[Federal Register Volume 83, Number 219 (Tuesday, November 13, 2018)]
[Proposed Rules]
[Pages 56640-56664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24169]



[[Page 56639]]

Vol. 83

Tuesday,

No. 219

November 13, 2018

Part III





National Credit Union Administration





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12 CFR Part 701





Federal Credit Union Bylaws; Proposed Rule

  Federal Register / Vol. 83 , No. 219 / Tuesday, November 13, 2018 / 
Proposed Rules  

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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701

RIN 3313-AE86


Federal Credit Union Bylaws

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule.

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SUMMARY: The NCUA Board (Board) is proposing to update, clarify, and 
simplify the federal credit union bylaws (FCU Bylaws). The Board also 
is proposing changes that will update and conform the FCU Bylaws to 
legal opinions issued by the NCUA's Office of General Counsel and/or 
provide greater flexibility to FCUs. Finally, the Board is proposing 
other changes that are designed to remove outdated or obsolete 
provisions.

DATES: Comments must be received by January 14, 2019.

ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Website: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the instructions for 
submitting comments.
     Email: Address to [email protected]. Include ``[Your 
name] Comments on FCU Bylaws'' in the email subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for email.
     Mail: Address to Gerard Poliquin, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public inspection: All public comments are available on the 
agency's website at http://www.ncua.gov/RegulationsOpinionsLaws/comments as submitted, except as may not be possible for technical 
reasons. Public comments will not be edited to remove any identifying 
or contact information. Paper copies of comments may be inspected in 
NCUA's law library, at 1775 Duke Street, Alexandria, Virginia 22314, by 
appointment weekdays between 9:00 a.m. and 3:00 p.m. To make an 
appointment, call (703) 518-6540 or send an email to [email protected].

FOR FURTHER INFORMATION CONTACT: Benjamin M. Litchfield, Staff 
Attorney, Office of General Counsel, 1775 Duke Street, Alexandria, 
Virginia 22314, or by telephone at (703) 518-6540.

SUPPLEMENTARY INFORMATION:

I. Background
II. Legal Authority
III. Summary of the Proposed Rule
IV. Article-by-Article Analysis
V. Regulatory Procedures

I. Background

    Section 108 of the Federal Credit Union Act (FCU Act) requires the 
Board to periodically prepare a form of bylaws to be used by FCU 
incorporators and to provide that form to FCU incorporators upon 
request.\1\ FCU incorporators must submit proposed bylaws to the NCUA 
as part of the chartering process. Once the NCUA has approved an FCU's 
proposed bylaws, the FCU must operate according to its approved bylaws 
or seek agency approval for a bylaw amendment.\2\
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    \1\ 12 U.S.C. 1758.
    \2\ 12 CFR 701.2(a).
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    The FCU Bylaws are set out in Appendix A to part 701 of the NCUA's 
regulations.\3\ The Board incorporated the FCU Bylaws into the NCUA's 
regulations to address concerns regarding bylaw enforcement.\4\ As the 
Board stated in the final rule incorporating the FCU Bylaws, the FCU 
Act only provides two mechanisms for correcting bylaw violations: (1) 
Suspension or revocation of an FCU's charter or (2) placing an FCU into 
conservatorship. Aside from these extreme remedies, when adopting the 
final rule, the Board was concerned about identifying what, if any, 
supervisory action the NCUA could take to protect fundamental member 
rights.\5\ By incorporating the FCU Bylaws into the NCUA's regulations, 
the Board believed that it could use additional regulatory tools, such 
as the issuance of a cease and desist order, to address material 
noncompliance with an FCU's bylaws.
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    \3\ 12 CFR 701, App. A.
    \4\ 72 FR 61495, 61496 (Oct. 31, 2007).
    \5\ Specifically, these rights include the right to: (1) 
Maintain a share account; (2) maintain FCU membership; (3) have 
access to credit union facilities; (4) participate in the director 
election process; (5) attend annual and special meetings; and (6) 
petition for removal of directors and committee members. See 72 FR 
30984, 30986 (June. 5, 2007) (proposed rule).
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    FCUs often express concerns that the FCU Bylaws do not provide 
sufficient operational flexibility to allow an FCU to respond to 
changing market practices or to address basic corporate governance 
matters in a prompt and efficient manner. These arguments are well 
taken. Accordingly, the NCUA has engaged in an ongoing review of the 
FCU Bylaws to determine what, if any, changes may be necessary to 
provide additional flexibility to FCUs.
    In 2013, the NCUA's Office of General Counsel consulted with 
representatives from the credit union industry regarding the FCU 
Bylaws. The NCUA received many comments during the 2013 consultation, 
many of which focused on relatively narrow aspects of the FCU Bylaws. 
For example, FCUs recommended that the NCUA provide more staff 
commentary on the meaning and interpretation of specific bylaw 
provisions. They also encouraged the NCUA to make a concerted effort to 
modernize the FCU Bylaws by using consistent terms throughout and 
deleting inapplicable language that is no longer useful. Commenters 
specifically recommended that the NCUA update the preamble to the FCU 
Bylaws and ensure that the instructions are current.
    On March 15, 2018, the Board issued an advance notice of proposed 
rulemaking (ANPR) soliciting comments on how to update, clarify, and 
simplify the FCU Bylaws.\6\ The Board solicited comment on five 
specific questions related to: (1) Improving the bylaw amendment 
process within the NCUA; (2) addressing ambiguities in the FCU Bylaws 
allowing for an FCU to limit services to a member and expel a member; 
(3) methods to facilitate recruitment and development of directors; (4) 
methods to encourage member attendance at annual and special meetings; 
and (5) eliminating regulatory overlaps between the FCU Bylaws and the 
NCUA's regulations. The Board also invited general comments on 
improvements to the FCU Bylaws.
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    \6\ 83 FR 12283 (Mar. 21, 2018).
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    The Board received a wide variety of comments to the ANPR from 
FCUs, federally insured, state-chartered credit unions, national credit 
union trade associations, state credit union trade associations, and 
law firms. Commenters generally appreciated the Board's efforts to 
provide an enhanced opportunity to participate in the rulemaking 
process. Nearly all of the commenters raised issues with specific 
aspects of the FCU Bylaws and requested that the Board provide the 
greatest amount of regulatory relief permissible under the FCU Act.
    Based on the comments the Board has received in response to the 
ANPR and throughout its ongoing review of the FCU Bylaws, the Board is 
proposing to make significant revisions to modernize the FCU Bylaws.

[[Page 56641]]

II. Legal Authority

    The Board is issuing this proposed rule pursuant to its specific 
authority in the FCU Act to adopt a form of bylaws to be used by FCU 
incorporators when chartering an FCU,\7\ as well as its plenary 
authority to adopt rules and regulations for the administration of the 
FCU Act.\8\ Given the importance of proper corporate governance 
procedures to the safe and sound operation of FCUs, the Board believes 
this proposed rule is a necessary and proper exercise of this statutory 
rulemaking authority.
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    \7\ 12 U.S.C. 1753.
    \8\ 12 U.S.C. 1766(a).
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III. Summary of the Proposed Rule

    The proposed rule incorporates many of the suggestions the Board 
received in response to the ANPR and throughout the NCUA's ongoing 
review of the FCU Bylaws. In addition, the proposed rule clarifies 
provisions that have created confusion in the past, as reflected by the 
numerous inquiries the NCUA has received from FCUs and members. In some 
instances, a proposed change offers more detail or further elaboration 
to help FCU officials, employees, and members better understand a 
provision.
    The proposed rule also makes stylistic and grammatical changes 
throughout the FCU Bylaws, which provide for a much clearer and more 
readable document. For example, the proposed rule moves the entire body 
of staff commentary to the end of the FCU Bylaws, with corresponding 
references to the articles and section numbers that are the subject of 
the commentary.
    However, the proposed rule does not permit an FCU to draft its own 
bylaws. The FCU Act requires the Board to develop a form of bylaws that 
``shall be used'' by FCU incorporators and mandates that FCUs operate 
according to their NCUA-approved bylaws.\9\ While commenters to the 
ANPR and throughout the NCUA's ongoing review of the FCU Bylaws have 
advocated greater flexibility to develop their own bylaws, the Board 
continues to believe that having a uniform set of FCU Bylaws is more 
consistent with the spirit of the FCU Act \10\ and is necessary to 
protect fundamental member rights, to avoid confusion among FCUs, and 
to prevent the adoption of illegal bylaw provisions.\11\
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    \9\ 12 U.S.C. 1758.
    \10\ See 71 FR 24551 (Apr. 26, 2006) (``NCUA's longstanding 
position has been that [the FCU Act] expresses a congressional 
desire for uniformity regarding FCU operations and member rights. 
Accordingly, NCUA views [the FCU Act] as providing authority to 
issue form bylaws that apply to all FCUs, not only newly chartered 
FCUs, and to review proposed bylaw amendments.'').
    \11\ See 72 FR 30984, 30985 (June 5, 2007) (proposed rule) 
(uniform bylaws necessary to protect fundamental member rights, 
avoid confusion, and prevent adoption of illegal bylaws).
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IV. Article-by-Article Analysis

Introduction

    This proposed rule modernizes the introductory language to the FCU 
Bylaws. It changes the instructions for bylaw amendments to reflect 
that the NCUA's Office of Credit Union Resources and Expansion (CURE) 
now is the primary office handling bylaw amendments, and consults with 
the NCUA's Office of General Counsel as necessary. The proposed rule 
also establishes an explicit 90 calendar day deadline for CURE to reach 
a decision on a bylaw amendment.
    In the ANPR, the Board specifically requested comments on improving 
the bylaw amendment process. Commenters requested that the Board adopt 
a deadline for CURE to process bylaw amendments, with a majority 
favoring 30 calendar days. While the Board agrees that the NCUA should 
process bylaw amendments as expeditiously as possible to allow the FCU 
to address any pressing operational concerns, the Board remains 
concerned that 30 calendar days may be an insufficient amount of time. 
Accordingly, the proposed rule adopts a 90-calendar day deadline. The 
Board believes that this time period will provide CURE with sufficient 
time to consider the bylaw amendment without imposing an undue 
operational burden on the FCU. The Board requests specific comments on 
this aspect of the proposed rule including whether another time period, 
such as 60 calendar days, would be more appropriate to ensure that CURE 
processes proposed bylaw amendments in a timely manner.
    Commenters to the ANPR also requested that the Board automatically 
approve any bylaw amendment that CURE does not approve within this 
deadline. The Board does not believe that it is appropriate to 
automatically approve proposed bylaw amendments, as this could result 
in adoption of a bylaw that has a material adverse effect on 
fundamental member rights, poses a safety and soundness risk to the 
FCU, or is otherwise contrary to law. Instead, the Board believes it is 
appropriate to treat the failure to approve a bylaw amendment within 
the prescribed deadline as a denial, which the FCU may then appeal to 
the Board pursuant to the appeals procedures set out in subpart B to 
part 746 of the NCUA's regulations.\12\
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    \12\ 12 CFR 746, subpart B.
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Article I. Name--Purposes

    Article I states the FCU's name and mission. The proposed rule 
amends section 2, which outlines the FCU's purposes, by changing the 
reference in the second sentence from ``consumers'' to ``members.'' The 
Board is proposing to change this term because FCUs are not limited in 
their mission to serving consumers. There may be small businesses and 
other organizations within the field of membership that can benefit 
from the FCU's services, and this change is designed to reflect this 
benefit.

Article II. Qualifications for Membership

    Article II outlines the requirements for obtaining and continuing 
FCU membership. The proposed rule includes an expanded discussion in 
the staff commentary of measures that an FCU may take to address 
abusive and disruptive members. In addition, to facilitate an FCU's 
implementation of any limitation of services policy, the proposed rule 
adds a new section 5, describing the concept of a ``member in good 
standing.'' As long as a member remains in good standing, that member 
retains all of the rights and privileges associated with FCU 
membership. A member not in good standing, however, may be subject to 
an FCU's limitation of services policy.
    In the ANPR, the Board specifically requested suggestions on ways 
to clarify an FCU's right to limit services or restrict access to 
credit union facilities to disruptive or abusive members. Some 
commenters recommended that the Board incorporate into the FCU Bylaws 
prior legal opinions by the NCUA's Office of General Counsel addressing 
this matter. Those legal opinions state than an FCU may limit services 
or access to credit union facilities to violent, belligerent, 
disruptive, or abusive members provided that there is a logical 
relationship between the objectionable conduct and the services to be 
suspended. The member must also receive adequate notice of the FCU's 
limitation of services policy.\13\
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    \13\ See OGC Op. No. 08-0431 (Aug. 12, 2008).
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    The Board agrees that incorporating these legal opinions into the 
FCU Bylaws is appropriate to provide additional clarity on an FCU's 
right to limit services or access to credit union facilities. 
Accordingly, the proposed rule includes staff commentary to Article II, 
based on these prior legal opinions, that details how an FCU may

[[Page 56642]]

handle an abusive or disruptive member. The staff commentary notes that 
there is a reasonably wide range within which an FCU may fashion a 
limitation of services policy that is tailored to the needs of the 
individual FCU. An FCU has broad discretion to deny, as it deems 
appropriate, all or most credit union services such as ATM services, 
credit cards, loans, share draft privileges, preauthorized transfers, 
or access to credit union facilities to a member that has engaged in 
conduct that has caused a loss to the FCU or that threatens the safety 
of credit union staff, facilities, or other members in the FCU or its 
surrounding property. Accordingly, an FCU may take immediate action to 
address situations in which a member is violent, belligerent, 
disruptive, or poses a threat to the credit union, or other members, or 
its employees even if the FCU Act prohibits the FCU from immediately 
expelling the member.
    The staff commentary also notes that the policy need not be 
identical or applied uniformly in all cases, provided that the FCU has 
a legitimate purpose for any disparate treatment of members. For 
additional clarity, the staff commentary contains cross references to 
procedures that FCUs must use to expel a member, and it refers to 
Article XVI, Sec.  1 of the FCU Bylaws, which contains language 
reiterating that no member may access or utilize an FCU's services in 
furtherance of an illegal objective.
    To facilitate an FCU's implementation of its limitation of services 
policy, the proposed rule amends Article II to distinguish between a 
member that retains all of the rights and privileges associated with 
FCU membership and a member that is subject to a limitation on services 
or a restriction on access to credit union facilities. As noted, the 
proposed rule adds a new section 5, describing the concept of a 
``member in good standing.'' A member in good standing retains all the 
rights of FCU membership. To remain in good standing, a member must be 
current on credit union loans, avoid engaging in any violent, 
belligerent, disruptive, or abusive behavior towards credit union staff 
or other credit union members in the FCU or its surrounding property, 
and not cause a financial loss to the credit union. A member that fails 
to observe any of these basic requirements may be subject to reasonable 
limitations of service or access to credit union facilities pursuant to 
the FCU's limitation of services policy.
    The Board recognizes that terms such as ``violent,'' 
``belligerent,'' ``disruptive,'' and ``abusive'' are subjective and, 
therefore, may not provide FCUs with absolute clarity regarding the 
circumstances under which a limitation of services or access to credit 
union facilities may be appropriate. The Board believes that, without 
question, certain actions warrant immediate limitations of service or 
access to credit union facilities, such as violence against other 
credit union members or credit union staff in the credit union facility 
or the surrounding property. In fact, the Board believes that an FCU 
has an obligation to take immediate action against such individuals. 
Other actions, such as rude behavior or potential threats of violence, 
may warrant limitations of service or restrictions of access to credit 
union facilities based on the specific facts and circumstances of that 
case. Accordingly, the Board requests comments on ways to clarify these 
terms, including specific examples of conduct that FCUs believe to be 
``disruptive,'' ``abusive,'' and ``belligerent.'' Based on the 
persuasiveness of the comments, the Board may incorporate examples of 
``violent,'' ``belligerent,'' ``disruptive,'' and ``abusive'' conduct 
into staff commentary to provide additional clarity for FCUs.
    The Board notes that, in addition to the rights granted under 
Article II, an FCU may immediately take actions such as contacting 
local law enforcement, seeking a restraining order, or pursuing other 
lawful means, to protect the credit union, credit union members, and 
staff. Nothing in the FCU Act or the FCU Bylaws prevents an FCU from 
using whatever lawful means it deems necessary to address circumstances 
where a member poses a risk of harm to the FCU, its members, or its 
staff.

Article III. Shares of Members

    Article III provides basic information about issues related to 
members' share accounts, including the par value of the membership 
share, trust accounts, and membership status of joint account holders. 
The proposed rule adds new language under Section 1 providing 
representative examples for FCUs to choose in establishing varying par 
values for different classes of membership (such as students, minors, 
or non-natural persons), provided that such differences conform to 
applicable legal requirements established by federal, state, or 
municipal anti-discrimination laws. The new language also clarifies 
that FCUs have options regarding whether to require all members to 
maintain a regular share account, or whether to permit members to base 
their qualification for membership on some other type of account. 
Additional staff commentary elaborates more fully on this option. The 
proposed rule revises the text of Article III to incorporate plain 
English writing principles and delete unnecessary provisions.
    Commenters to the ANPR requested that the Board provide additional 
guidance on trust accounts. New staff commentary addresses some of the 
considerations that apply in the context of trust accounts, including a 
discussion of the pertinent differences between revocable and 
irrevocable trusts. It also clarifies that, in the case of a revocable 
trust, the individual who establishes the trust (also known as the 
settlor) maintains ownership and control of the funds during that 
person's lifetime. Thus, the NCUA requires the settlor to join the FCU 
in order to establish a revocable trust account for that individual, 
thus requiring the settlor to be within the FCU's field of membership. 
The staff commentary notes that there is no requirement that the 
settlor first establish a regular share account to become a member. 
Rather, the settlor may satisfy the membership through the opening of 
the revocable trust account itself.
    In contrast, the staff commentary clarifies that membership 
requirements for an irrevocable trust account may be met through the 
settlor, who is the original owner of the funds, or the beneficiary, 
who obtains an equitable, beneficial interest in the funds once the 
trust is established. So long as one or the other is eligible for 
membership and actually joins the FCU, then the FCU may accept the 
account. As with revocable trusts, the membership obligation can be 
satisfied through the opening of the trust account itself, so it is not 
necessary for the beneficiary or the settlor, as applicable, to 
establish a regular share account as a condition precedent to 
membership. Furthermore, the trustee need not actually be a member of 
the FCU. Many irrevocable trusts have a trustee and the NCUA often 
receives questions on whether membership requirements for an 
irrevocable trust may be met through the trustee. While the trustee has 
administrative responsibility for the account, the trustee has no 
ownership interest in the account and is, therefore, irrelevant for 
purposes of establishing membership.
    The staff commentary also notes that a trust itself, whether 
revocable or irrevocable, may be a member of an FCU in its own right if 
all parties to the trust, including the settlors, beneficiaries and 
trustees, are within the field of membership and actually join the FCU.

