[Federal Register Volume 84, Number 193 (Friday, October 4, 2019)]
[Rules and Regulations]
[Pages 53278-53302]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20826]



[[Page 53277]]

Vol. 84

Friday,

No. 193

October 4, 2019

Part III





 National Credit Union Administration





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12 CFR Parts 701 and 746





 Federal Credit Union Bylaws; Final Rule

  Federal Register / Vol. 84 , No. 193 / Friday, October 4, 2019 / 
Rules and Regulations  

[[Page 53278]]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Parts 701 and 746

RIN 3313-AE86


Federal Credit Union Bylaws

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: The NCUA Board (Board) is issuing a final rule to update, 
clarify, and simplify the federal credit union bylaws (FCU Bylaws). The 
final rule updates and conforms the FCU Bylaws to legal opinions issued 
by the NCUA's Office of General Counsel and provides greater 
flexibility to federal credit unions (FCUs). The final rule also makes 
other changes that are designed to remove outdated or obsolete 
provisions.

DATES: The final rule is effective January 2, 2020.

FOR FURTHER INFORMATION CONTACT: Rachel Ackmann, Senior Staff Attorney, 
Office of General Counsel, 1775 Duke Street, Alexandria, Virginia 
22314, or by telephone at (703) 548-2601.

SUPPLEMENTARY INFORMATION:

I. Background and Legal Authority
II. Summary of the Proposed Rule
III. Final Rule and Discussion of the Comments
IV. Regulatory Procedures

I. Background and Legal Authority

Background

    Section 108 of the Federal Credit Union Act (FCU Act) requires the 
Board to prepare periodically 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\ 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 provides only 
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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    \1\ 12 U.S.C. 1758.
    \2\ 12 CFR 701.2(a).
    \3\ 12 CFR part 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.

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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II. Summary of the Proposed Rule

    Based on the comments the Board has received in response to the 
ANPR and throughout its ongoing review of the FCU Bylaws, the Board 
issued a proposed rule on October 18, 2018.\9\ The proposed rule 
incorporated 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 clarified 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 offered more detail or further elaboration to help FCU 
officials, employees, and members better understand a provision.
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    \9\ 83 FR 56640 (Nov. 13, 2018).
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    The proposed rule also made stylistic and grammatical changes 
throughout the FCU Bylaws, which provided for a much clearer and more 
readable document. For example, the proposed rule moved the entire body 
of staff commentary to the end of the FCU Bylaws, with corresponding 
references

[[Page 53279]]

to the articles and section numbers that are the subject of the 
commentary.
    However, the proposed rule did 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.\10\ 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 bylaws drafted by the 
NCUA is consistent with the FCU Act \11\ and is necessary to protect 
fundamental member rights, to avoid confusion among FCUs, and to 
prevent the adoption of illegal bylaw provisions.\12\
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    \10\ 12 U.S.C. 1758.
    \11\ 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.'').
    \12\ 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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III. Final Rule and Summary of the Comments

    The Board received 35 comments from FCUs, federally insured, state-
chartered credit unions (FISCUs), national credit union trade 
associations, state credit union trade associations, and one individual 
who provides legal services to FCUs. The commenters generally 
appreciated the Board's efforts to modernize the FCU Bylaws and to 
eliminate regulatory burden where possible. Many commenters focused on 
two aspects of the proposed rule--the provisions governing limitation 
of services and expulsion of members. Furthermore, several commenters 
questioned whether it was necessary to codify the bylaws or requested 
that the Board allow FCUs to draft their own bylaws. As noted above, 
the Board does not believe that it is appropriate for FCUs to draft 
their own bylaws. All of the commenters also expressed concerns about 
specific aspects of the proposal. In response to the comments received, 
the Board has made several changes to the final rule. The specific 
details of the final rule, including changes as a result of the 
comments received, are discussed below.

