or below 80 percent of the statewide non-
Metropolitan Area median family income or the national non-
Metropolitan Area median family income, whichever is greater;
     An area where the unemployment rate is at least 1.5 
times the national average;
     An area where the percentage of occupied distressed 
housing (as indicated by lack of complete plumbing and occupancy of 
more than one person per room) is at least 20 percent;
     An area located outside of a Metropolitan Area with a 
county population loss between 1980 and 1990 of at least 10 percent;
    In addition, the local community, neighborhood, or rural 
district must be underserved, based on data considered by the NCUA 
Board and the Federal banking agencies.
    Once an underserved area has been added to a federal credit 
union's field of membership, the credit union must establish and 
maintain an office or facility in the community within two years. A 
service facility is defined as a place where shares are accepted for 
members' accounts, loan applications are accepted and loans are 
disbursed. This definition includes a credit union owned branch, a 
shared branch, a mobile branch, an office operated on a regularly 
scheduled weekly basis, or a credit union owned electronic facility 
that meets, at a minimum, these requirements. This definition does 
not include an ATM.
    If a credit union has a preexisting office within close 
proximity to the underserved area, then it will not be required to 
maintain an office or facility within the underserved area. Close 
proximity will be determined on a case-by-case basis, but the office 
must be readily accessible to the residents and the distance from 
the underserved area will not be an impediment to a majority of the 
residents to transact credit union business.
    The federal credit union adding the underserved community must 
document that the community meets the definition for serving 
underserved areas in the Federal Credit Union Act. The charter type 
of a federal credit union adding such a community will not change 
and therefore the credit union will not be able to receive the 
benefits afforded to low-income designated credit unions, such as 
expanded use of non member deposits and access to the Community 
Development Revolving Loan Program for Credit Unions.
    A federal credit union that desires to include an underserved 
community in its field of membership must first develop a business 
plan specifying how it will serve the community. The business plan, 
at a minimum, must identify the credit and depository needs of the 
community and detail how the credit union plans to serve those 
needs. The credit union will be expected to regularly review the 
business plan, to determine if the community is being adequately 
served. The regional director may require periodic service status 
reports from a credit union about the underserved area to ensure 
that the needs of the underserved area are being met as well as 
requiring such reports before NCUA allows a federal credit union to 
add an additional underserved area.


    23. In IRPS 99-1, Chapter 4, Section II is revised to read as 
follows:

    Any state-chartered credit union may apply to convert to a 
federal credit union. In order to do so it must:
     Comply with state law regarding conversion;
     File proof of compliance with NCUA;
     File the required conversion application, proposed 
federal credit union organization certificate, and other documents 
with NCUA;
     Comply with the requirements of the Federal Credit 
Union Act, e.g., chartering and reserve requirements; and
     Be granted federal share insurance by NCUA.
    Conversions are treated the same as any initial application for 
a federal charter, including mandatory on-site examination by NCUA. 
NCUA will also consult with the appropriate state authority 
regarding the credit union's current financial condition, management 
expertise, and past performance. Since the applicant in a conversion 
is an ongoing credit union, the economic advisability of granting a 
charter is more readily determinable than in the case of an initial 
charter applicant.
    A converting state credit union's field of membership must 
conform to NCUA's chartering policy. The field of membership will be 
phrased in accordance with NCUA chartering policy. Subsequent 
changes must conform to NCUA chartering policy in effect at that 
time. The converting credit union may continue to serve members of 
record.
    If the converting credit union is a multiple group charter and 
the new federal charter is a multiple group, then the new federal 
charter may retain in its field of membership any group that the 
state credit union was serving at the time of conversion. Any 
subsequent additions or amendments to the credit union's field of 
membership must comply with federal field of membership policies.
    If the converting credit union is a community charter and the 
new federal charter is community-based, it must meet the community 
field of membership requirements set forth in Chapter 2, Section V. 
If the state chartered credit union's community boundary is more 
expansive than the approved federal boundary, only members of record 
outside of the new community boundary may continue to be served.


    24. In IRPS 99-1, Chapter 4, Section III.A is revised to read as 
follows:


[[Page 64528]]


    Any federal credit union may apply to convert to a state credit 
union. In order to do so, it must:
     Notify NCUA prior to commencing the process to convert 
to a state charter and state the reason(s) for the conversion;
     Comply with the requirements of Section 125 of the 
Federal Credit Union Act that enable it to convert to a state credit 
union and to cease being a federal credit union; and
     Comply with applicable state law and the requirements 
of the state regulator.
    It is important that the credit union provide an accurate 
disclosure of the reasons for the conversion. These reasons should 
be stated in specific terms, not as generalities. The federal credit 
union converting to a state charter remains responsible for the 
entire operating fee for the year in which it converts.


    25. In IRPS 99-1, Chapter 2, the title of Sections II.H, III.H, and 
IV.F is revised to read as ``Other Persons Eligible for Credit Union 
Membership.''