[[Page 56643]]

Article IV. Meetings of Members

    Article IV addresses procedures related to annual and special 
meetings of an FCU's membership. In the ANPR, the Board specifically 
requested comments on methods to encourage member attendance at annual 
and special meetings. The proposed rule makes several changes to 
Article IV to encourage greater member participation, including 
enhanced notice requirements and adjustments to quorum requirements.
    To ensure that members receive adequate notice of an annual or 
special meeting, the proposed rule requires that the notice for the 
annual meeting be posted in a conspicuous place in the FCU's physical 
office of the FCU, such as at the teller windows or on the front door 
of the FCU's office, at least 30 calendar days before the meeting. The 
notice must also be prominently displayed on the FCU's website if the 
credit union then maintains a website. An FCU is not required to 
establish and maintain a website solely for this purpose, however. The 
proposed rule also deletes the option to waive prior notice if all 
members entitled to vote waived the notice requirement. The Board 
believes that these changes are appropriate because members are more 
likely to participate in annual and special meetings if the notice is 
widely announced.
    In the staff commentary, the proposed rule encourages FCUs to 
provide a live webcast of annual and special meetings for interested 
members, as well as post a video of the annual meeting on the FCU's 
website. The NCUA encourages this policy only for FCUs with a website 
at the time of any such meeting; nothing requires FCUs to establish or 
maintain a website solely for this purpose. This policy encourages 
members to participate in the annual meeting, while also providing 
access to members who cannot attend meetings in person.
    The proposed rule also adjusts the quorum requirement for meetings. 
It requires 12 members, excluding the board, credit union staff, and 
officials, for a quorum. The Board is proposing this adjustment to 
encourage FCUs to have wider participation from members, rather than 
allowing credit union staff and board members to control all corporate 
decision making within the credit union.
    The proposed rule, however, does not change the total number of 
member signatures required to call a special meeting. During the 2013 
consultation process with members of the credit union industry, 
commenters favored increasing the total number of member signatures 
required to call a special meeting. They posited that special meetings 
are expensive and time-consuming to conduct and, thus, should be 
reserved only for matters of interest to a broad group of members. 
These comments are well taken. The Board does not believe that adopting 
a blanket increase is appropriate, however, given its potential to 
disenfranchise members of smaller FCUs. Accordingly, the Board is not 
proposing to make any changes to the provisions in Article IV that 
impose a limit on the total number of member signatures required to 
call a special meeting. Instead, the Board believes that a preferable 
approach is to continue the NCUA's current practice of considering 
requests from individual FCUs to increase this signature requirement on 
a case-by-case basis.
    Furthermore, the proposed rule does not generally allow an FCU to 
conduct a virtual or hybrid (combined virtual and in-person) annual or 
special meeting. Commenters to the ANPR noted that at least 22 states 
currently permit corporations to host virtual or hybrid meetings, with 
several of those states extending the same flexibility to state-
chartered financial institutions. The commenters argued that FCUs with 
the appropriate size, complexity, and sophistication should be allowed 
to take advantage of these solutions to provide greater flexibility for 
their members to attend annual or special meetings. The Board is 
sympathetic to the commenters' arguments. Due to its concerns about 
member disenfranchisement, however, the Board does not currently 
support adopting this position in a rulemaking that affects all FCUs. 
The Board is particularly concerned with the rights of members that do 
not have access to electronic devices or that may live in areas without 
access to broadband internet.
    The NCUA will, however, consider bylaw amendment requests allowing 
for hybrid meetings on a case-by-case basis depending on, among other 
things, the FCU's size, nature, and field of membership. For example, 
the NCUA may grant such a bylaw amendment for an FCU that offers a 
majority of its financial services online or an FCU with a 
geographically dispersed field of membership. To avoid the possibility 
of member disenfranchisement, however, the Board does not believe it is 
appropriate to allow a virtual meeting to completely supplant a member 
meeting. Therefore, FCUs holding hybrid meetings must always offer an 
option for in-person attendance as well as online.
    The FCU Bylaws already grant an FCU considerable discretion to hold 
meetings in a location that is convenient for most of its members. 
Article IV allows an FCU to hold an annual or special meeting in the 
county in which any office of the FCU is located or within a radius of 
100 miles of such an office, provided that the FCU does not pick a 
location designed to limit member participation or that has such an 
effect. Accordingly, the Board believes that an FCU has sufficient 
flexibility to ensure broad participation from members without the need 
for entirely virtual meetings and would be reluctant to approve any 
bylaw amendment allowing for entirely electronic voting. The Board 
encourages FCUs to be mindful when selecting a location for a member 
meeting to choose a location that maximizes member participation.

Article V. Elections

    Article V addresses procedures for electing FCU Board members, and 
allows FCUs to select one of four options for conducting nominations 
and elections. During the 2013 consultation process with members of the 
credit union industry, the NCUA received comments that focused on 
several discrete aspects of this Article. Commenters suggested that, in 
regulating the voting process, the NCUA should take modern technology 
into consideration, including an option for electronic-only voting. 
Some commenters requested clarification on the appropriate procedures 
in cases of uncontested elections. Other commenters asked about the 
procedures for, and permissibility of, imposing additional director 
qualifications, and how to permit board-established qualifications.
    The proposed rule provides staff commentary clarifying electronic 
voting. The staff commentary states that an FCU may use as many forms 
of electronic voting (e.g., mobile phone or internet) as it wishes for 
those members who choose to vote electronically. However, the proposed 
rule does not allow an FCU to adopt an entirely electronic voting 
process. While modern technological innovations have changed the way 
that corporations and other businesses conduct meetings and hold 
elections, the Board remains concerned that allowing electronic-only 
voting could disenfranchise those members that do not have access to 
electronic devices or that may live in areas without access to reliable 
internet. The NCUA will, however, consider bylaw amendment requests 
allowing for electronic-only voting on a case-by-case basis.
    The proposed rule also provides staff commentary clarifying 
procedures for

[[Page 56644]]

uncontested elections. The staff commentary notes that three of the 
options for conducting nominations and elections provide for elections 
by acclamation or consensus when the number of nominees for board 
positions equals the number of positions to be filled. These options do 
not permit nominations from the floor at the meeting because members 
must be provided a ballot in advance of the member vote, so a petition 
is the only way to nominate a candidate not on the nominating 
committee's slate. The staff commentary also highlights that section 
(1)(c) in each of these options requires the notice to members to 
include the fact that there are no nominations from the floor at the 
meeting, as well as a notice that the FCU will not conduct a vote by 
ballot if the number of nominees equals the number of positions to be 
filled.
    Lastly, the proposed rule amends the staff commentary to encourage 
FCUs to take steps to increase the number of members who vote in FCU 
elections by increasing the range of voting options. The NCUA recently 
has approved several bylaw amendments that essentially combine the 
election options, for example, by adding a provision for mail or 
electronic ballots to one of the in-person voting options. The Board 
believes that, where possible, FCUs using one of the in-person voting 
options should consider offering mail or electronic ballots in addition 
to in-person voting. Similarly, FCUs conducting elections by mail and 
electronic means should consider also offering in-person voting. These 
changes currently require interested FCUs to pursue bylaw amendments 
individually. Accordingly, the Board seeks comment on whether the FCU 
Bylaws should include an additional option for conducting elections 
that would allow FCUs to use a combination of voting methods without 
needing to make individual requests to do so.
    The Board seeks specific comments on whether the FCU Bylaws should 
require that the nominating committee widely publicize to all FCU 
members the call for nominations by any medium the FCU determines and 
interview every member who volunteers to serve. In addition, the Board 
asks whether the secretary should post the nominations by petition 
along with those of the nominating committee on the credit union's 
website (if the credit union maintains a website). The Board believes 
that widely publicizing the nomination process and posting the 
nominations by petition on the credit union's website will provide more 
opportunities for member participation and is considering adopting such 
requirements in the final rule.

Article VI. Board of Directors

    This Article provides the requirements related to the board of 
directors, such as the number of members, the composition of the board, 
the terms of office, and the responsibilities of the board. It also 
describes the regular and special meetings of the board. In addition, 
this Article provides the requirements for quorums, attendance and 
removal of board or credit committee members, and the suspension of 
supervisory committee members.
    As part of the 2013 consultation process with members of the credit 
union industry, the NCUA received comments suggesting that the FCU 
Bylaws be revised to provide specific guidance to FCUs interested in 
establishing director emeritus and associate director positions. 
Commenters suggested that greater flexibility in regard to these types 
of arrangements will enable an FCU to better plan for vacancies in 
board positions and retirements among current directors. They also 
recommended enhanced flexibility regarding the composition of the board 
and reorganization of board duties. Moreover, commenters requested 
greater flexibility with regard to options concerning attendance by 
directors at meetings, and criteria and procedures by which incumbent 
directors may be removed. Commenters to the ANPR reiterated the need 
for additional guidance on associate director positions.
    The Board agrees that an FCU should have the ability to establish, 
as a matter of FCU board policy, the position of director emeritus for 
former directors who faithfully fulfilled their responsibilities as 
members of the board for at least a specified minimum number of years. 
Accordingly, the proposed rule includes a new section 10 that an FCU 
may adopt to create such positions. It also includes specific staff 
commentary to this section that states that the decision to establish a 
director emeritus position, as well as any selection of individuals to 
become directors emeriti, is solely within the discretion of the FCU's 
board. The staff commentary clarifies that a director emeritus may 
attend and participate in board meetings, but may not vote on any 
matter before the board or exercise any official duties of a director.
    To provide additional guidance to FCUs on associate director 
positions, the proposed rule clarifies, through staff commentary, that 
an FCU may establish associate director positions through board policy. 
The staff commentary notes that the purpose of these positions is to 
provide qualified individuals with an opportunity to gain exposure to 
board meetings and discussions, but without formal director 
responsibility or the right to vote. As with the director emeritus 
position, the decision to establish an associate director position, as 
well as the selection of the individual(s) to become associate 
directors, is solely within the discretion of the FCU's board.
    To provide FCUs with greater flexibility to address concerns 
regarding director and credit committee member attendance at monthly 
meetings, the proposed rule amends the option for FCUs to remove a 
director or a credit committee member for failure to attend regular 
meetings. The current bylaw language allows FCUs to remove a director 
or credit committee member that has missed 3 consecutive months, or 4 
meetings in a calendar year. Under the proposed rule, an FCU may remove 
a director or credit committee member for missing 3 consecutive months 
or for missing 4 meetings within any 12 consecutive months. The Board 
believes this change provides FCUs with greater flexibility to address 
situations where a director or credit committee member misses a 
substantial number of consecutive meetings but would otherwise not 
qualify for removal because the missed meetings do not all occur within 
the same calendar year. In addition, the proposed rule adds language to 
allow FCUs to choose whether directors or credit committee members may 
be paid employees after such positions end.
    The proposed rule also adds language that clarifies the existing 
restriction on the number of employees and family members of employees 
who may simultaneously serve on the board. The NCUA has received 
numerous questions regarding this issue since the FCU Bylaws were first 
incorporated into the NCUA's regulations in 2007. The current bylaw 
language prohibits FCU employees, their family members, or a 
combination of FCU employees and their family members from constituting 
a majority of the board. The purpose of this restriction is to prevent 
conflicts of interest that may arise when a majority of the board has a 
personal or pecuniary interest in a matter currently being reviewed by 
the board.
    The Board has historically interpreted this provision of the FCU 
Bylaws to prohibit any combination of FCU employees, their family 
members, or FCU employees and their family members from constituting a 
majority of the board. To provide FCUs with

[[Page 56645]]

additional clarity, the proposed rule states that the total number of 
current voting directors serving who fall into the following categories 
must not constitute a majority of the board: (1) Management officials 
plus assistant management officials plus other employees; (2) immediate 
family members or persons in the same household as the management 
officials, assistant management officials, and other employees; or (3) 
management officials plus assistant management officials plus other 
employees, plus immediate family members or persons in the same 
household as management officials, assistant management officials, and 
other employees. The Board believes that this clarification will 
provide additional guidance to FCUs on this restriction.
    For FCUs that elect not to have a specifically appointed credit 
committee, the proposed rule adds two new options to provide additional 
flexibility in addressing an applicant's request for review of a denied 
loan application. The FCU Act requires a board, at the request of the 
applicant, to review any application that has been denied by a loan 
officer.\14\ The FCU Bylaws allow the board, in its discretion, to 
establish subcommittees for the purpose of reviewing, at the request of 
an applicant, loan applications that have been rejected. These 
subcommittees are comprised of three members that serve a regular term 
of two years and function as mid-level appeal committees for the review 
of denials. The board itself must, at the request of an applicant, 
continue to review all applications denied by any such subcommittee. 
These two new options allow for FCUs to choose different ways to form 
the committee and select terms for the committee members.
---------------------------------------------------------------------------

    \14\ See 12 U.S.C. 1761c(b) (``If there is not a credit 
committee, a member shall have the right upon written request of 
review by the board of directors of a loan application which has 
been denied.'').
---------------------------------------------------------------------------

    Under the first new option, the board may elect to establish a 
subcommittee of three members and two alternates. The term of office of 
the subcommittee members may be for up to 3 years. Any number of 
lending professionals within the credit union may serve on the 
subcommittee, provided that no loan officer reviews any loan that the 
loan officer denied. At least 3 members of the subcommittee must review 
loan denials, none of whom have been a party to denying the loan. Under 
the second new option, the board may, by resolution, change the number 
of committee members to an odd number no less than 3 and no more than 
7. The board has the discretion to set the length of each subcommittee 
member's term upon appointment and stagger terms to prevent a complete 
turnover of subcommittee members. This option requires the board to 
file a copy of the resolution covering any increase or decrease in the 
number of subcommittee members with the official copy of the FCU's 
bylaws.
    The proposed rule also adds staff commentary that encourages FCUs 
to form a board of directors that reflects the FCU's field of 
membership. This policy encourages FCUs to consider all members in its 
leadership. While the Board does not have specific concerns regarding 
board diversity or representativeness at this time, it believes in the 
importance of including such statements in the FCU Bylaws to remind 
stakeholders that credit unions are fundamentally different than many 
other depository financial institutions. Accordingly, the Board 
believes that credit unions should strive to have a board that reflects 
their membership to the greatest extent possible.
    Finally, the proposed rule adds staff commentary that encourages 
FCUs to notify members, through a website posting (if the credit union 
then maintains a website), whenever the FCU's board adopts a resolution 
that changes the size of the FCU's board of directors. An FCU that does 
not then maintain a website can post such a notice in a conspicuous 
place in the FCU's offices, such as at the teller windows or on the 
FCU's front doors.

Article VII. Board Officers, Management Officials and Executive 
Committee

    Article VII provides the requirements related to board officers, 
such as their election and their terms of office. It lists the duties 
of the chair, vice chair, financial officer, management officials, and 
secretary of the board. Article VII also explains the board powers 
regarding employees and the provisions for an executive committee and 
an investment committee.
    The proposed rule makes certain clarifications and improvements to 
the readability of the language in this Article. For example, this 
Article utilizes the term ``financial officer,'' and the NCUA has 
received comments that this term is confusing. The proposed rule, 
therefore, modifies the definition of ``financial officer'' in Article 
XVIII to mean ``treasurer.'' The proposed rule also updates the 
language in section 8 to allow different options for addressing when 
directors or committee members may serve as paid employees of the 
credit union after their terms as directors and/or committee members 
have ended.
    The proposed rule adds more staff commentary under this Article, 
addressing procedural questions that arise in connection with specified 
board officer positions that may be held by directors, such as the 
president, vice president, and secretary of the board. The staff 
commentary clarifies that officers hold their respective board officer 
positions for a term of one year, until the first board meeting 
following the next annual meeting of the members. At that board 
meeting, board officer positions are again filled. Each board officer 
holds his or her position until the election and qualification of his 
or her successors. Thus, a board officer who is re-elected to the 
position the officer is currently holding serves for another year. 
Where another director is chosen to fill the position, the director 
takes office effective as of the date of the election, assuming the 
director is qualified.
    The proposed rule adds additional staff commentary to address 
questions relating to temporary appointments of board officers, 
succession, replacement of director positions that may have become 
vacant between election cycles, and notifying members about membership 
on FCU committees. The staff commentary notes that, in the absence of 
both the chair and vice chair, those directors who are present at a 
meeting may select from among themselves an individual director to act 
as temporary chair for that particular meeting. Actions taken by the 
board under the direction of the temporary chair have the same validity 
and effect as if taken under the direction of the chair or the vice 
chair, provided a quorum of the board, including the temporary chair, 
is present. There is no requirement for the board to ratify actions 
taken under the temporary chair at a subsequent meeting of the board 
where either the chair or vice chair are present.

Article VIII. Credit Committee or Loan Officers

    This Article provides the requirements for the credit committee, if 
an FCU elects to have one. This Article also lists the requirements for 
loan officers if an FCU does not have a credit committee. The proposed 
rule modernizes the language of this Article and incorporates plain 
English writing principles. In addition, the proposed rule incorporates 
into the FCU Bylaws several NCUA Office of General Counsel opinion 
letters permitting FCUs to use automated systems to process,

[[Page 56646]]

underwrite, and fund loans under certain conditions.