Introduction

    The proposed rule modernized the introductory language to the FCU 
Bylaws. It changed 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 established 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 agreed in the proposed rule that the 
NCUA should process bylaw amendments as expeditiously as possible to 
allow the FCU to address any pressing operational concerns, the Board 
expressed concerns that 30 calendar days may be an insufficient amount 
of time. Accordingly, the proposed rule adopted a 90-calendar-day 
deadline. The Board believed that this time period would provide CURE 
with sufficient time to consider the bylaw amendment without imposing 
an undue operational burden on the FCU. The Board requested 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 that responded to this aspect of the proposed rule 
appreciated the Board's effort to provide a clear timeline for CURE to 
process bylaw amendment requests. A majority favored a shorter deadline 
of 30 calendar days for CURE to make a decision. Some of these 
commenters suggested that the rule allow CURE to extend the deadline 
for particularly difficult bylaw amendment requests. Others favored 45 
or 60 calendar days as a compromise. Only a few of the commenters 
believed that 90 calendar days was an appropriate timeframe for CURE to 
consider a bylaw amendment request.
    The Board is sympathetic to commenters' arguments that 90 calendar 
days may impose an undue burden on an FCU seeking approval of a bylaw 
amendment. However, the Board does not believe that a 30-calendar-day 
deadline for CURE to render a decision is appropriate especially in 
cases involving complex bylaw amendments. Accordingly, in the final 
rule, the Board is adopting a 60-calendar-day deadline for CURE to 
render a decision. The Board is convinced that 60 calendar days is an 
appropriate compromise between granting CURE sufficient time to render 
a decision on most bylaw amendment requests and remaining responsive to 
FCUs that may seek bylaw amendments to address pressing operational 
concerns.
    Commenters to the ANPR also requested that the Board automatically 
approve any bylaw amendment that CURE does not approve within this 
deadline. In the proposed rule, the Board noted that it does not 
believe that it is appropriate to approve proposed bylaw amendments 
automatically, as this could result in an FCU adopting 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 adopted an approach that treated the failure to 
approve a bylaw amendment by the prescribed deadline as a denial, which 
the FCU may then appeal pursuant to the appeals procedures set out in 
subpart B to part 746 of the NCUA's regulations.\13\
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    \13\ 12 CFR part 746, subpart B. The final rule makes a 
conforming amendment to subpart B of part 746.
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    Nearly all commenters that responded to this aspect of the proposed 
rule expressed concerns about the proposed automatic denial. Most 
commenters requested that the NCUA approve bylaw amendment requests if 
CURE fails to meet this deadline. These commenters expressed concerns 
with automatic denial because FCUs would not know, and therefore not be 
able to correct, any potential defects in their bylaw amendment 
requests prior to an appeal. Commenters also noted that there are other 
areas of NCUA regulations that permit automatic approval. For example, 
net worth restoration plans for undercapitalized credit unions are 
automatically approved if the NCUA Board, or the delegated official, 
does not reach a decision within 45 days.\14\ Commenters also argued 
that any delay on CURE's part should inure to the benefit of FCUs and 
not the NCUA. Finally, several commenters expressed concern about the 
lack of communication between CURE and FCUs. One commenter noted that 
FCUs could be left wondering whether an approval was in fact sent that 
the FCU somehow missed or did not receive, the proposed amendment was 
denied because of a substantive defect, or there was no substantive 
issue, but CURE could not review the amendment within 90 days.
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    \14\ 12 CFR 702.206(f)(2).
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    The Board does not believe that it is appropriate for the NCUA to 
approve proposed bylaw amendments

[[Page 53280]]

automatically, as this could result in the adoption of illegal or 
unsafe and unsound bylaw provisions. Instead, the Board believes that 
the most appropriate approach is to treat CURE's failure to approve a 
bylaw amendment request as a denial, which the FCU may then appeal to 
the Board. The Board recognizes that some credit unions may wish to 
continue to work with CURE on bylaw amendments even if they have the 
right to appeal. Accordingly, the final rule permits CURE to request 
additional time from the FCU to process a bylaw amendment request. If 
CURE fails to render a decision, even after an extension of time, the 
FCU may appeal to the Board. To address commenters' concerns regarding 
appeals to the Board in the event that CURE fails to render a timely 
decision, the final rule requires CURE to provide the FCU with a list 
of any concerns that CURE has that the FCU may use as part of its 
appeal. The list must be provided to the FCU within 30 days of the 
denial.
    A few commenters also disagreed with the Board's statement that it 
may take action against minor or technical violations of an FCU's 
Bylaws. These commenters requested that the Board remove the word 
``generally'' from the statement that it would not take action against 
minor or technical violations. The Board believes that the word 
``generally'' provides sufficient flexibility to act in rare cases in 
which a minor or technical violation might warrant agency action while 
still expressing the Board's position that codification of the FCU 
Bylaws was not intended as a tool for the agency to pursue minor and 
technical violations.

Article I. Name--Purposes

    Article I states the FCU's name and mission. The proposed rule 
amended section 2, which outlines the FCU's purposes, by changing the 
reference in the second sentence from ``consumers'' to ``members.'' The 
Board proposed 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. Commenters that responded to this aspect of the proposed rule 
favored this change. As a result, the Board is adopting this aspect of 
the proposed rule without amendment.