    26. In IRPS 99-1, Appendix D, Form 4015EZ is revised to read as 
follows:

Application for Field of Membership Amendment NCUA Form 4015-EZ

Use Only for Expansions Covering Groups of 500 Persons or Less

    Attach a separate application for each group included in your 
request for expansion. The application must be complete or it will 
be returned unprocessed.

    1. Name and address of credit union:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------

    2. Name and address of group:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------

(If the group is an association, include a copy of the association's 
Charter/Bylaws or other equivalent organizational documentation.)

    3. Provide the proposed field of membership wording:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------

    4. How many primary potential members (excluding immediate 
family and household members) are in the group:

----------------------------------------------------------------------
    5. Attach a letter, on letterhead stationery if possible, from 
the group requesting credit union service. This letter must 
indicate:

{time}  how the group shares the occupational or associational 
common bond (for single common bond additions only);
{time}  that the group wants to be added to the federal credit 
union's field of membership;
{time}  the number of persons to be added and the group's 
location(s); and
{time}  the group's proximity to the credit union's nearest service 
facility (for multiple common bond additions only).
    Name and title of credit union board-authorized representative 
(e.g., President/CEO):

----------------------------------------------------------------------
(Typed/Printed Name)
----------------------------------------------------------------------
(Signature)
----------------------------------------------------------------------
(Date)


    27. In IRPS 99-1, Appendix D, Form 4015 is revised to read as 
follows:

Application for Field of Membership Amendment NCUA Form 4015

Use Only for Expansions Covering Groups of More Than 500 Persons

    For expansions covering groups of 500 or less persons--use the 
short form application, NCUA 4015-EZ.
    Attach a separate application for each group included in your 
request for expansion. The application must be complete or it will 
be returned unprocessed.

    1. Name and address of credit union:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------

    2. Name and address of the group:
----------------------------------------------------------------------
----------------------------------------------------------------------

(If the group is an association, include a copy of the association's 
Charter/Bylaws or other equivalent organizational documentation.)

    3. Provide the proposed field of membership wording. Use the 
example wording found in NCUA's Chartering and Field of Membership 
Manual, Chapter 2:

{time}  Section II.A for single occupational common bond groups;
{time}  Section III.A for single associational common bond groups; 
or
 Section IV.A for multiple common bond fields of membership.

    4. How many primary potential members (excluding immediate 
family and household members) are in the group:

----------------------------------------------------------------------
    5. (a) For multiple common bond expansions, what is the distance 
between the group's location and your credit union's nearest service 
facility \1\ to which the group has access (Reference Chapter 2, 
Section IV.A.1):
---------------------------------------------------------------------------

    \1\ A service facility is defined as a place where shares are 
accepted for members' accounts, loan applications are accepted, and 
loans are disbursed.
---------------------------------------------------------------------------

----------------------------------------------------------------------
----------------------------------------------------------------------

    (b) What is the address of this service facility:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------

    (c) Describe the service area \2\ primarily served by the above 
service facility:
---------------------------------------------------------------------------

    \2\ A federal credit union's service area is the area that can 
reasonably be served by the service facility accessible to the 
groups within the field of membership. It will most often coincide 
with that geographic area primarily served by the service facility.
---------------------------------------------------------------------------

----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------

    6. Is the group in the field of membership of any other credit 
union? Yes____ No____ If yes, and the overlapped credit union is not 
a community credit union or a non-federally insured credit union, 
please address the following:

{time}  Provide the name and location of the other servicing credit 
union:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------

{time}  Include a letter from the overlapped credit union indicating 
whether it concurs or objects to the overlap. If the overlapped 
credit union objects or fails to respond, document attempts to 
resolve the issue:
----------------------------------------------------------------------
----------------------------------------------------------------------

{time}  Explain how the expansion's beneficial effect in meeting the 
convenience and needs of the members of the group clearly outweighs 
any adverse effect on the overlapped credit union:
----------------------------------------------------------------------
----------------------------------------------------------------------

    7. Attach a letter, on letterhead stationery if possible, from 
the group requesting credit union service. This letter must 
indicate:

{time}  how the group shares the occupational or associational 
common bond (for single common bond additions only);
{time}  that the group wants to be added to the federal credit 
union's field of membership;
{time}  whether the group presently has other credit union service 
available;
{time}  the number of persons currently included within the group to 
be added and the group's location(s);
{time}  the group's proximity to the credit union's nearest service 
facility (for multiple common bond additions only); and
{time}  why the formation of a separate credit union for the group 
is not practical or consistent with safety and soundness standards 
(for multiple common bond additions only). The formation of a 
separate credit union may not be practical if the group lacks 
sufficient volunteers or resources to support the operation of a 
credit union or does not meet the economic advisability criteria 
outlined in Chapter 1 of NCUA's Chartering and Field of Membership 
Manual.

    8. Other comments:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------

    Name and title of credit union board-authorized representative 
(e.g., President/CEO):
----------------------------------------------------------------------
(Typed/Printed Name)
----------------------------------------------------------------------
(Signature)
----------------------------------------------------------------------
(Date)

[FR Doc. 00-27361 Filed 10-26-00; 8:45 am]
BILLING CODE 7535-01-P