Article IX. Supervisory Committee

    Article IX provides the requirements for the supervisory committee, 
such as the appointment and membership of the committee, its duties, 
and the required officers. This Article also lists the powers of the 
supervisory committee. The FCU Act requires each FCU to have a 
supervisory committee. The supervisory committee must conduct or 
arrange for annual audits and verify members' deposits at least once 
every two years.\15\ The NCUA has assigned additional duties to FCUs' 
supervisory committees, including having them serve as an initial forum 
for hearing FCU members' complaints.\16\
---------------------------------------------------------------------------

    \15\ 12 U.S.C. 1761d.
    \16\ See 12 CFR 715.3.
---------------------------------------------------------------------------

    The proposed rule modernizes the language of this Article. In 
addition, the proposed rule deletes paragraph (c) of section 3, as it 
is duplicative of paragraph (b). During the 2013 consultation process, 
commenters requested a number of changes to this Article to allow for 
greater flexibility. For example, one commenter requested that the 
Board amend section 3 to allow an FCU to call a special meeting 30 
calendar days after all director positions become vacant, rather than 
the 7-14 calendar days currently set out in the FCU Bylaws. Another 
commenter requested that the Board amend section 6 to limit the actions 
members could take at a special meeting called to consider allegations 
of unsafe or illegal activity by a credit union director or credit 
committee member. These requested changes require statutory amendments 
to the FCU Act, so the proposed rule does not include any other 
substantive changes to this Article.

Article X. Organization Meeting

    Some commenters have noted that the provisions in Article X, which 
govern the initial organizational meeting by which the FCU is 
established, effectively become obsolete and irrelevant after that 
initial organizational meeting. Although the Board acknowledges that 
this Article serves a limited purpose, it does not agree that the 
Article is necessarily irrelevant after the FCU has been established. 
Nevertheless, the proposed rule includes an option whereby FCUs may 
eliminate the Article after five years of operation. For FCUs electing 
this option, Article X will become ``reserved'' and its language 
inoperative.

Article XI. Loans and Lines of Credit to Members

    Article XI lists loan purposes for members and addresses member 
delinquencies on loans. The proposed rule slightly edits the language 
of this Article for readability, but there are no other substantive 
changes.

Article XII. Dividends

    Article XII establishes the power of the board to declare 
dividends. The proposed rule slightly edits the language of this 
Article for readability. There are no other substantive changes.

Article XIII. Reserved

    The proposed rule makes no changes to this Article.

Article XIV. Expulsion and Withdrawal

    Article XIV addresses the expulsion and withdrawal procedures for 
members. The Board notes that expulsion from membership is a very 
serious remedy that may only be accomplished in accordance with the 
procedures set forth in the FCU Act. An FCU may only expel a member 
upon a two-thirds majority vote of the membership at a special meeting 
called for that purpose or by operation of a board-approved 
nonparticipation policy.\17\ The FCU Act allows an FCU's board to 
adopt, by majority vote of a quorum of directors, and enforce a 
nonparticipation policy. If the FCU's board adopts such a policy, the 
FCU must provide written notice of the policy and its effective date to 
each member at least 30 calendar days prior to the policy's effective 
date. Each new member also must be provided a written notice of the 
policy prior to, or upon applying for, membership.
---------------------------------------------------------------------------

    \17\ 12 U.S.C. 1764.
---------------------------------------------------------------------------

    New staff commentary to this Article reiterates that the FCU Act 
provides only two methods for an FCU to expel a member and clarifies 
that only in-person voting is permitted in conjunction with a special 
meeting held for that purpose. This gives the affected member an 
opportunity to present his or her case against expulsion and an 
opportunity to respond to the FCU's concerns. The staff commentary 
clarifies that, short of expulsion, an FCU has a wide range of measures 
available to address abusive or disruptive members, and it specifically 
references Article XVI, Section 1 of the FCU Bylaws, which addresses 
situations when members use their accounts for unlawful purposes.
    During the 2013 consultation process with representatives of the 
credit union industry, commenters pressed for ways to make the 
expulsion of a disruptive member easier to accomplish. Commenters to 
the ANPR reiterated many of the same concerns. Many commenters 
requested that the Board either amend the FCU Bylaws or include staff 
commentary interpreting the FCU Act to allow an FCU to expel a member 
for actions such as filing for bankruptcy, habitual default, or 
misconduct under the FCU's board-approved nonparticipation policy. The 
FCU Act does not permit such an interpretation. A word used in a 
statute is given its ordinary or plain meaning unless context indicates 
otherwise.\18\ The term ``nonparticipation'' generally refers to a 
person not being involved with or participating in something. 
Accordingly, the Board believes that the term ``nonparticipation'' is 
best understood in a more limited sense to mean a failure to 
participate, or a lack of involvement, in credit union affairs. It does 
not refer to an act of malfeasance.
---------------------------------------------------------------------------

    \18\ Sebelius v. Cloer, 569 U.S. 369 (May 20, 2013) (absent 
evidence to the contrary, words must receive their ordinary 
meaning).
---------------------------------------------------------------------------

    As the Board notes in the discussion of changes to Article II 
above, FCUs have the option to address violent, belligerent, 
disruptive, and abusive members by limiting their access to products 
and services provided that there is a logical relationship between the 
objectionable conduct and the services to be suspended and the member 
has received adequate notice of the FCU's limitation of services 
policy.\19\ Neither the FCU Act nor the NCUA's regulations prohibit an 
FCU, as it deems appropriate, from denying all or most credit union 
services such as ATM services, credit cards, loans, share draft 
privileges, preauthorized transfers, or access to credit union 
facilities to a member that has engaged in some objectionable conduct 
that has caused a loss to the FCU or that threatens the safety of 
credit union staff, facilities, or members. In fact, the Board believes 
that, without question, certain actions warrant immediate limitations 
of service or access to credit union facilities, such as violence 
against other credit union members or credit union staff in the credit 
union facility or the surrounding property. Consequently, even though 
the FCU Act does not permit an FCU to immediately expel a member under 
these circumstances, an FCU may still take immediate action to address 
situations in which a member is disruptive or poses a threat to the 
credit

[[Page 56647]]

union, its employees, or other members in the FCU or its surrounding 
property.
---------------------------------------------------------------------------

    \19\ See OGC Op. No. 08-0431 (Aug. 12, 2008).
---------------------------------------------------------------------------

    Furthermore, as noted in the discussion of changes to Article II 
above, neither the FCU Act nor the NCUA's regulations prohibit an FCU 
from using lawful means to immediately protect the credit union, credit 
union members, and staff such as contacting local law enforcement, 
seeking a restraining order, or pursuing other forms of legal redress. 
The Board fully expects that an FCU would use these lawful means in 
addition to its limitation of services policy to proactively limit 
security threats or financial harm caused by violent, belligerent, 
disruptive, or abusive credit union members.

Article XV. Minors

    This Article provides that minors are permitted to own shares and 
that the rights of minors to transact business with the FCU are 
governed by state law. The proposed rule slightly edits the language of 
this Article for readability, but there are no other substantive 
changes.

Article XVI. General

    Article XVI addresses other general requirements, such as complying 
with other laws and regulations, confidentiality, and conflicts of 
interest. It also provides requirements related to records, 
indemnification, and the removal of directors and committee members.
    During the 2013 consultation process with representatives of the 
credit union industry, the NCUA received comments regarding section 3, 
requesting a simplified procedure for confirmation by the membership of 
the suspension of a director or committee member by the supervisory 
committee. Commenters suggested that the confirmation of suspension be 
accomplished through balloting rather than a special meeting at which 
members must vote in person to accomplish the removal. The Board notes, 
in this respect, that these procedures are mandated by statute. The FCU 
Act requires that membership confirmation of supervisory committee 
suspension be accomplished only by majority vote of the members at a 
special meeting called for that purpose.\20\ The proposed rule adds 
staff commentary explaining these requirements.
---------------------------------------------------------------------------

    \20\ 12 U.S.C. 1761d.
---------------------------------------------------------------------------

    The staff commentary also adds new language regarding section 1 of 
this Article, which specifies that the credit union, its powers and 
duties, as well as the functions of its members, officers, and 
directors, are all strictly circumscribed by law and regulation. It 
notes that, insofar as section 1 is included in the FCU Bylaws, an FCU 
need not adopt a specific policy or requirement that members use credit 
union products or services for lawful purposes. Furthermore, it 
confirms that this bylaw provision supports an FCU's decision to impose 
limits on products and services available to any individual who is 
found to be using the FCU in furtherance of unlawful purposes.
    The proposed rule also amends section 6 to require FCUs with 
websites to post their bylaws on the website. The Board believes that 
adding this new requirement will ensure that members without access to 
an FCU's physical location where they can request a copy of the bylaws, 
can still have access to the FCU's corporate governance documents. Some 
FCUs operate over a wide geographic area, employing shared branch 
networks and/or online banking as a way to provide fast and reliable 
services to their members. It may be difficult for members of these 
FCUs, particularly in rural areas, to travel to the nearest branch 
office to request a copy of the FCU's bylaws. Accordingly, the Board 
believes that, to the extent an FCU maintains a website, an FCU should 
post its current bylaws on that website to provide these members with 
immediate access.
    Finally, the proposed rule adds a new section 9 which clarifies the 
use of singular and plural terms as well as pronouns in the bylaws. The 
NCUA has received questions in the past in this regard. New section 9 
clarifies that, unless the context requires otherwise, words denoting 
the singular may be construed as denoting the plural, words of the 
plural may be construed as denoting the singular, and words of one 
gender may be construed as denoting another gender as appropriate.

Article XVII. Amendments of Bylaws and Charter

    Article XVII provides the requirements for amending an FCU's bylaws 
or charter. The proposed rule modernizes the language of this Article 
and incorporates plain English writing principles. In addition, in 
conjunction with the proposed rule's requirement for an FCU to post its 
current bylaws on its website (if the FCU maintains a website), the 
proposed rule requires an FCU to update the posting if it amends its 
bylaws.

Article XVIII. Definitions

    Article XVIII lists the definitions applicable to all of the FCU 
Bylaws. The proposed rule makes a few technical changes to this Article 
and adds several new definitions, which the Board believes are useful 
for purposes of clarification. These include new definitions for 
``Agency,'' ``Charter,'' ``Field of Membership,'' ``Loans,'' and 
``Membership Officer.'' In addition, the definitions include a listing 
of approved board officers. This article also includes the term 
``Member,'' the definition of which identifies the characteristics and 
actions an individual must take to become a qualified member. Finally, 
the definitions include the term ``Management,'' which is defined to 
include the Board, Financial Officer, and Management Official.

V. Regulatory Procedures

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) \21\ requires the NCUA to 
provide an initial regulatory flexibility analysis with a proposed rule 
to certify that the rule will not have a significant economic impact on 
a substantial number of small entities (defined for the purpose of the 
RFA to include credit unions with assets less than or equal to $100 
million) and to publish its certification and a short explanatory 
statement in the Federal Register along with the proposed rule. The 
proposed new bylaw amendments are simply a resource that is available 
to all FCUs, regardless of size. Except for newly chartered FCUs, there 
is nothing prescriptive or mandatory about this proposed rule. All FCUs 
are free to adopt the proposed new bylaws, retain their current bylaws, 
or adopt some combination of the proposed bylaws and their current 
bylaws. If an FCU elects to adopt the new proposed version that FCU 
only needs to adopt a board resolution to that effect. Accordingly, the 
NCUA hereby certifies this proposed rule will not have a significant 
economic impact on a substantial number of small credit unions.
---------------------------------------------------------------------------

    \21\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemaking in 
which an agency by rule creates a new paperwork burden on regulated 
entities or modifies an existing burden.\22\ For purposes of the PRA, a 
paperwork burden may take the form of a reporting, disclosure, or 
recordkeeping requirement, both referred to as information collection. 
The NCUA may not conduct or sponsor, and the respondent is not required 
to respond

[[Page 56648]]

to, an information collection unless it displays a currently valid 
Office of Management and Budget (OMB) control number.
---------------------------------------------------------------------------

    \22\ 44 U.S.C. 3507(d); 5 CFR part 1320.
---------------------------------------------------------------------------

    The current proposal clarifies many bylaws provisions and adds a 
few substantive changes.
    The amendments under this proposal would affect newly chartered 
FCUs or FCUs that choose to adopt these provisions. These provisions 
are:
     Article IV, Sec.  2--The proposed rule would require FCUs 
to post annual meeting notices in a conspicuous place in the office of 
the credit union at least 30 days before the annual meeting, and to 
post the notice on the credit union's website, if the FCU has a 
website.
     Article V--The nominating committee must widely publicize 
the call for nominations to all members by any medium and interview 
each member who volunteers. The secretary must post the nominations by 
petition along with those of the nominating committee on the credit 
union's website, if the FCU has a website.
     Article XVI, Sec.  6--If an FCU has a website, the FCU 
must post the bylaws on the website.
     Article XVII--After adopting amendments, a FCU must update 
the bylaws posted on its website, if the FCU has a website.
    The information collection requirements under OMB control number 
3133-0052 will be revised as follows due to the following program 
changes:
Article IV. Meetings of Members
    The current information collection requirements under Article IV is 
related to notices related to member meetings. The NCUA estimated the 
current burden hours at 3,721. NCUA has determined that the new changes 
from the proposed rule would only increase the burden for each FCU by 
15 minutes.
    Each FCU is estimated to spend 10 minutes posting notices for an 
increase of 620 hours, and each FCU with a website is estimated to 
spend 5 minutes posting notices to their website for an increase of 301 
hours. NCUA estimates that 3,617 of the total number of FCUs have 
websites. This new disclosure requirement will increase the burden 
hours associated with the information collection under Article IV by 
921 hours; for a total of 4,642 hours.
Article V. Elections
    The current information collection requirements under Article V 
covers the burden associated with the recordkeeping requirements for 
FCU elections. NCUA estimated the current burden hours to be 29,768. 
The NCUA has determined that the new changes from the proposed rule 
would increase the burden for each FCU by 40 minutes. Each FCU is 
estimated to spend 30 minutes publicizing the call for nominations for 
an increase of 1,851 burden hours; and each FCU with a website is 
estimated to spend 10 minutes posting nominations to their website for 
an increase of 603 hours. The NCUA estimates that 3,617 of the total 
number of FCUs have websites. This new disclosure requirement will 
increase the burden hours associated with the information collection 
under Article V by 2,464 hours; for a total of 32,232 hours.
    The information collection requirement associated with section 6 of 
Article V, Report of Officials, is cleared under OMB control number 
3133-0004.
Article XVI. General
    The current information collection requirements under Article XVI 
is FCU recordkeeping requirements specified in sections 5 and 6. The 
proposed rule does not affect the current recordkeeping requirements; 
however, under section 6 of Article XVI, a one-time burden of 1 hour 
will be reported for FCU's with a website to post their bylaws. This 
new disclosure requirements will increase the burden associated with 
Article XVI by 3,617 hours; for a total of 92,921 hours.
Article XVII. Amendments of Bylaws and Charter
    A new information collection requirement proposed under Article 
XVII is that FCU, who maintains a website, would be required to update 
its bylaws on its website after adopting any amendments. The NCUA 
estimates that it would take an FCU 30 minutes to update its bylaws on 
its website annually; for a total of 1,809 burden hours.
    The total increase in burden hours due to these proposed program 
changes is 8,810 and action will be taken to amend OMB control number 
3133-0052 to reflect this increase.
    Title of Information Collection: Federal Credit Union Bylaws, 
Appendix A to Part 701.
    OMB Control Number: 3133-0052.
    Estimated number of respondents: 3,721.
    Estimated total annual responses: 1,276,965.
    Estimated total annual burden: 445,424.
    Affected Public: Private Sector: Not-for-profit institutions.
    The Board invites comment on (a) whether the collections of 
information are necessary for the proper performance of the agency's 
function, including whether the information has practical utility; (b) 
the accuracy of estimates of the burden of the information collections, 
including the validity of the methodology and assumptions used; (c) 
ways to enhance the quality, utility, and clarity of the information 
being collected; (d) ways to minimize the burden of the information 
collection on respondents, including through the use of automated 
collection techniques or other forms of information technology; and (e) 
estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    All comments are a matter of public record. Comments regarding the 
information collection requirements of this rule should be sent to (1) 
Dawn Wolfgang, NCUA PRA Clearance Officer, National Credit Union 
Administration, 1775 Duke Street, Suite 5080, Alexandria, Virginia 
22314, or Fax No. 703-519-8572, or Email at [email protected] and 
the (2) Office of Information and Regulatory Affairs, Office of 
Management and Budget, Attention: Desk Officer for NCUA, New Executive 
Office Building, Room 10235, Washington, DC 20503, or email at 
[email protected].

C. Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. The 
NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the executive order to adhere to fundamental 
federalism principles. This rule will not have a direct effect 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. This proposed rule will only apply to 
FCUs. Accordingly, the NCUA has determined this proposed rule does not 
constitute a policy that has federalism implications for purposes of 
the executive order.

D. Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that this proposed rule will not affect 
family well-being within the meaning of Section 654 of the Treasury and 
General Government Appropriations Act, 1999, Public Law 105-277, 112 
Stat. 2681 (1998).

[[Page 56649]]

List of Subjects in 12 CFR Part 701

    Credit, Credit unions, Federal credit union bylaws.

    By the National Credit Union Administration Board on October 18, 
2018.
Gerard S. Poliquin,
Secretary of the Board.
    For the reasons stated above, NCUA proposes to amend 12 CFR part 
701, Appendix A as follows:

PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

0
1. The authority for part 701 continues to read as follows:

    Authority:  12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759, 
1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788, 1789. 
Section 701.6 is also authorized by 15 U.S.C. 3717. 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 42 U.S.C. 4311-4312.

0
2. Appendix A to Part 701 is revised to read as follows:

Appendix A to Part 701--Federal Credit Union Bylaws

Introduction

    1. Effective date. The National Credit Union Administration 
(NCUA) Board first incorporated the Federal Credit Union (FCU) 
Bylaws as Appendix A to Part 701 of the NCUA's regulations on 
November 30, 2007. FCUs may retain previously adopted versions of 
the FCU Bylaws including the November 30, 2007 version. Unless an 
FCU has adopted bylaws before [insert effective date of final rule], 
it must adopt these revised bylaws.
    2. Adoption of all or part of these bylaws. Although FCUs may 
retain any previously approved version of the FCU Bylaws, the NCUA 
Board encourages FCUs to adopt the revised bylaws because it 
believes they provide greater clarity and flexibility for credit 
unions and their officials and members. FCUs may also adopt portions 
of the revised bylaws and retain the remainder of previously 
approved bylaws, but the NCUA Board cautions FCUs to be extremely 
careful in making the decision. FCUs must be careful because they 
run the risk of having inconsistent or conflicting provisions 
because of the various options the revised bylaws provide, as well 
as other revisions in the text.
    3. Bylaw amendments. a. The FCU Bylaws contain provisions 
allowing FCU boards to select from an option or range of options or 
to fill in a blank. The ``fill-in-the-blank'' provisions are changes 
to the FCU's bylaws. Thus, they require a two-thirds vote of the 
FCU's board of directors. As long as the board selects from the 
permissible options, the FCU does not need to submit the change to 
the NCUA for its approval.
    b. FCUs continue to have the flexibility to request bylaw 
amendments. The NCUA must approve all bylaw amendments except for 
the provisions noted above. In the past, the NCUA has published a 
``Standard Bylaw Amendments'' booklet containing a list of 
``standard'' preapproved and optional amendments not included in the 
FCU Bylaws. That document remains on the NCUA's website for 
historical purposes. However, FCUs may not adopt amendments from the 
``Standard Bylaw Amendments'' booklet, as the FCU Bylaws include 
sufficient flexibility to make a separate list of standard bylaw 
amendments unnecessary. Thus, the NCUA no longer makes a distinction 
between ``standard'' and ``nonstandard'' bylaw amendments. 
Consequently, the NCUA considers any change to the FCU Bylaws that 
is not a ``fill-in-the-blank'' provision or part of a range of 
options to be a bylaw amendment that requires the NCUA approval.
    c. The procedure for approval of a bylaw amendment is as 
follows:
    i. The FCU must submit its request to the Office of Credit Union 
Resources and Expansion (CURE).
    ii. The request must include:
    1. The section of the FCU Bylaws to be amended;
    2. The reason for, or purpose of, the amendment;
    3. An explanation of why the amendment is desirable and what it 
will accomplish for the federal credit union; and
    4. The specific wording of the proposed amendment.
    iii. CURE will advise the credit union within 90 days if it 
approved the proposed amendment after its review and, if necessary, 
consultation with the NCUA's Office of General Counsel. If CURE 
denies a proposed amendment, the credit union may appeal that 
decision to the NCUA Board in accordance with the procedures set out 
in subpart B to part 746 of this chapter. For purposes of this 
provision, if CURE does not reach a decision within 90 days, the 
proposed amendment is considered to be denied.
    d. Federal credit unions considering an amendment may find it 
useful to review the bylaws section of the agency website, which 
includes the NCUA's Office of General Counsel opinions on proposed 
bylaw amendments.\23\ Opinions issued after April 2006 include the 
language of the approved amendment.
---------------------------------------------------------------------------

    \23\ http://www.ncua.gov/Legal/Pages/BylawByYear.aspx.
---------------------------------------------------------------------------

    e. Because each decision by CURE is made on a case-by-case basis 
that depends on the unique facts and circumstances applicable to 
each FCU, the credit union must submit a proposed amendment to the 
NCUA for review under the procedure listed above, even if the NCUA 
previously approved an identical or similar amendment for another 
credit union.
    4. The nature of the FCU Bylaws. a. The Federal Credit Union Act 
requires the NCUA Board to prepare bylaws for federal credit 
unions.\24\ The FCU Bylaws address a broad range of matters 
concerning a credit union's organization and governance, the 
relationship of the credit union to its members, and the procedures 
and rules a credit union follows.
---------------------------------------------------------------------------

    \24\ 12 U.S.C. 1758.
---------------------------------------------------------------------------

    b. The FCU Bylaws supplement the broad provisions of:
     A federal credit union's charter, which establishes the 
existence of a federal credit union;
     The Federal Credit Union Act, which establishes the 
powers of federal credit unions; and
     The NCUA's regulations, which implement the Federal 
Credit Union Act.
    As a legal matter, a federal credit union's bylaws must conform 
to, and cannot be inconsistent with, any provision of its charter, 
the Federal Credit Union Act, the NCUA's regulations, or other laws 
or regulations applicable to the credit union's operations.
    c. The NCUA expects federal credit unions and their members will 
make every effort to resolve bylaw disputes using the credit union's 
internal member complaint resolution process. If a bylaw dispute 
cannot be resolved internally, credit union officials or members 
should contact the regional office with oversight over the credit 
union for assistance in resolving the dispute.
    d. The NCUA has discretion to take administrative actions when a 
credit union is not in compliance with its bylaws. If a potential 
violation is identified, the NCUA will carefully consider all of the 
facts and circumstances in deciding whether to take enforcement 
action. The NCUA will not generally take action against minor or 
technical violations, but emphasizes that it retains discretion to 
enforce the FCU Bylaws in appropriate cases, such as safety and 
soundness concerns or threats to fundamental, material credit union 
member rights.

Table of Contents

Article I. Name--Purposes
Article II. Qualifications for Membership
Article III. Shares of Members
Article IV. Meetings of Members
Article V. Elections
Article VI. Board of Directors
Article VII. Board Officers, Management Officials and Executive 
Committee
Article VIII. Credit Committee or Loan Officers
Article IX. Supervisory Committee
Article X. Organization Meeting
Article XI. Loans and Lines of Credit to Members
Article XII. Dividends
Article XIII. Reserved
Article XIV. Expulsion and Withdrawal
Article XV. Minors
Article XVI. General
Article XVII. Amendments of Bylaws and Charter
Article XVIII. Definitions

Bylaws

Federal Credit Union, Charter No. __

(A corporation chartered under the laws of the United States)

Article I. Name--Purposes

    Section 1. Name. The name of this credit union is as stated in 
Section 1 of

[[Page 56650]]

its charter (approved organization certificate).
    Section 2. Purposes. This credit union is a member owned, 
democratically operated, not-for-profit organization managed by a 
volunteer board of directors. Its stated mission is to meet the credit 
and savings needs of members, especially individuals of modest means. 
The purpose of this credit union is to promote thrift among its members 
by affording them an opportunity to accumulate their savings and to 
create a source of credit for provident or productive purposes. The 
credit union may add business as one of its purposes by placing a comma 
after ``provident'' and inserting ``business.''

Article II. Qualifications for Membership

    Section 1. Field of membership. The field of membership of this 
credit union is limited to that stated in Section 5 of its charter.
    Section 2. Membership application procedures. Persons eligible for 
membership under Section 5 of the charter must sign a membership 
application on approved forms. The applicant becomes a member upon 
approval of the application by a membership officer, after subscription 
to at least one share, payment of the initial installment, and payment 
of a uniform entrance fee if required by the board. If the membership 
officer denies a person's membership application, the credit union must 
explain the reasons for the denial in writing upon written request.
    Section 3. Maintenance of membership share required. A member who 
withdraws all shareholdings or fails to comply with the time 
requirements for restoring his or her account balance to par value in 
Article III, Section 3, ceases to be a member. By resolution, the board 
may require persons readmitted to membership to pay another entrance 
fee.
    Section 4. Continuation of membership. Once a member, always a 
member until the person or organization chooses to withdraw its 
membership or is expelled under the Act and Article XIV of these 
bylaws. The credit union may limit services and access to its 
facilities to a member who is disruptive to credit union operations.
    Section 5. Member in good standing. A member in good standing 
retains all their rights and privileges in the credit union. A member 
in good standing is a member who maintains at least the minimum share 
set forth in Article III, Section 1 of these bylaws; who is not 
delinquent on any credit union loan; who has not had any account with 
this credit union closed due to abuse or negligent behavior; who has 
not been belligerent or abusive to any duly elected or appointed 
official or employee when that official or employee is carrying out 
their duties as set in the Act, the rules and regulations, the charter, 
and bylaws of this credit union; and who has not caused a financial 
loss to this credit union. Subject to Article XIV of these bylaws and 
any applicable limitation of services policy approved by the board, 
members not in good standing retain their right to attend, participate, 
and vote at the annual and special meetings of the members and maintain 
a share account.

Article III. Shares of Members

    Section 1. Par value. The par value of each share is $__. 
Subscriptions to shares are payable at the time of subscription, or in 
installments of at least $__ per month. FCUs may establish differing 
par values for different classes of members or types of accounts (such 
as students, minors, or non-natural persons), provided this action does 
not violate any federal, state or local antidiscrimination laws. Below 
are some options an FCU can choose. The FCU may also establish 
differing par values for other classes of members not listed below. 
List all established par values in Section 1.

__ Option. Par value for minors. The par value of each share for 
members ____ years of age or younger is $__. Subscriptions to shares 
are payable at the time of subscription, or in installments of at least 
$__ per month.

__ Option. Par value for students. The par value of each share for 
students is $__. Subscriptions to shares are payable at the time of 
subscription, or in installments of at least $__ per month. A student 
is defined as anyone enrolled [ballot] [ballot] full-time or [ballot] 
[ballot] part-time in ____.

__ Option. Par value for non-natural persons. The par value of each 
share for non-natural persons is $__. Subscriptions to shares are 
payable at the time of subscription, or in installments of at least $__ 
per month.

    Section 2. Establishing membership. To establish membership, the 
member must subscribe to one par value of share. The share does not 
have to be in a regular share account. The board may choose the best 
account for the characteristics of its membership. Below are some 
options an FCU can choose. Select one option and check the box 
corresponding to that option.

__ Option A--Regular Share account required to establish membership. To 
establish membership in the credit union, the member must subscribe to 
one share in a regular share account.

__ Option B--____ account required to establish membership. To 
establish membership in the credit union, the member must subscribe to 
one share in the stated account or accounts (note the account(s) in the 
blank above).

    Section 3. Cap on shares held by one person. The board may 
establish, by resolution, the maximum amount of shares that any one 
member may hold.
    Section 4. Time periods for payment and maintenance of membership 
share. The credit union will terminate from membership a member who:
     Fails to complete payment of one share within ____ of 
admission to membership, or
     Fails to complete payment of one share within ____ from 
the increase in the par value of shares, or
     Reduces the share balance below the par value of one share 
and does not increase the balance to at least the par value of one 
share within ____ of the reduction.
    Section 5. Transferability. Members may transfer shares to another 
member in any form approved by the board. Shares that accrue credits 
for unpaid dividends retain those credits when transferred.
    Section 6. Withdrawals. Members may withdraw money paid in on 
shares provided that:
    (a) The board has the right, at any time, to require members, or a 
subset of members, to give up to 60 days written notice of intention to 
withdraw all or part of the amounts they paid in.
    (b) Reserved.
    (c) A member delinquent on any loan or obligation to the credit 
union may not withdraw their shares below the delinquent amount without 
the written approval of the credit committee or loan officer. This 
withdrawal restriction also applies if the member is a comaker, 
endorser, or guarantor of a delinquent loan. Coverage of overdrafts 
under an overdraft protection policy does not constitute delinquency 
for purposes of this paragraph. Shares issued in an irrevocable trust 
as provided in Section 6 of this article are not subject to withdrawal 
restrictions except as stated in the trust agreement.
    (d) The share account of a deceased member (other than one held in 
joint tenancy with another member) may be continued until the close of 
the dividend period in which the administration of the deceased's 
estate is completed.
    (e) The board can impose a fee for excessive share withdrawals from

[[Page 56651]]

regular share accounts. By resolution, the board can set the number of 
withdrawals not subject to a fee and the amount of the fee subject to 
regulations relevant to the advertising and disclosure of terms and 
conditions on member accounts.
    Section 7. Trusts. Shares may be issued in a revocable or 
irrevocable trust, subject to the following:
    (a) Shares issued in a revocable trust--the settlor must be a 
member of this credit union in his or her own right.
    (b) Shares issued in an irrevocable trust--either the settlor or 
the beneficiary must be a member of this credit union.
    (c) Both a revocable and irrevocable trust must state the name of 
the beneficiary.
    A trust may be a member of the credit union as an entity if all 
parties to the trust, including all settlors, beneficiaries and 
trustees, are within the credit union's field of membership.
    (d) Shares issued through a pension plan authorized by the rules 
and regulations will be treated as an irrevocable trust unless 
otherwise indicated in the rules and regulations.
    Section 8. Joint accounts and membership requirements. Select one 
option and check the box corresponding to that option.

__ Option A--Separate account not required to establish membership

    Owners of a joint account may both be members of the credit union 
without opening separate accounts. For joint membership, both owners 
are required to fulfill all of the membership requirements including 
each member purchasing and maintaining at least one share in the 
account and filling out the membership card.

__ Option B--Separate account required to establish membership

    Each member must purchase and maintain at least one share in a 
share account that names the member as the sole or primary owner. Being 
named as a joint owner of a joint account is not sufficient to 
establish membership.

Article IV. Meetings of Members

    Section 1. Annual meeting. The board must hold the annual meeting 
of the members [insert time for annual meeting, for example, ``during 
the month of March/on the third Saturday of April/no later than March 
31''], in the county in which any office of the credit union is located 
or within a radius of 100 miles of an office, at the time and place as 
the board determines and announces in the notice of the annual meeting.
    Section 2. Notice of meetings required. a. The secretary must give 
written notice to each member at least 30 but no more than 75 days 
before the date of any annual meeting. The secretary must give written 
notice to each member at least 7 days before the date of any special 
meeting of the members and at least 45 but no more than 90 days before 
the date of any meeting to vote on a merger with another credit union. 
The secretary may deliver the notice in person, by mail to the member's 
address, or, for members who have opted to receive statements and 
notices electronically, by electronic mail. The secretary must give 
notice of the annual meeting by posting the notice in a conspicuous 
place in the office of this credit union where members may read it at 
least 30 days before the meeting. The secretary must also prominently 
display the notice on the credit union's website if such credit union 
maintains a website.
    b. All special meeting notices must state the purpose of the 
meeting. The officials and members may only transact business related 
to the stated purpose at the meeting.
    Section 3. Special meetings. a. The board chair, the board of 
directors by majority vote, or the supervisory committee as provided in 
these bylaws may call a special meeting of the members. The chair must 
call and hold a special meeting within 30 days of the receipt of a 
written request from 25 members or 5% of the members as of the date of 
the request, whichever number is larger. However, a request of no more 
than 750 members may be required to call a special meeting.
    b. The credit union may hold a special meeting at any location 
permitted for the annual meeting.
    Section 4. Items of business for annual meeting and rules of order 
for annual and special meetings. The suggested order of business at 
annual meetings of members is--
    (a) Ascertain that a quorum is present.
    (b) Reading and approval or correction of the minutes of the last 
meeting.
    (c) Report of directors, if there is one. For credit unions 
participating in the Community Development Revolving Loan Program, the 
directors must report on the credit union's progress on providing 
needed community services, if required by NCUA Regulations.
    (d) Report of the financial officer or the chief management 
official.
    (e) Report of the credit committee, if there is one.
    (f) Report of the supervisory committee, as required by Section 115 
of the Act.
    (g) Unfinished business.
    (h) New business other than elections.
    (i) Elections, as required by Section 111 of the Act.
    (j) Adjournment.
    (k) To the extent consistent with these bylaws, the board will 
conduct all meetings of the members according to ____. The order of 
business for the annual meeting may vary from the suggested order, 
provided it includes all required items and complies with the rules of 
procedure adopted by the credit union.
    The credit union must fill in the blank with one of the following 
authorities, noting the edition to be used: Democratic Rules of Order, 
The Modern Rules of Order, Robert's Rules of Order, or Sturgis' 
Standard Code of Parliamentary Procedure.
    Section 5. Quorum. Except as otherwise provided, 12 members 
excluding the board, credit union staff, and officials, constitute a 
quorum at annual or special meetings. If a quorum is not present, the 
board may adjourn to a date at least 7 but not more than 14 days 
thereafter. The members present at any adjourned meeting will 
constitute a quorum, regardless of the number of members present. The 
board must give the same notice for the adjourned meeting as prescribed 
in Section 2 of this article for the original meeting, except that they 
must give notice at least 5 days before the date of the meeting fixed 
in the adjournment.

Article V. Elections

    The Credit Union must select one of the four voting options. The 
board may print the credit union's bylaws with the option selected or 
retain this copy and check the box of the option selected. All options 
continue with Section 3 of this article.

Option A1--In-Person Elections; Nominating Committee and Nominations 
From Floor

    Section 1. Nomination procedures. At least 30 days before each 
annual meeting, the chair will appoint a nominating committee of three 
or more members. The nominating committee will nominate at least one 
member for each vacancy, including any unexpired term vacancy, for 
which elections are being held, and determine that the members 
nominated are agreeable to the placing of their names in nomination and 
will accept office if elected. The nominating committee must widely 
publicize the call for nominations to all members by any medium and 
interview each member who volunteers.
    Section 2. Election procedures. After placing the nominations of 
the nominating committee before the members, the chair calls for

[[Page 56652]]

nominations from the floor. When nominations are closed, the chair 
appoints election tellers. The election tellers distribute the ballots, 
collect the ballots and tally the votes, and the chair announces the 
results. Except when there is only one nominee for each open office, 
all elections are by ballot and determined by the plurality of vote. If 
there is only one nominee for each open office, the chair may take a 
voice vote or declare the election of each nominee by general consent 
or acclamation.

Option A2--In-Person Elections; Nominating Committee and Nominations by 
Petition

    Section 1. Nomination procedures. a. At least 120 days before each 
annual meeting the chair will appoint a nominating committee of three 
or more members. The nominating committee will nominate at least one 
member for each vacancy, including any unexpired term vacancy, for 
which elections are being held, and determine that the members 
nominated are agreeable to the placing of their names in nomination and 
will accept office if elected. The nominating committee must widely 
publicize the call for nominations to all members by any medium and 
interview each member who volunteers.
    b. At least 90 days before the annual meeting, the nominating 
committee files its nominations with the secretary of the credit union. 
At least 75 days before the annual meeting, the secretary notifies, in 
writing, all members eligible to vote that they may make nominations 
for vacancies by petition signed by 1% of the members with a minimum of 
20 and a maximum of 500. The secretary may use electronic mail to 
notify members who have opted to receive notices or statements 
electronically.
    c. The written notice must specify that the credit union will not 
conduct the election by ballot and there will be no nominations from 
the floor when the number of nominees equals the number of open 
positions.
    d. The notice will include, in a form approved by the board of 
directors, a brief statement of qualifications and biographical data 
for each nominee submitted by the nominating committee. Each nominee by 
petition must submit a similar statement of qualifications and 
biographical data with the petition.
    e. The written notice must state the closing date for receiving 
nominations by petition. At least 40 days before the annual meeting, 
nominee(s) must file the nomination petition with the secretary of the 
credit union. To be effective, nominee(s) must include a signed 
certificate with the nomination petition stating that they are 
agreeable to nomination and will serve if elected to office.
    f. At least 35 days before the annual meeting, the secretary will 
post the nominations by petition along with those of the nominating 
committee in a conspicuous place in each credit union office and on the 
credit union's website.
    Section 2. Election procedures. a. The secretary must place all 
persons nominated by either the nominating committee or by petition 
before the members. When nominations are closed, the chair appoints the 
election tellers. The election tellers distribute the ballots, collect 
the ballots, and tally the votes, and the chair announces the results. 
Except when there is only one nominee for each open office, all 
elections are by ballot and determined by the plurality of vote.
    b. There are no nominations from the floor if there are sufficient 
nominations by the nominating committee or by petition to provide at 
least one nominee for each open position. If there are nominations from 
the floor and they result in more nominees than open positions, the 
chair will close nominations, and appoint election tellers. The 
election tellers distribute the ballots, collect the ballots and tally 
the votes, and the chair announces the results. If there is only one 
nominee for each open office, the chair may take a voice vote or 
declare the election of each nominee by general consent or acclamation.

Option A3--Election by Ballot Boxes or Voting Machine; Nominating 
Committee and Nomination by Petition

    Section 1. Nomination procedures. a. At least 120 days before each 
annual meeting, the chair will appoint a nominating committee of three 
or more members. The nominating committee will nominate at least one 
member for each vacancy, including any unexpired term vacancy, for 
which elections are being held, and determine that the members 
nominated are agreeable to the placing of their names in nomination and 
will accept office if elected. The nominating committee must widely 
publicize the call for nominations to all members by any medium and 
interview each member who volunteers.
    b. At least 90 days before the annual meeting, the nominating 
committee files its nominations with the secretary of the credit union. 
At least 75 days before the annual meeting, the secretary notifies, in 
writing, all members eligible to vote that they may make nominations 
for vacancies by petition signed by 1% of the members with a minimum of 
20 and a maximum of 500. The secretary may use electronic mail to 
notify members who have opted to receive notices or statements 
electronically.
    c. The written notice must specify that the credit union will not 
conduct the election by ballot and there will be no nominations from 
the floor when the number of nominees equals the number of open 
positions.
    d. The notice will include, in a form approved by the board of 
directors, a brief statement of qualifications and biographical data 
for each nominee submitted by the nominating committee. Each nominee by 
petition must submit a similar statement of qualifications and 
biographical data with the petition.
    e. The written notice must state the closing date for receiving 
nominations by petition. At least 40 days before the annual meeting, 
nominee(s) must file the nomination petition with the secretary of the 
credit union. To be effective, nominee(s) must include a signed 
certificate with the nomination petition stating that they are 
agreeable to nomination and will serve if elected to office.
    f. At least 35 days before the annual meeting, the secretary will 
post the nominations by petition along with those of the nominating 
committee in a conspicuous place in each credit union office and on the 
credit union's website.
    Section 2. Election procedures. The plurality of the vote 
determines all elections. The election is conducted by ballot boxes or 
voting machines, subject to the following conditions:
    (a) The board of directors will appoint the election tellers;
    (b) At least 10 days before the annual meeting, the secretary will 
direct the preparation and placement of ballot boxes, printed ballots, 
or voting machines if there are sufficient nominations made by the 
nominating committee or by petition to provide more nominees than open 
positions. The secretary will place the boxes or voting machines in 
conspicuous locations as determined by the board of directors. The 
secretary will post the names of the candidates near the boxes or 
voting machines. The posting will include a brief statement of the 
candidates' qualifications and biographical data in a form approved by 
the board of directors;
    (c) The members have 24 hours to vote at conspicuous locations as 
the board determines. After 24 hours, election tellers will open the 
ballot boxes or voting machines, tally the vote, place the tally in the 
ballot boxes, and reseal the ballot boxes. The election tellers are 
responsible at all times for the ballot boxes or voting machines and 
the integrity of the vote. The election tellers will keep a record of 
all persons voting

[[Page 56653]]

and must assure themselves that each person voting is entitled to vote; 
and
    (d) The election tellers will take the ballot boxes to the annual 
meeting and place them in conspicuous locations with the names of the 
candidates posted near them. At the annual meeting, the election 
tellers will distribute printed ballots to those in attendance who have 
not voted. Members will deposit their votes in the ballot boxes placed 
by the election tellers. After giving the members an opportunity to 
vote at the annual meeting, the chair will close balloting. The 
election tellers will open the ballot boxes, tally the vote, and add 
the vote to the previous count. The chair will then announce the result 
of the vote.

Option A4--Election by Electronic Device (Including But Not Limited to 
Telephone and Electronic Mail) or Mail Ballot; Nominating Committee and 
Nominations by Petition

    Section 1. Nomination procedures. a. At least 120 days before each 
annual meeting, the chair will appoint a nominating committee of three 
or more members. The nominating committee will nominate at least one 
member for each vacancy, including any unexpired term vacancy, for 
which elections are being held, and determine that the members 
nominated are agreeable to the placing of their names in nomination and 
will accept office if elected. The nominating committee must widely 
publicize the call for nominations to all members by any medium and 
interview each member who volunteers.
    b. At least 90 days before the annual meeting, the nominating 
committee files its nominations with the secretary of the credit union. 
At least 75 days before the annual meeting, the secretary notifies, in 
writing, all members eligible to vote that they may make nominations 
for vacancies by petition signed by 1% of the members with a minimum of 
20 and a maximum of 500. The secretary may use electronic mail to 
notify members who have opted to receive notices or statements 
electronically.
    c. The written notice must specify that the credit union will not 
conduct the election by ballot and there will be no nominations from 
the floor when the number of nominees equals the number of open 
positions.
    d. The notice will include, in a form approved by the board of 
directors, a brief statement of qualifications and biographical data 
for each nominee submitted by the nominating committee. Each nominee by 
petition must submit a similar statement of qualifications and 
biographical data with the petition.
    e. The written notice must state the closing date for receiving 
nominations by petition. At least 40 days before the annual meeting, 
nominee(s) must file the nomination petition with the secretary of the 
credit union. To be effective, nominee(s) must include a signed 
certificate with the nomination petition stating that they are 
agreeable to nomination and will serve if elected to office.
    f. At least 35 days before the annual meeting, the secretary will 
post the nominations by petition along with those of the nominating 
committee in a conspicuous place in each credit union office and on the 
credit union's website (if the credit union maintains a website).
    Section 2. Election procedures. The plurality of vote determines 
all elections. The election is conducted by electronic device or mail 
ballot, subject to the following conditions:
    (a) The board of directors will appoint the election tellers;
    (b) At least 30 days before the annual meeting, the secretary will 
ensure either a printed ballot or notice of ballot is mailed to all 
members eligible to vote if there are sufficient nominations made by 
the nominating committee or by petition to provide more nominees than 
open positions. The secretary may use electronic mail to provide the 
notice of ballot to members who have opted to receive notices or 
statements electronically;
    (c) If the credit union conducts its elections electronically, the 
secretary will ensure the transmission of the following materials to 
each eligible voter using the following procedures:
    (1) One notice of balloting stating the names of the candidates for 
the board of directors and the candidates for other separately 
identified offices or committees. The notice must include a brief 
statement of qualifications and biographical data for each candidate in 
a form approved by the board of directors. The secretary may use 
electronic mail to provide the notice of ballot to members who have 
opted to receive notices or statements electronically.
    (2) One mail ballot that conforms to Section 2(d) of this article, 
as well as instructions for the electronic election procedure, 
including how to access and use the system and the timeframe for 
voting. The instructions will state that members without the requisite 
electronic device necessary to vote on the system may vote by 
submitting the enclosed mail ballot and specify the date the mail 
ballot must be received by the credit union. For members who have opted 
to receive notices or statements electronically, the mail ballot is not 
required and the secretary may use electronic mail to provide the 
instructions for the electronic election procedure.
    (3) The election tellers verify, or cause to be verified, the name 
of the voter and their credit union account number as registered in the 
electronic balloting system. The election tellers will test the 
integrity of the balloting system at regular intervals during the 
election period.
    (4) Election tellers must receive ballots no later than midnight, 5 
calendar days before the annual meeting.
    (5) Election tellers will tally the vote and the chair will make 
the result of the vote public at the annual meeting.
    (6) If the electronic balloting system malfunctions, the board of 
directors may, in its discretion, hold the election by mail ballot 
only. The mail ballots must conform to Section 2(d) of this article and 
the secretary must mail them once more to all eligible members 30 days 
before the annual meeting. The board may make reasonable adjustments to 
the voting time frames above, or postpone the annual meeting when 
necessary, to complete the elections before the annual meeting.
    (d) If the credit union conducts its election by mail ballot, the 
secretary will ensure the mailing of the following materials to each 
member using the following procedures:
    (1) One ballot, clearly identified as the ballot, with the names of 
the candidates for the board of directors and the candidates for other 
separately identified offices or committees printed in random order. A 
brief statement of qualifications and biographical data for each 
candidate, in a form approved by the board of directors, will accompany 
the ballot;
    (2) One ballot envelope, with instructions to place the completed 
ballot placed in the envelope and seal the envelope;
    (3) One identification form the member completes that includes 
their name, address, signature and credit union account number;
    (4) One mailing envelope that instructs the member to insert the 
sealed ballot envelope and the identification form. The mailing 
envelope must have prepaid postage and be preaddressed for return to 
the election tellers;
    (5) When properly designed with features that preserve the secrecy 
of the ballot, the ballot, identification form, and prepaid postage and 
preaddressed return envelope may be combined;
    (6) The election tellers will verify, or cause to be verified, the 
name and credit union account number of the voter as

[[Page 56654]]

appearing on the identification form. The tellers will retain the 
verified identification form and the sealed ballot envelope until the 
vote count is completed. In the event of a questionable or challenged 
identification form, the tellers must retain the identification form 
and sealed ballot envelope together until the verification or challenge 
is resolved;
    (7) Election tellers must receive ballots mailed to them no later 
than midnight 5 days before the date of the annual meeting;
    (8) The election tellers will tally the vote. They will verify the 
result at the annual meeting and the chair will make the result of the 
vote public at the annual meeting.

All Options Continue Here

    Section 3. Order of nominations. Nominations may be in the 
following order:
    (a) Nominations for directors.
    (b) Nominations for credit committee members, if applicable. 
Elections may be by separate ballots following the same order as the 
above nominations or, if preferred, may be by one ballot for all 
offices.
    Section 4. Proxy and agent voting. Members cannot vote by proxy. A 
member other than a natural person may vote through an agent designated 
in writing for the purpose.
    Section 5. One vote per member. Irrespective of the number of 
shares, no member has more than one vote.
    Section 6. Submission of information regarding credit union 
officials to NCUA. The secretary must forward the names and business 
addresses of board members, board officers, executive committee, credit 
committee members, if applicable, and supervisory committee members to 
the Administration in accordance with the Act and regulations in the 
manner as required by the Administration.
    Section 7. Minimum age requirement. Members must be at least ____ 
years of age by the date of the meeting (or for appointed offices, the 
date of appointment) in order to vote at meetings of the members, hold 
elective or appointive office, sign nominating petitions, or sign 
petitions requesting special meetings.
    The credit union may select the following option:
    Section 7. Members must be at least ____ years of age by the date 
of the meeting in order to vote at meetings of the members, sign 
nominating petitions, or sign petitions requesting special meetings. 
Members must be at least ____ years of age to hold elective or 
appointive office.
    The Credit Union's board should adopt a resolution inserting an age 
no greater than 18, or the age of majority under the state law 
applicable to the credit union, in the blank space for voting, or not 
greater than 21 for holding elective or appointive office.
    The Credit Union may select the absentee ballot provision in 
conjunction with the selected voting procedure. The board may do this 
by printing the credit union's bylaws with this provision or by 
retaining this copy and checking the box.

__ Section 8. Absentee ballots. The board of directors may authorize 
the use of absentee ballots in conjunction with the other procedures 
authorized in this article, subject to the following conditions:

    (a) The board of directors will appoint the election tellers;
    (b) If there are sufficient nominations made by the nominating 
committee or by petition to provide more than one nominee for each open 
position, at least 30 days before the annual meeting, the secretary 
will ensure a printed ballot is mailed to all members of the credit 
union who are eligible to vote and who have submitted a written or 
electronic request for an absentee ballot;
    (c) The secretary will ensure the following materials are mailed to 
each eligible voter who submitted a written or electronic request for 
an absentee ballot:
    (1) One ballot, clearly identified as the ballot, with the names of 
the candidates for the board of directors and the candidates for other 
separately identified offices or committees printed in random order. A 
brief statement of qualifications and biographical data for each 
candidate, in a form approved by the board of directors, will accompany 
the ballot;
    (2) One ballot envelope clearly marked with instructions to place 
the completed ballot placed in the envelope and seal the envelope;
    (3) One identification form the member completes that includes 
their name, address, signature and credit union account number;
    (4) One mailing envelope that instructs the member to insert the 
sealed ballot envelope and the identification form. The mailing 
envelope must have prepaid postage and be preaddressed for return to 
the election tellers;
    (5) When properly designed with features that preserve the secrecy 
of the ballot, the ballot, identification form, and prepaid postage and 
preaddressed return envelope may be combined;
    (d) The election tellers will verify, or cause to be verified, the 
name and credit union account number of the voter as appearing on the 
identification form. The tellers will retain the verified 
identification and the sealed ballot envelope until the vote count is 
completed. In the event of a questionable or challenged identification 
form, the tellers must retain the identification form and the sealed 
ballot envelope together until the verification or challenge is 
resolved. If more than one voting procedure is used, the tellers must 
verify that no eligible voter voted more than one time;
    (e) Election tellers must receive ballots mailed to them no later 
than midnight 5 days before the date of the annual meeting;
    (f) Members or authorized personnel will deposit absentee ballots 
in the ballot boxes taken to the annual meeting or included in a 
precount in accordance with procedures specified in Article V, Section 
2; and
    (g) If a member has chosen to receive statements and notices 
electronically, the credit union may provide notices required in this 
section by email and provide instructions for voting via electronic 
means instead of mail ballots.

Article VI. Board of Directors

    Section 1. Number of members. The board consists of ____ directors, 
all of whom must be members. By resolution, the board may change the 
number of directors to an odd number not fewer than 5 or more than 15. 
The board may not reduce the number of directors unless there is a 
corresponding vacancy as a result of a death, resignation, expiration 
of a term of office, or other action provided by these bylaws. The 
board must file a copy of the resolution covering any increase or 
decrease in the number of directors with the official copy of the 
bylaws.
    Section 2. Composition of board and committees. a. __ (Fill in the 
number, which may be zero) director(s) may be a paid employee of the 
credit union. The board may appoint a management official who ____ (may 
or may not) be a member of the board and one or more assistant 
management officials who ____ (may or may not) be a member of the 
board. If the board permits the management official or assistant 
management official(s) to serve on the board, he or she may not serve 
as the chair.
    b. __ (Fill in the number, which may be zero) immediate family 
members, or those persons living in the same household, of a director 
may be a paid employee of the credit union.
    c. The total number of directors serving who fall into each of the

[[Page 56655]]

categories below must not constitute a majority of the board:
     Management official plus assistant management official(s) 
plus other employees;
     Immediate family members or persons in the same household 
as the management official, assistant management official(s), and other 
employees; or
     Management official plus assistant management official(s) 
plus other employees, plus immediate family members or persons in the 
same household as management officials, assistant management officials 
and other employees.
    d. __ (Fill in the number, which may be zero) committee member(s) 
may be a paid employee of the credit union. __ (Fill in the number, 
which may be zero) immediate family members, or those persons living in 
the same household, of a committee member(s) may be a paid employee of 
the credit union.
     The board may also choose the option below:

__No director or committee member, who is not then a paid employee of 
the credit union, may become a paid employee of this credit union for a 
minimum of ____ (Fill in the number, which may be zero) years from the 
date the official terminates his or her position as a director or 
committee member.

     You can also add ``unless the employee position to be filled 
exists as a result of a death or disability'' after committee member.
     For this section, you can correct the syntax by omitting the 
plural(s) if applicable.
    Section 3. Terms of office. Terms for directors are for periods of 
2 or 3 years as decided by the board. All terms must be for the same 
number of years and until the election and qualification of successors. 
Terms are set and staggered at the first meeting, or when the number of 
directors changes, so that approximately an equal number of terms 
expire at each annual meeting.
    Section 4. Vacancies. The directors, by majority vote, will fill 
any vacancy on the board, credit committee, if applicable, or 
supervisory committee as soon as possible. If all director positions 
become vacant at once, the supervisory committee immediately becomes 
the temporary board of directors and must follow the procedures in 
Article IX, Section 3. Directors and credit committee members appointed 
to fill a vacancy hold office only until the next annual meeting. The 
FCU's members then vote to select a candidate to fill the remainder of 
the original director's unexpired term. Members of the supervisory 
committee appointed to fill a vacancy on the supervisory committee hold 
office through the remainder of the unexpired term.
    Section 5. Regular and special meetings. The board must hold a 
regular meeting each month at the time and place fixed by resolution. 
The board must conduct one regular meeting each calendar year in 
person. If a quorum of the board is present at the in person meeting, 
the remaining board members may participate by audio or video 
teleconference. The board may conduct the other regular meetings by 
audio or video teleconference. The chair, or in the chair's absence the 
ranking vice chair, may call a special meeting of the board at any time 
and must do so upon written request of a majority of the directors. The 
chair, or in the chair's absence the ranking vice chair, will fix the 
time and place of special meetings unless the board directs otherwise. 
The board will give notice of all meetings in the manner set by 
resolution. The board may conduct special meetings by audio or video 
teleconference. The board may take action and vote on resolutions 
without a meeting. The board must first obtain unanimous consent for 
the action in writing or by electronically recorded means.
    Section 6. Board responsibilities. The board has the general 
direction and control of the affairs of this credit union. The board is 
responsible for performing all the duties customarily done by boards of 
directors. This includes but is not limited to:
    (a) Directing the affairs of the credit union in accordance with 
the Act, these bylaws, the rules and regulations and sound business 
practices.
    (b) Establishing programs to achieve the purposes of this credit 
union as stated in Article I, Section 2, of these bylaws.
    (c) Establishing lending policies, a loan collection program, and 
authorizing the charge-off of uncollectible loans.
    (d) Establishing policies to address training for directors and 
volunteer officials in areas such as ethics and fiduciary 
responsibility, regulatory compliance, and accounting.
    (e) Ensuring that staff and volunteers who handle the receipt, 
payment or custody of money or other property of this credit union; or 
property in its custody as collateral or otherwise, are properly bonded 
in accordance with the Act and regulations.
    (f) Performing additional acts and exercising additional powers as 
required or authorized by applicable law and regulation.
     If the credit union has an elected credit committee, you do not 
need to check a box. If the credit union has no credit committee check 
Option 1, and if it has an appointed credit committee check Option 2.

__ Option 1. No Credit Committee.

    (g) Reviewing denied loan applications of members who file written 
requests for review.
    (h) Appointing one or more loan officers and delegating to those 
officers the power to approve or disapprove loans, lines of credit or 
advances from lines of credit.
    (i) In its discretion, appointing a loan review (the credit union 
may fill in another name if desired) committee to review loan denials 
and delegating to the committee the power to overturn denials of loan 
applications. The committee will function as a mid-level appeal 
committee for the board. The board must review all loans denied by the 
committee upon written request of the member.
     The credit union may select one of three options for the makeup 
and term of the committee. Enter the option selected______.

__Option A. The committee must consist of three members with a term of 
office of ____ (enter no more than 3) years. The committee may not have 
more than one loan officer.
__Option B. The committee must consist of three members and two 
alternates. The term of office of the committee members will be for 
____ (enter no more than 3) years. The board may appoint any number of 
lending professionals within the organization to the committee, 
provided that no loan officer may review any loan that he or she 
denied. At least 3 members of the committee must review loan denials, 
none of whom have been a party to denying the loan.

__Option C. The board may, by resolution, change the number of 
committee members to an odd number no less than three and no more than 
seven. The board will determine the length of each committee member's 
term upon appointment and stagger terms as necessary to prevent a 
complete turnover of committee members. The board must file a copy of 
the resolution covering any increase or decrease in the number of 
committee members with the official copy of the bylaws of this credit 
union. The committee will act by majority vote of members present at a 
meeting. The committee may not have more than one loan officer.


[[Page 56656]]


__ Option 2. Appointed Credit Committee.

    (g) Appointing an odd number of credit committee members as 
provided in Article VIII of these bylaws.
    Section 7. Quorum. A majority of directors, including any vacant 
positions, constitutes a quorum for the transaction of business at any 
meeting. A majority of the directors holding office constitutes a 
quorum to fill any vacancies as stated in Section 4 of this article. 
Less than a quorum may adjourn from time to time until a quorum is in 
attendance.
    Section 8. Attendance and removal. a. If a director or a credit 
committee member, if applicable, fails to attend regular meetings of 
the board or credit committee, respectively, for 3 consecutive months, 
(choose one of the following) ____ or 4 meetings within a calendar 
year, or ____ 4 meetings within any 12 consecutive meetings or 
otherwise fails to perform any significant duties as a director or a 
credit committee member, the board may declare the office vacant and 
fill the vacancy as provided in the bylaws.
    b. The board may remove any board officer from office for failure 
to perform any significant duties as an officer. Prior to removal, the 
board must give the officer reasonable notice and an opportunity to 
respond to the issues.
    c. When any board officer, membership officer, executive committee 
member or investment committee member is absent, disqualified, or 
otherwise unable to perform the duties of the office, the board may by 
resolution designate another member of this credit union to fill the 
position temporarily. The board may also, by resolution, designate 
another member or members of this credit union to act on the credit 
committee when necessary in order to obtain a quorum.
    Section 9. Suspension of supervisory committee members. The board 
may suspend any member of the supervisory committee by a majority vote. 
In the event of a suspension, the board must hold a special meeting of 
the members at least 7 but no more than 14 days after any suspension. 
The members will decide whether to remove or to restore the suspended 
committee member of the supervisory committee.
     The credit union may add the optional Section 10 if desired.
    Section 10. Director Emeritus. The board of directors may appoint 
any former director who served on the board at least ____ (fill in the 
number) years as ``Director Emeritus.'' The board my substitute 
suitable volunteer service time for some of the board service time 
provided the candidate has served at least ____ (fill in the number) 
years on the board. The individuals appointed directors emeritus 
function as an advisory committee to the board of directors. Terms for 
directors emeritus are ____ (fill in the number) years. The board may 
increase or decrease the number of directors emeritus, or shorten or 
extend any director emeritus's term, by resolution. Unless separately 
elected or appointed, directors emeritus are not members of any other 
committee of the credit union. Directors emeritus are not a member or 
officer of the board of directors; they may not vote on any matter 
before the board or any other committee of the credit union; they may 
not receive any compensation from the credit union; and they are not 
required to attend any meetings or authorized to perform any duties 
other than providing advice to the credit union's board, staff and 
other committees as needed.

Article VII. Board Officers, Management Officials and Executive 
Committee

    Section 1. Board officers. The board elects the following officers 
from their number: A chair, one or more vice chairs, a financial 
officer, and a secretary. The board determines the title and rank of 
each board officer and records them in the addendum to this article. 
The board may compensate one board officer, the ____, for services as 
they determine. If the board elects more than one vice chair, the board 
determines their rank as first vice chair, second vice chair, and so 
on. The same person may hold the offices of the financial officer and 
secretary. If the board permits a management official or assistant 
management official to serve on the board, he or she may not serve as 
the chair. Unless removed as provided in these bylaws, the board 
officers elected at the first meeting of the board hold office until 
the first meeting of the board following the first annual meeting of 
the members and until the election and qualification of their 
respective successors.
    Section 2. Election and term of office. The board must hold a 
meeting not later than 7 days after the annual meeting to elect 
officers. Board officers hold office for a 1-year term and until the 
election and qualification of their respective successors. Any person 
elected to fill a vacancy caused by the death, resignation, or removal 
of an officer is elected by the board to serve only for the unexpired 
term of that officer and until a successor is duly elected and 
qualified.
    Section 3. Duties of Chair. The chair presides at all meetings of 
the members and at all meetings of the board, unless disqualified 
through suspension by the supervisory committee. The chair also 
performs other duties customarily assigned to the office of the chair 
or duties directed to perform by resolution of the board that are not 
inconsistent with the Act, regulations, and these bylaws.
    Section 4. Approval required. The board must approve all 
individuals authorized to sign all notes, checks, drafts, and other 
orders for disbursement of credit union funds.
    Section 5. Vice chair. The ranking vice chair has and may exercise 
all the powers, authority, and duties of the chair during the chair's 
absence or inability to act.
    Section 6. Duties of financial officer. i. The financial officer 
manages this credit union under the control and direction of the board 
unless the board has appointed a management official to act as general 
manager. Subject to limitations, controls and delegations the board may 
impose, the financial officer will:
    (a) Have charge over all funds, securities, valuable papers and 
other assets of this credit union.
    (b) Provide and maintain full and complete records of all the 
assets and liabilities of this credit union in accordance with 
prescribed law, regulation, and Administration guidance.
    (c) Within 20 days after the close of each month, prepare and 
submit to the board a financial statement showing the condition of this 
credit union as of the end of the month, including a summary of 
delinquent loans; and post a copy of the statement in a conspicuous 
place in the office of the credit union where it will remain until 
replaced by the next month's financial statement.
    (d) Ensure that financial and other reports the Administration may 
require are prepared and sent.
    (e) Within standards and limitations set by the board, employ 
sufficient staff to run the credit union, and have the power to remove 
these employees.
    (f) Perform other duties customarily assigned to the office of the 
financial officer or duties assigned by board resolution that are not 
inconsistent with the Act, regulations, and these bylaws.
    ii. The board may employ one or more assistant financial officers, 
none of whom may also hold office as chair or vice chair. The board may 
authorize them, under the direction of the financial officer, to 
perform any of the duties falling to the financial officer, including 
the signing of checks. When

[[Page 56657]]

designated by the board, any assistant financial officer may also act 
as financial officer during the financial officer's temporary absence 
or temporary inability to act.
    Section 7. Duties of management official and assistant management 
official. The board may appoint a management official who is under the 
direction and control of the board or of the financial officer as 
determined by the board. The board may assign any or all of the 
responsibilities of the financial officer described in Section 6 of 
this article. The board will determine the title and rank of each 
management official and record them in the addendum to this article. 
The board may employ one or more assistant management officials. The 
board may authorize assistant management officials under the direction 
of the management official, to perform any of the duties falling to the 
management official, including the signing of checks. When designated 
by the board, any assistant management official may also act as 
management official during the management official's temporary absence 
or temporary inability to act.
    Section 8. Board powers regarding employees. The board employs, 
fixes the compensation, and prescribes the duties of employees as 
necessary, and has the power to remove employees, unless it has 
delegated these powers to the financial officer or management official. 
Management does not have the power or duty to employ, prescribe the 
duties of, or remove necessary clerical and auditing assistance 
employed or used by the supervisory committee or remove any loan 
officer appointed by the credit committee.
     The credit union may select one of the following options and add 
it to the end of Section 8:
__Option A. No director or committee member, who is not then a paid 
employee of the credit union, may become a paid employee of this credit 
union for a minimum of ____(Fill in the number, which may be zero) 
years from the date the official terminates his or her position as a 
director or committee member.
__Option B. No director, committee member, immediate family member of a 
director or committee member, or person in the same household as a 
director or committee member, who is not then a paid employee of this 
credit union, may become a paid employee of the credit union for a 
minimum of ____(Fill in the number, which may be zero) years from the 
date the official terminates his or her position as a director or 
committee member.
__Option C. No director, committee member, immediate family member of a 
director or committee member, or person in the same household as a 
director or committee member, who is not then a paid employee of the 
credit union, may become a paid employee of this credit union for a 
minimum of ____(Fill in the number, which may be zero) years from the 
date the official terminates his or her position as a director or 
committee member, unless the employee position to be filled exists as a 
result of a death or disability.
__Option D. No official, who is not already a paid employee of this 
credit union, may become a paid employee of this credit union for a 
minimum of ____(Fill in the number, which may be zero) years from the 
date the official terminates his or her position as a director or 
committee member, unless the employee position to be filled exists as a 
result of death or disability. The term ``official'' in this bylaw 
means a person who is a member of the board of directors, supervisory 
committee, or other volunteer committee established by the board of 
directors.
    Section 9. Duties of secretary. The secretary prepares and 
maintains full and correct records of all meetings of the members and 
of the board. The secretary will prepare a record of each respective 
meeting within 7 days after its completion. The secretary must promptly 
inform the Administration in writing of any change in the address of 
the office of this credit union or the location of its principal 
records. The secretary provides the proper notice of all meetings of 
the members in the manner prescribed in these bylaws. The secretary 
also performs other duties as directed by resolution of the board that 
are not inconsistent with the Act, regulation, and these bylaws. The 
board may employ one or more assistant secretaries, none of whom may 
also hold office as chair, vice chair, or financial officer, and may 
authorize them under direction of the secretary to perform any of the 
duties assigned to the secretary.
    Section 10. Executive committee. As authorized by the Act, the 
board may appoint an executive committee of not fewer than three 
directors to serve at its pleasure, to act for it with respect to the 
board's specifically delegated functions. When making delegations to 
the executive committee, the board must be specific with regard to the 
committee's authority and limitations related to the particular 
delegation. The board may also authorize any of the following to act 
upon membership applications under conditions the board and these 
bylaws may prescribe: An executive committee; a membership officer(s) 
appointed by the board from the membership, other than a board member 
paid as an officer; the financial officer; any assistant to the paid 
officer of the board or to the financial officer; or any loan officer. 
The board may not compensate the executive committee member or 
membership officer as such.
    Section 11. Investment committee. The board may appoint an 
investment committee composed of not less than two, to serve at its 
pleasure to have charge of making investments under rules and 
procedures established by the board. The board may not compensate any 
member of the investment committee as such.
     Addendum: The board must list the positions of the board officers 
and management officials of this credit union. They are as follows:

------------------------------------------------------------------------
                                                          Officer or
            Position              Credit union title     Official name
------------------------------------------------------------------------
Board Chair....................
Vice Chair.....................
Treasurer......................
Secretary......................
Management Official............
Other 1........................
Other 2........................
Other 3........................
Other 4........................
------------------------------------------------------------------------


[[Page 56658]]

     Select Option 1 if the credit union has a credit committee and 
Option 2 if it does not have a credit committee.

Article VIII. Option 1 Credit Committee

    Section 1. Credit committee members. The credit committee consists 
of ____members. All the members of the credit committee must be members 
of this credit union. The board determines the number of members on the 
credit committee, which must be an odd number and may be fewer than 3 
and no more than 7. The board may not reduce the number of members 
unless there is a corresponding vacancy as a result of a death, 
resignation, expiration of a term of office, or other action provided 
by these bylaws. The board must file a copy of the resolution covering 
any increase or decrease in the number of committee members with the 
official copy of the bylaws of this credit union.
    Section 2. Terms of office. Regular terms of office for elected 
credit committee members are for periods of either 2 or 3 years as the 
board determines. All regular terms are for the same number of years 
and until the election and qualification of successors. The board will 
fix the regular terms at the beginning or upon any increase or decrease 
in the number of committee members so that approximately an equal 
number of regular terms expire at each annual meeting. The board 
determines the periods for the regular terms of office for appointed 
credit committee members and records these periods in the board's 
minutes.
    Section 3. Officers of credit committee. The credit committee 
chooses from their number a chair and a secretary. The secretary of the 
committee prepares and maintains full and correct records of all 
actions taken by it. They must prepare those records within 3 days 
after the action. The same person may hold the offices of the chair and 
secretary.
    Section 4. Credit committee powers. The credit committee may, by 
majority vote of its members, appoint one or more loan officers to 
serve at its pleasure. The committee may delegate to them the power to 
approve loan applications, share withdrawals, releases and 
substitutions of security, within limits specified by the committee and 
within limits of applicable law and regulations. The committee may not 
appoint more than one of its members as a loan officer. Each loan 
officer must furnish to the committee a record of each approved or not 
approved transaction within 7 days of the date of the filing of the 
application or request. This record becomes a part of the committee's 
records. The committee must act on all applications or requests not 
approved by a loan officer. No individual may disburse funds of this 
credit union for any application or share withdrawal that the 
individual has approved as a loan officer.
    Section 5. Credit committee meetings. The credit committee must 
hold at least one meeting a month and as frequently as required to 
complete the business of this credit union. The committee will give 
notice of meetings to its members in the manner it prescribes by 
resolution.
    Section 6. Credit committee duties. For each loan, the credit 
committee or loan officer must review the character and financial 
condition of the applicant and their surety, if any. The credit 
committee or loan officer will ascertain the applicant's ability to 
fully and promptly repay the loan. The credit union may use an 
automated loan processing system to conduct this review, subject to the 
conditions set forth in Section 7, below. Where appropriate, the credit 
committee or loan officers should provide, or refer applicants to, 
financial counseling assistance.
    Section 7. Unapproved loans prohibited. The credit committee must 
approve all loans. If the credit union uses an automated lending 
system, the credit committee must review all loan applications the 
system has denied and review at least a sample of approved loans to 
screen for fraud and ensure the automated system is functioning within 
the lending policies the board has established.
    Section 8. Lending procedures. The credit committee, loan officer, 
or automated system determines the required security, if any, and the 
terms of repayment for each application. All lending decisions and loan 
terms must comply with applicable law and regulations, these bylaws, 
and board policy. The security furnished must be adequate in quality 
and character as well as consistent with sound lending practices. When 
the credit union does not have the funds available to make all the 
loans requested, the credit committee should give preference, in all 
cases, to the smaller applications if the need and credit factors are 
nearly equal.

Article VIII. Option 2 Loan Officers (No Credit Committee)

    Section 1. Records of loan officer; prohibition on loan officer 
disbursing funds. Each loan officer must maintain a record of each 
approved or not approved transaction within 7 days of the filing of the 
application or request. This record then becomes a part of the records 
of the credit union. No individual may disburse funds of this credit 
union for any application or share withdrawal that the individual has 
approved as a loan officer.
    Section 2. Loan officer duties. For each loan, the loan officer 
must review the character and financial condition of the applicant and 
their surety, if any. The loan officer will ascertain the applicant's 
ability to fully and promptly repay the loan. The credit union may use 
an automated loan processing system to conduct this review, subject to 
the conditions set forth in Section 3, below. Where appropriate, the 
loan officer should provide, or refer applicants to, financial 
counseling assistance.
    Section 3. Unapproved loans prohibited. The loan officer must 
approve all loans. Loan terms and rates must comply with applicable law 
and regulations. If the credit union uses an automated lending system, 
the loan officer must review all loan applications the system has 
denied, and review at least a sample of approved loans to screen for 
fraud and ensure the automated system is functioning within the lending 
policies the board has established.
    Section 4. Lending procedures. The loan officer or automated 
lending system determine the required security, if any, and the terms 
of repayment for each application. All lending decisions and loan terms 
must comply with applicable law and regulation, these bylaws, and board 
policy. The security furnished must be adequate in quality and 
character as well as consistent with sound lending practices. When the 
credit union does not have the funds available to make all the loans 
requested, the loan officer should give preference, in all cases, to 
the smaller applications if the need and credit factors are nearly 
equal.

Article IX. Supervisory Committee

    Section 1. Appointment and membership. The board appoints the 
supervisory committee from members of this credit union. One of the 
committee members may be a director other than the financial officer or 
the paid officer of the board. The board determines the number of 
members on the committee, which may not be fewer than 3 or more than 5. 
No member of the credit committee, if applicable, or employee of this 
credit union may be appointed to the committee. Terms of committee 
members are for periods of 1, 2, or 3 years as decided by the board. 
However, all terms are for the same number of years and until the 
appointment and qualification of successors. Terms are

[[Page 56659]]

set and staggered at the beginning, or on the increase or decrease in 
the number of committee members so that approximately an equal number 
of terms expire at each annual meeting.
    Section 2. Officers of supervisory committee. The supervisory 
committee members choose from their number a chair and a secretary. The 
secretary prepares, maintains, and has custody of all records of the 
committee's actions. The same person may hold the offices of chair and 
secretary.
    Section 3. Duties of supervisory committee.
    a. The supervisory committee makes, or arranges for, the audits, 
and prepares and submits the written reports required by the Act and 
regulations. The committee may employ and use the clerical and auditing 
assistance required to carry out its responsibilities. The committee 
may request the board to provide compensation for this assistance. It 
will prepare and forward to the Administration required reports.
    b. If all director positions become vacant at once, the supervisory 
committee immediately assumes the role of the board of directors. The 
supervisory committee acting as the board must generally call and hold 
a special meeting to elect a board. That board will serve until the 
next annual meeting. They must hold the special meeting at least 7 but 
no more than 14 days after all director positions became vacant. 
Nominations for the board at the special meeting are by petition or 
from the floor. However, the supervisory committee may forego the 
special meeting if the next annual meeting will occur within 45 days 
after all the director positions become vacant.
    c. The supervisory committee acting as the board may not act on 
policy matters. However, directors elected at a special meeting have 
the same powers as directors elected at the annual meeting.
    Section 4. Verification of accounts. The supervisory committee will 
cause the verification of the accounts of members with the records of 
the financial officer from time to time and not less frequently than as 
required by the Act and regulations. The committee must maintain a 
record of this verification.
    Section 5. Powers of supervisory committee--removal of directors 
and credit committee members. By unanimous vote, the supervisory 
committee may suspend any director, board officer, or member of the 
credit committee. In the event of a suspension, the supervisory 
committee must call a special meeting of the members to act on the 
suspension. They must hold the meeting at least 7 but no more than 14 
days after the suspension. The chair of the committee acts as chair of 
the meeting unless the members select another person to act as chair.
    Section 6. Powers of supervisory committee--special meetings. By 
majority vote, the supervisory committee may call a special meeting of 
the members to: Consider any violation of the provisions of the Act, 
the regulations, the credit union's charter or bylaws; or to consider 
any practice of this credit union the committee deems to be unsafe or 
unauthorized.

Article X. Organization Meeting

    Section 1. Initial meeting. When making an application for a 
federal credit union charter, the subscribers to the organization 
certificate must meet to elect a board of directors and a credit 
committee, if applicable. The Agency may revoke the charter for failure 
to start operations within 60 days after receipt of the approved 
organization certificate unless the Agency approves an extension of 
time.
    Section 2. Election of directors and credit committee. The 
subscribers elect a chair and a secretary for the meeting. The 
subscribers then elect a board of directors and a credit committee, if 
applicable. The elected directors or committee members will hold office 
until the first annual meeting of the members and until the election of 
their respective successors. Every person elected under this section or 
appointed under Section 3 of this article, must become a member within 
30 days if they are not already. If any person elected as a director or 
committee member or appointed as a supervisory committee member does 
not become a member within 30 days of election or appointment, the 
office will automatically become vacant and be filled by the board.
    Section 3. Election of board officers. Promptly after the elections 
held under the provisions of Section 2 of this article, the board must 
meet to elect the board officers. The officers will hold office until 
the first meeting of the board of directors after the first annual 
meeting of the members and until the election of their respective 
successors. The board also appoints a supervisory committee at this 
meeting as provided in Article IX, Section 1, of these bylaws and a 
credit committee, if applicable. The appointed members hold office 
until the first regular meeting of the board after the first annual 
meeting of the members and until the appointment of their respective 
successors.
    After five years of operation, the credit union may select the 
following:
    Article X of the bylaws shall be amended to read as follows:
Reserved

Article XI. Loans and Lines of Credit to Members

    Section 1. Loan purposes. The credit union may make loans to 
members for provident or productive purposes in accordance with 
applicable law and regulations.
    The credit union may add business as one of its purposes by placing 
a comma after ``provident'' and inserting ``business.''.
    Section 2. Delinquency. Any member whose loan is delinquent may be 
required to pay a late charge as determined by the board of directors.

Article XII. Dividends

    Section 1. Power of board to declare dividends. The board sets 
dividend periods and declares dividends as permitted by the Act and 
applicable law and regulation.

Article XIII. Reserved

Article XIV. Expulsion and Withdrawal

    Section 1. Expulsion procedure; expulsion or withdrawal does not 
affect members' liability or shares. To expel a member, the credit 
union must:
     Call a special meeting of the members;
     Provide the member the opportunity to be heard; and
     Obtain a two-thirds vote of the members present at the 
special meeting.
    The credit union may also expel a member under a nonparticipation 
policy given to each member that follows the requirements found in the 
Act. Expulsion or withdrawal does not relieve a member of any liability 
to this credit union. The credit union will pay all of their shares 
upon their expulsion or withdrawal less any amounts due to this credit 
union.

Article XV. Minors

    Section 1. Minors permitted to own shares. The credit union may 
issue shares in the name of a minor. State law governs the rights of 
minors to transact business with this credit union.

Article XVI. General

    Section 1. Compliance with law and regulation. The members, 
directors, officers, and employees of this credit union must exercise 
all power, authority, duties, and functions according to the provisions 
of these bylaws in strict conformity with the provisions of applicable 
law and regulations, and the credit union's charter and bylaws.

[[Page 56660]]

    Section 2. Confidentiality. The officers, directors, members of 
committees and employees of this credit union must keep all member 
transactions and all information respecting their personal affairs in 
confidence, unless otherwise directed by state or federal law.
    Section 3. Removal of directors and committee members. 
Notwithstanding any other provisions in these bylaws, any director or 
committee member of this credit union may be removed from office by the 
affirmative vote of a majority of the members present at a special 
meeting called for the purpose, but only after an opportunity has been 
given to be heard. If member votes at a special meeting result in the 
removal of all directors, the supervisory committee immediately becomes 
the temporary board of directors and must follow the procedures in 
Article IX, Section 3.
    Section 4. Conflicts of interest prohibited. a. No director, 
committee member, officer, agent, or employee of this credit union may 
participate in any manner, directly or indirectly, in the consideration 
or determination of any question affecting his or her pecuniary or 
personal interest or the pecuniary interest of any corporation, 
partnership, or association (other than this credit union) in which he 
or she is directly or indirectly interested.
    b. If the board receives a matter affecting any director's 
interest, the director must withdraw from the consideration or 
determination of that matter. If the remaining qualified directors 
present at the meeting plus the disqualified director or directors 
constitute a quorum, the remaining qualified directors, by majority 
vote, may exercise with respect to this matter all the powers of the 
board. In the event of the disqualification of any member of the credit 
committee, if applicable, or the supervisory committee, that committee 
member must withdraw from the deliberation or determination.
    Section 5. Records. The board must preserve copies of the 
organization certificate of this credit union, its bylaws, any 
amendments to the bylaws, and any special authorizations by the 
Administration. The board must attach copies of the organization 
certificate and field of membership amendments as an appendix to these 
bylaws. The board must record all returns of nominations, elections, 
and proceedings of all regular and special meetings of the members and 
directors in the minutes of this credit union. The respective chair or 
presiding officer and the person serving as secretary of the meeting 
must sign all minutes of the meetings of the members, the board, and 
the committees. All copies and records maintained under this section 
may be stored physically or electronically provided that the 
information is readily accessible to the directors, committee members 
of this credit union, members, and the Administration. Moreover, 
signatures may be provided electronically where permissible under 
federal or state law.
    Section 6. Availability of credit union records. All books of 
account and other records of this credit union must be available upon 
request at all times to the directors, committee members of this credit 
union, and members provided they have a proper purpose for obtaining 
the records. If this credit union maintains a website currently or in 
the future, the board must post the bylaws of this credit union on the 
website. The board must also make the charter and bylaws of this credit 
union available for inspection by any member, upon request. If the 
member requests a copy of the charter or bylaws, the board will provide 
a copy to the member. The board may provide this copy to the member in 
physical or electronic copy. If the member requests a physical copy, 
the board may charge a reasonable fee for the physical copy.
    Section 7. Member contact information. Members must keep the credit 
union informed of their current mailing address or, if the member has 
elected to receive electronic communications, their current email 
address.
    Section 8. Indemnification. (a) Subject to the limitations in Sec.  
701.33(c)(5) through (c)(7) of the regulations, the credit union may 
elect to indemnify to the extent authorized by (check one):
    [ ] Law of the State of __:
    [ ] Model Business Corporation Act:
    The following individuals from any liability asserted against them 
and expenses reasonably incurred by them in connection with judicial or 
administrative proceedings to which they are or may become parties by 
reason of the performance of their official duties (check as 
appropriate).
    [ ] Current officials.
    [ ] Former officials.
    [ ] Current employees.
    [ ] Former employees.
    (b) The credit union may purchase and maintain insurance on behalf 
of the individuals indicated in (a) above against any liability 
asserted against them and expenses reasonably incurred by them in their 
official capacities and arising out of the performance of their 
official duties to the extent such insurance is permitted by the 
applicable State law or the Model Business Corporation Act.
    (c) The term ``official'' in this bylaw means a person who is a 
member of the board of directors, credit committee, supervisory 
committee, other volunteer committee (including elected or appointed 
loan officers or membership officers), established by the board of 
directors.
    Section 9. Pronouns, Singular and Plural. Unless the context 
requires otherwise, words denoting the singular may be construed as 
denoting the plural, words of the plural may be construed as denoting 
the singular, and words of one gender may be construed as denoting such 
other gender as is appropriate.

Article XVII. Amendments of Bylaws and Charter

    Section 1. Amendment procedures. The board may adopt amendments of 
these bylaws by an affirmative two-thirds vote of the directors. 
Written NCUA approval is required for the amendment of the bylaws to 
become effective. After adopting amendments, the credit union will 
update the bylaws posted on its website (if such credit union maintains 
a website) and ensure that members seeking to inspect the bylaws 
receive the most current version of the bylaws. To adopt amendments to 
the credit union's charter, members must vote at a duly held meeting 
after receiving prior written notice of the meeting and a copy of the 
proposed amendment or amendments with the notice. Written NCUA approval 
is required for the amendment to the charter to become effective.

Article XVIII. Definitions

    Section 1. General definitions. When used in these bylaws the 
terms:
    ``Act'' means the Federal Credit Union Act, as amended.
    ``Administration'' means the National Credit Union Administration.
    ``Agency'' means the Regional Director, the Director of the Office 
of National Examinations and Supervision, or the Director of the Office 
of Credit Union Resources and Expansion.
    ``Applicable law and regulations'' means the Federal Credit Union 
Act and rules and regulations issued thereunder or other applicable 
federal and state statutes and rules and regulations issued thereunder 
as the context indicates.
    ``Board'' means board of directors of the federal credit union.
    ``Board officers'' means:
    1. ``Chair'' means Presiding Board officer, President of the Board, 
Presiding Board Officer, or Chairperson.
    2. ``Vice Chair'' means Vice President.
    3. ``Financial Officer'' means Treasurer.

[[Page 56661]]

    4. ``Secretary'' means Recording Officer.
    5. ``Management Official'' means General Manager, Manager, 
President, or Chief Executive Officer.
    ``Charter'' means the approved organization certificate and field 
of membership issued by the National Credit Union Administration or one 
of its predecessors. It is the document that authorizes a group to 
operate as a credit union, defines the fundamental limits of its 
operating authority, and includes the persons the credit union is 
permitted to accept for membership.
    ``Field of membership'' means the persons (including organizations 
and other legal entities) a credit union is permitted to accept for 
membership.
    ``Immediate family member'' means spouse, child, sibling, parent, 
grandparent, grandchild, stepparents, stepchildren, stepsiblings, and 
adoptive relationships.
    ``Loans'' means any type of loan product the credit union offers. 
This includes, but is not limited to, consumer loans, lines of credit, 
credit cards, member business loans, commercial loans, and real estate 
loans.
    ``Management'' means the Board, Financial Officer, and Management 
Official.
    ``Member'' means a person must:
    1. Be eligible for membership under Section 5 of the charter;
    2. Sign membership forms as approved by the credit union board;
    3. Subscribe to at least one share (par value) of stock;
    4. Pay the initial installment;
    5. Pay an entrance fee, if required; and
    6. Be eligible to vote upon reaching the minimum age the credit 
union establishes for voting and participation in the affairs of the 
credit union.
    ``Membership Officer'' means a majority of the board of directors, 
a majority of the members of a duly authorized executive committee, or 
an individual(s) appointed by the board of directors to serve as such.
    ``NCUA Board'' means the Board of the National Credit Union 
Administration.
    ``Person in the same household'' means an individual living in the 
same residence maintaining a single economic unit.
    ``Regulation'' or ``regulations'' means rules and regulations 
issued by the NCUA Board.
    ``Share'' or ``shares'' means all classes of shares and share 
certificates that may be held in accordance with applicable law and 
regulations.
Official NCUA Commentary--Federal Credit Union Bylaws

Article II. Qualifications for Membership

    i. Entrance fee: FCUs may not vary the entrance fee among different 
classes of members (such as students, minors, or non-natural persons) 
because the Act requires a uniform fee. FCUs may, however, eliminate 
the entrance fee for all applicants.
    ii. Membership application procedures: Under section 113 of the 
Act,\25\ the board acts upon applications for membership. However, the 
board can appoint membership officers from among the members of the 
credit union. Such membership officers cannot be a paid officer of the 
board, the financial board officer, any assistant to the paid officer 
of the board or to the financial officer, or any loan officer. As 
described under section 2 of this Article, an applicant becomes a 
member upon approval by a membership officer and payment of at least 
one share (or installment or uniform entrance fee).
---------------------------------------------------------------------------

    \25\ See 12 U.S.C. 1761b.
---------------------------------------------------------------------------

    iii. Violent, belligerent, disruptive, or abusive members: a. Many 
credit unions have confronted the issue of handling a violent, 
belligerent, disruptive, or abusive individual. Doing so is not a 
simple matter, insofar as it requires the credit union to balance the 
need to preserve the safety of individual staff, other members, and the 
integrity of the workplace, on one hand, with the rights of the 
affected member on the other. In accordance with the Act and applicable 
interpretations by the NCUA's Office of General Counsel, there is a 
reasonably wide range within which FCUs may fashion a policy that works 
in their case. Thus, an individual that has become violent, 
belligerent, disruptive, or abusive may be prohibited from entering the 
premises or making telephone contact with the credit union, and the 
individual may be severely restricted in terms of eligibility for 
products or services. So long as the individual is not barred from 
exercising the right to vote at annual meetings and is allowed to 
maintain a regular share account, the FCU may fashion and implement a 
policy that is reasonably designed to preserve the safety of its 
employees and the integrity of the workplace.\26\ The policy need not 
be identical nor applied uniformly in all cases--there is room for 
flexibility and a customized approach to fit the particular 
circumstances. In fact, the NCUA anticipates that some circumstances, 
such as violence against another member or credit union staff in the 
FCU or its surrounding property, an FCU may take immediate action to 
restrict most, if not all, services to the violent member. In other 
situations, such as a member that frequently writes checks with 
insufficient funds, the FCU may attempt to resolve the matter with the 
member before limiting check writing services. Once adopted, the FCU 
must disclose the policy to new members when they join, and, as 
required by the Act,\27\ notify existing members of the policy at least 
30 days before it becomes effective. The FCU's board has the option to 
adopt the optional amendment addressing members in good standing.
---------------------------------------------------------------------------

    \26\ See OGC Op. No. 08-0431 (Aug. 12, 2008).
    \27\ See 12 U.S.C. 1764.
---------------------------------------------------------------------------

    b. FCUs should also make specific note of Article XIV, Sec.  1 of 
the bylaws, which spells out in detail the procedure required to expel 
an individual from membership. This procedure is mandated by the 
Act.\28\ Furthermore, this Article specifies that the credit union, its 
powers and duties, and the functions of its members, officers and 
directors, are all strictly circumscribed by law and regulation. The 
commentary for this Article provides more details on members using 
accounts for unlawful purposes.
---------------------------------------------------------------------------

    \28\ Id.
---------------------------------------------------------------------------

Article III. Shares of Members

    i. Installments: FCUs may insert zero for the number of 
installments. The Act allows membership upon the payment of the initial 
installment of a membership share, but the NCUA no longer views this 
provision as requiring FCUs to offer the option of paying for the 
membership share in installments.
    ii. Par value: FCUs may establish differing par values for 
different classes of members or types of accounts (such as students, 
minors, or non-natural persons), provided this action does not violate 
any federal, state or local antidiscrimination laws. For example, an 
FCU may want to establish a higher par value for recent credit union 
members, without requiring long-time members to bring their accounts up 
to the new par value. A differing par value may also be permissible for 
different types of accounts, such as requiring a higher par value for a 
member with only a share draft account. If a credit union adopts 
differing par values, all of the possible par values must be stated in 
section 1. The FCU Bylaws include several options for differing par 
values. The credit union may select one or more of these or establish 
its own.
    iii. Regular share account: To establish membership, the member 
must subscribe to one par value of share. The

[[Page 56662]]

share does not have to be in a regular share account. The bylaws 
include two options. One option requires the member to have a regular 
share account to open membership, and one option allows them to use any 
other account. The board may select which option to use. If the board 
does not select an option, the member must have a regular share account 
to open an account. Please note, if the board selects an account other 
than the regular share, the requirements of Article III, Sec.  3 still 
apply. The member must maintain one share to remain a member. If the 
share balance falls below the par value and does not increase the 
balance within the time set by the board, membership is terminated. If 
the board decides to allow the members to use a share draft account, 
this section still applies if the member overdrafts the account below 
the par value.
    iv. Reduction in share balance below par value: When a member's 
account balance falls below the par value, section 3 of this article 
requires FCUs to allow members a minimum time period to restore their 
account balance to the par value before membership is terminated. FCUs 
may not delete this requirement or delete references to this 
requirement in Article II, Sec.  3.
    v. Trusts: a. Trusts and shares issued in trust can be a 
complicated subject. For purposes of the FCU Bylaws, perhaps the main 
issue is the distinction between revocable and irrevocable trusts. In 
the case of a revocable trust, the individual who establishes the trust 
is essentially still in control of the funds during his lifetime. Thus, 
the account owner can change the designated beneficiary at any time, 
and he or she can determine whether the identified beneficiary actually 
receives any money simply by deciding to withdraw the funds before his 
or her own death. Accordingly, the requirement in the case of revocable 
trust accounts is simply that the owner of the funds be a member of the 
FCU. Furthermore, provided the owner of the funds is within the field 
of membership and eligible for membership, he or she may use the 
vehicle of the payable-on-death or revocable trust account itself as 
the method of becoming a member. There is no requirement that the 
account holder first establish a regular share account to become a 
member. In accordance with legal opinions issued by the NCUA's Office 
of General Counsel, an individual may fulfill the requirement of 
becoming a member by subscribing to the equivalent of the par value of 
one share, which can be done through the opening of any type of account 
the credit union offers.\29\
---------------------------------------------------------------------------

    \29\ See OGC Op. No. 92-0522 (June 15, 1992).
---------------------------------------------------------------------------

    b. There is no requirement that the beneficiaries be members, since 
they may never actually come to own the funds or have a right to them. 
Furthermore, in the case of a revocable trust, since it is essentially 
indistinguishable from the member, there is no need for the trust to 
have a separate account number assigned or for it to be viewed as a 
legal entity separate from the member who set it up.
    c. In the case of an irrevocable trust, the requirements are 
somewhat different. Membership requirements here may be met though 
either the settlor, who is the original owner of the funds, or the 
beneficiary, who obtains an equitable, beneficial interest in the funds 
once the trust is established. So long as one or the other is eligible 
for membership, the credit union may accept the account. Furthermore, 
as with revocable trusts, the membership obligation can be met through 
the opening of the trust account itself; it is not required that the 
beneficiary or the settlor have previously established a separate, 
regular share account. Most irrevocable trusts have a trustee who has 
administrative responsibility for the account, and so the credit union 
will typically deal with the trustee for purposes such as sending 
monthly statements and year-end tax reporting. However, the trustee 
need not actually be a member of the credit union, and the credit union 
need not necessarily view the trust account as a separate legal entity, 
with its own separate tax ID number. Instead, it need only verify and 
confirm the eligibility of either the settlor or the beneficiary (or 
all of the settlors or all of the beneficiaries in the case of multiple 
settlors or beneficiaries) to join the credit union.
    d. A trust itself, either revocable or irrevocable, may be a member 
of the credit union in its own right if all parties to the trust, 
including all settlors, beneficiaries and trustees, are within the 
field of membership.\30\ If all parties to the trust are within a 
credit union's field of membership, the trust will qualify as ``an 
organization of such persons,'' which is a standard clause in FCU 
fields of membership.
---------------------------------------------------------------------------

    \30\ OGC Op. No. 99-1110 (Feb. 25, 2000).
---------------------------------------------------------------------------

Article IV. Meetings of Members

    i. Annual and special meetings: FCUs are encouraged to provide a 
live webcast of annual and special meetings for interested members, 
and/or post a video of the annual meeting on the FCU's website. The 
NCUA Board encourages this policy for FCUs that currently have a 
website.

Article V. Elections

    i. Eligibility requirements: The Act and the FCU Bylaws contain the 
only eligibility requirements for membership on an FCU's board of 
directors, which are as follows:
    (a) The individual must be a member of the FCU before distribution 
of ballots;
    (b) The individual cannot have been convicted of a crime involving 
dishonesty or breach of trust unless the NCUA Board has waived the 
prohibition for the conviction; and
    (c) The individual meets the minimum age requirement established 
under Article V, Sec.  7 of the FCU Bylaws.
    Anyone meeting the three eligibility requirements may run for a 
seat on the board of directors if properly nominated. It is the 
nominating committee's duty to ascertain that all nominated candidates, 
including those nominated by petition, meet the eligibility 
requirements.
    ii. Nomination criteria for nominating committee: The Act and the 
FCU Bylaws do not prohibit a board of directors from establishing 
reasonable criteria, in addition to the eligibility requirements, for a 
nominating committee to follow in making its nominations, such as 
financial experience, years of membership, or conflict of interest 
provisions. The board's nomination criteria, however, applies only to 
individuals nominated by the nominating committee; they cannot be 
imposed on individuals who meet the eligibility requirements and are 
properly nominated from the floor or by petition.
    iii. Candidates' names on ballots: When producing an election 
ballot, the FCU's secretary may order the names of the candidates on 
the ballot using any method for selection provided it is random and 
used consistently from year to year so as to avoid manipulation or 
favoritism.
    iv. Secret ballots: An FCU must establish an election process that 
assures members their votes remain confidential and secret from all 
interested parties. If the election process does not separate the 
member's identity from the ballot, FCUs should use a third-party teller 
that has sole control over completed ballots. If the ballots are 
designed so that members' identities remain secret and are not 
disclosed on the ballot, FCUs may use election tellers from the FCU. In 
any case, FCU employees, officials, and members must not have access to 
ballots identifying members or to information that links members' votes 
to their identities.

[[Page 56663]]

    v. Plurality voting: At least one nominee must be nominated for 
each vacant seat. When there are more nominees than seats open for 
election, the nominees who receive the greatest number of votes are 
elected to the vacant seats.
    vi. Minimum age requirement: The age the board selects may not be 
greater than eighteen or the age of majority under the state law 
applicable to the credit union, whichever is lower.
    vii. Electronic voting: Some members lack digital access or wish to 
have a choice to vote non-electronically. The FCU Bylaws protect 
members who cannot or choose not to vote electronically. For those 
members who vote electronically, credit unions have the flexibility to 
use as many forms of electronic voting (phone, internet, etc.) as they 
wish.
    viii. Voting methods: Options A1, A2 and A3 provide for in-person 
voting at the annual meeting, or, for Option A3, by voting machine. 
Option A4 provides for remote voting via electronic device or mail 
ballot. The NCUA has approved several bylaw amendments for FCUs that 
combine in-person and remote options for member voting. The NCUA 
encourages FCUs using one of the first three options to consider 
whether they can also incorporate mail ballots or electronic voting. 
Likewise, the NCUA encourages FCUs using option A4 to consider whether 
they can also provide a means to vote for members who come to the 
annual meeting but have not voted in the election, such as a paper 
ballot.
    ix. Uncontested elections: Options A2, A3 and A4 provide for 
election by acclamation or consensus when the number of nominees for 
board positions equals the number of positions to be filled. These 
options do not permit nominations from the floor at the meeting, so a 
petition is the only way for members to nominate a candidate not on the 
nominating committee's slate. Accordingly, section (1)(c) in each of 
these options requires the notice to members to include the fact that 
there are no nominations from the floor at the meeting, as well as a 
notice that the credit union will not conduct a vote by ballot if the 
number of nominees equals the number of positions to be filled. The FCU 
Bylaws do not require a particular procedure for uncontested elections.
    The contents of the notice to members required in section (1)(c) 
does not alter the basic election procedures the credit union has 
selected. Should the number of the nominating committee nominees fall 
below the number of positions to be filled after the member notice is 
sent, this section does not permit nominations from the floor. Only 
option A1 permits nominations from the floor.
    x. Nomination procedures: Under all options under this Article, the 
nominating committee must widely publicize the call for nominations to 
all members by any medium. This requirement can be satisfied by 
publicizing the information to a large audience, whether by newsletter, 
email, or any other satisfactory medium that reaches as many members as 
possible. The NCUA emphasizes that member participation is important 
during an election, and FCUs must make sure that members are aware of 
the nomination process.

Article VI. Board of Directors

    i. Vacancies: In accordance with the Act, when a vacancy on the 
board of directors occurs between annual elections, the remaining 
directors are to appoint a replacement. This replacement will serve as 
a director until the next annual meeting. The vacancy is then to be 
filled at the next annual meeting through the normal membership voting 
process, with the newly elected director serving out the remainder of 
the original term.\31\ The number of director positions may be changed 
to any odd number between 5 and 15, inclusive, but a position may not 
be eliminated if it is currently an occupied position. As the bylaw 
itself specifies, no reduction in the number of director positions may 
be made unless there is a corresponding vacancy, caused by death, 
resignation, expiration of term or other action permissible under the 
FCU Bylaws. In other words, the FCU may not arbitrarily propose to 
reduce the number of director positions and terminate one or more 
incumbent directors.
---------------------------------------------------------------------------

    \31\ 12 U.S.C. 1761(a).
---------------------------------------------------------------------------

    ii. Director emeritus: As a matter of board policy, the board may 
establish the position of director emeritus for former directors who 
faithfully fulfilled their responsibilities as members of the board for 
at least a specified minimum number of years. The board may determine 
that director emeritus status confers authority to attend board 
meetings and to participate in discussions and other board events; 
however, directors emeritus may not vote on any matter before the board 
or exercise any official duties of a director. The position is 
essentially an honorary title designed to recognize and reward the good 
service of those designated and to retain some of their institutional 
knowledge for the benefit of the board and the FCU. The decision to 
establish a director emeritus position, as well as the selection of 
individuals to become directors emeritus, is solely within the 
discretion of the board. The board may establish a director emeritus 
position by adopting either the optional bylaw amendment or a board 
policy.
    To assist them in providing advice, Directors emeriti have access 
to confidential information, including but not limited to the credit 
union's examination reports and CAMEL ratings, to the same extent as 
members of the board. Directors emeriti are also subject to the same 
confidentiality and conflict of interest standards applicable to 
directors.
    iii. Associate directors: a. The board may also establish the 
position of associate director through board policy. This position is 
designed to provide qualified individuals with an opportunity to gain 
exposure to board meetings and discussions but without formal director 
responsibility or the right to vote. It may be thought of as an 
apprenticeship position in which the incumbent receives training and 
knowledge about the business of the board, with the expectation that 
the experience will prepare him or her for an eventual election to a 
director position. As with the director emeritus position, the decision 
to establish an associate director position, as well as the selection 
of individuals to become associate directors, is solely within the 
discretion of the board.
    b. To assist their learning process, the board may determine to 
permit associate directors to have access to confidential information, 
including but not limited to the credit union's examination reports and 
CAMEL ratings, to the same extent as members of the board. Associate 
directors are also subject to the same confidentiality and conflict of 
interest standards applicable to directors.
    iv. Composition of the board: The NCUA Board encourages the 
composition of the board of directors to reflect the field of 
membership of the FCU.
    v. Notice to members of change in size of board: The NCUA 
encourages FCUs changing the size of their boards to post a notice of 
the change on the FCU's website (if the FCU maintains a website). An 
FCU is not required to establish and maintain a website solely for this 
purpose, however. An FCU that does not maintain a website can post such 
a notice in a conspicuous place in the office of the FCU, such as at 
the teller window or on the front door of the FCU.

Article VII. Board Officers, Management Officials and Executive 
Committee


[[Page 56664]]


    i. Board officers: a. As specified in this bylaw, members of the 
board are elected by the credit union membership to the board itself. 
Once on the board, the directors themselves vote to select individuals 
from among their number to serve as officers of the board (chair, one 
or more vice chairs, secretary and financial officer). One board 
officer may be compensated as such for services he or she performs in 
that capacity. The offices of financial officer and secretary may be 
held by the same person.
    b. Members of the board must hold the vote for the specified 
officer positions at the first board meeting following the annual 
meeting of the members. This board meeting should be held not later 
than seven days after the annual meeting. The Act requires the credit 
union to file a record of the names and addresses of the executive 
offices, members of the supervisory committee, credit committee, and 
loan officers be filed with the Administration within ten days after 
election or appointment.\32\ The NCUA's regulations also require 
federally insured credit unions to file NCUA Form 4501 or its 
equivalent within 10 days after an election or appointment of senior 
management or volunteer officials.\33\
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    \32\ 12 U.S.C. 1761(b).
    \33\ 12 CFR 741.6.
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    c. Officers hold their respective officer positions for a term of 
one year, until the first board meeting that follows the next annual 
meeting of the members. At that board meeting, officer positions are 
again filled. Each board officer holds his or her position until the 
election and qualification of his or her successor. Thus, a board 
officer who is re-elected to the position he or she is currently 
holding serves for another year. Where another director is chosen to 
fill the position, he or she takes office effective as of the date of 
the election, assuming he or she is qualified--meaning simply that he 
or she was properly elected by the membership to the board in the first 
place and is in good standing as a director.
    d. As specified in this bylaw, the board chair presides at all 
board meetings. In the absence of the chair or his or her inability to 
act, the vice chair presides at the meeting. In the absence or 
inability to act of both the chair and the vice chair, those directors 
who are present may select from among their number an individual 
director to act as temporary chair for that particular meeting. Actions 
taken by the board under the direction of the temporary chair have the 
same validity and effect as if taken under the direction of the chair 
or the vice chair, provided a quorum of the board, including the 
temporary chair, is present. If the board secretary is absent for any 
reason from a meeting, the chair (or acting chair) must select another 
director to fulfill the secretary's function at the meeting.
    ii. Committee Membership: The NCUA encourages FCUs to publicize the 
names of the members of each FCU committee to FCU members. FCUs could 
provide this information either on the FCU's public website or to the 
portion of the website only accessible to members after logging in. The 
NCUA encourages this policy for FCUs that have a website. An FCU is not 
required to establish and maintain a website solely for this purpose, 
however. Providing a short description of the committee's duties also 
assists members in better understanding the leadership structure of the 
FCU.

Article VIII. Credit Committee or Loan Officers

    i. Automated lending systems: Many FCUs now use automated systems 
for accepting loan applications, loan underwriting, and loan 
processing, as permitted by several of the NCUA Office of General 
Counsel's legal opinions. The bylaws reflect that FCUs may use 
automated lending systems, as long as the credit committee or a loan 
officer: (1) Reviews the loans the automated system granted for fraud 
and other purposes; and (2) reviews loans the automated system denied.

Article IX. Supervisory Committee

    i. Nominations: The Act requires that the FCU's board appoint the 
members of the Supervisory Committee. It is permissible for the board 
to seek nominations from members before making Supervisory Committee 
appointments.

Article XIV. Expulsion and Withdrawal

    i. Expulsion procedures: As noted in the commentary to Article II, 
there is a fairly wide range of measures available to the credit union 
in responding to abusive or disruptive members. However, in accordance 
with the Act, there are only two ways a member may be expelled: (1) A 
two-thirds vote of the membership present at a special meeting called 
for that purpose, and only after the individual is provided an 
opportunity to be heard; and (2) for non-participation in the affairs 
of the credit union, as specified in a policy adopted and enforced by 
the board.\34\ Only in-person voting is permitted in conjunction with 
the special meeting, so that the affected member has an opportunity to 
present their case and respond to the credit union's concerns. In 
addition, FCUs should consider the commentary under Article XVI about 
members using accounts for unlawful purposes.
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    \34\ See 12 U.S.C. 1764.

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Article XVI. General

    i. Special meeting requirements: To remove a director under section 
3 of this Article requires a majority vote of members present at a 
special meeting called for the purpose of voting on removal. The bylaw 
requires that the affected director have the ``opportunity to be 
heard.'' NCUA interprets this provision as requiring the vote to occur 
at an in-person meeting rather than by mail ballot. At an in-person 
meeting, the director subject to the removal vote can make his or her 
case before the members. The director removal provisions derive from 
provisions of the Act, as follows:
     The bylaws govern the conduct of special meetings; \35\
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    \35\ 12 U.S.C. 1760.
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     Members must have the opportunity to vote, at a meeting, 
on the Supervisory Committee's suspension of a director; \36\ and
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    \36\ 12 U.S.C. 1761d.
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     FCU members may be expelled by vote of members present at 
a meeting called for that purpose.\37\
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    \37\ 12 U.S.C. 1764(a).
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    ii. Unlawful purposes: FCUs expressed concerns that some members 
may be using their accounts for unlawful purposes. Section 1 of this 
Article specifies that the credit union, its powers and duties, and the 
functions of its members, officers and directors, are all strictly 
circumscribed by law and regulation. Insofar as this provision is 
included in the bylaws, an FCU need not adopt a specific policy or 
requirement that members conform their use of credit union products or 
services to lawful purposes. Furthermore, the existence of this bylaw 
provides ample support should an FCU determine to impose strict limits 
on products and services available to any individual who is found to be 
using the FCU in furtherance of unlawful purposes.
    iii. Posting of bylaws on website: FCUs that maintain a website 
must post a copy of the FCU's bylaws on the website. After adopting 
amendments, FCUs must post an updated copy of the bylaws. An FCU is not 
required to establish and maintain a website solely for this purpose, 
however.

[FR Doc. 2018-24169 Filed 11-9-18; 8:45 am]
 BILLING CODE 7535-01-P