Article II. Qualifications for Membership

    Article II outlines the requirements for obtaining and continuing 
FCU membership. The proposed rule included an expanded discussion in 
the associated 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 added a new section 5 to this Article, describing the concept of a 
``member in good standing.'' So 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, but even a 
member deemed not in good standing retains fundamental rights as a 
credit union member, including the right to attend, participate, and 
vote at the annual and special meetings of the members, and maintain a 
share account.
    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 that an FCU may limit services 
or access to credit union facilities to violent, belligerent, 
disruptive, or abusive members, provided 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.\15\
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    \15\ See OGC Op. No. 08-0431 (Aug. 12, 2008).
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    The Board agreed in the proposed rule that incorporating these 
legal opinions into the FCU Bylaws was appropriate to provide 
additional clarity on an FCU's right to limit services or access to 
credit union facilities. Thus, the proposed rule included staff 
commentary to Article II, based on these prior legal opinions, that 
details how an FCU may handle an abusive or disruptive member. The 
staff commentary noted 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, and 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 noted 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 contained 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.
    A vast majority of the commenters that addressed this aspect of the 
proposed rule appreciated staff commentary explaining the measures that 
an FCU may take to address abusive and disruptive members through a 
limitation of services policy. These commenters noted that this change 
is useful to FCUs because it consolidates all prior NCUA Office of 
General Counsel Legal Opinion Letters in one place within the 
regulation. However, a small number of commenters opposed this change. 
They argued that codifying the NCUA's prior opinions into the Code of 
Federal Regulations eliminated any flexibility for FCUs to exercise 
business judgment regarding limitation of services policies.
    The Board continues to believe that incorporating prior NCUA Office 
of General Counsel Legal Opinion Letters into the staff commentary of 
the FCU Bylaws will be a useful compliance tool for FCUs that may have 
questions regarding the scope of an FCU's authority to impose a 
limitation of services policy on a member. The Board does not agree 
that codification of these legal opinions in the NCUA's regulations 
will eliminate any flexibility for FCUs to exercise business judgment 
regarding limitation of services policies, as the agency expects FCUs 
to implement their bylaws consistently with its legal opinions, 
regardless of whether they are incorporated into the Appendix. The sole 
purpose of codification is to provide FCUs with easy access to 
authoritative opinions issued by Office of General Counsel staff 
regarding the meaning of the FCU Bylaws. Accordingly, the Board is 
adopting this aspect of the staff commentary with no material 
changes.\16\
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    \16\ One technical change was made to the staff commentary. The 
proposed rule stated that FCUs must disclose any limitation of 
services policy to new members when they join and notify existing 
members of the policy at least 30 days before it becomes effective. 
The final rule, instead, states FCUs must provide notice of this 
policy, but characterizes the timeframe for providing the notice as 
an expectation rather than a requirement. The cited statutory 
provision, which relates to expulsion based on nonparticipation, has 
been removed to avoid conflating these subjects.

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[[Page 53281]]

    To facilitate an FCU's implementation of its limitation of services 
policy, the proposed rule amended Article II to distinguish between a 
member that retains all 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 added 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 
maintain the minimum share established by the FCU's bylaws, not be 
delinquent on credit union loans, not have had any account closed due 
to abuse or negligent behavior, 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 FCU. A member that fails to 
observe any of these basic requirements may be subject to reasonable 
limitations of services or access to credit union facilities pursuant 
to the FCU's limitation of services policy.
    A vast majority of the commenters that addressed this aspect of the 
proposed rule approved of the new section creating a ``member in good 
standing'' policy. These commenters argued that the ``member in good 
standing'' policy would make it easier for FCUs to enforce limitation 
of services policies. One commenter proposed additional clarifying 
language to Article II, Sec.  4 and asked the Board to create a new 
section that addressed the duties of members. In contrast, a small 
number of commenters opposed this change. They argued that a ``member 
in good standing'' policy would be unduly restrictive and prohibit FCUs 
from tailoring limitation of services policies to the unique needs of 
the individual FCUs.
    The Board disagrees that new section 5 restricts the ability of 
FCUs to tailor limitation of services policies to the unique needs of 
individual FCUs. In fact, it grants an FCU broad discretion on how to 
handle a member not in good standing through its limitation of services 
policy. This provision neither dictates the content of an FCU's 
limitation of services policy nor defines its scope. Rather, new 
section 5 merely provides FCUs with a convenient tool to inform members 
that they may be subject to limitation of services by virtue of their 
status as a member not in good standing, depending on the specific 
policy adopted by the FCU's board. It also clarifies that even if that 
member is not in good standing, the member still enjoys certain 
fundamental rights of credit union membership. Because the Board 
believes the benefits of this new provision outweigh any theoretical 
costs, it is adopting this aspect of the proposed rule.
    One commenter requested that the definition of member in good 
standing be limited to members who are not significantly delinquent, 
instead of any delinquency. The Board agrees. A member should not be 
subject to a limitation of service for any delinquency, such as a 
single missed payment. An FCU should reserve limitation of services to 
substantial and material delinquencies. Therefore, the final rule 
provides that a member may be subject to a restriction of services only 
if the delinquency is significant.
    In the proposed rule, the Board recognized 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. Accordingly, the 
Board requested comments on ways to clarify these terms, including 
whether specific examples of offending conduct would be beneficial. 
Depending on the persuasiveness of the comments, the Board noted that 
it might incorporate such examples in the staff commentary. In response 
to comments, the Board is adopting clarifying language to section 5. 
These amendments further clarify the circumstances under which an FCU 
may impose a limitation of services policy consistent with existing 
NCUA Office of General Counsel legal opinion letters and outline the 
obligations of members.
    Commenters were split on whether the Board should provide examples 
of conduct that may be considered ``violent,'' ``belligerent,'' 
``disruptive,'' or ``abusive.'' The Board believes that examples of 
conduct would be beneficial and notes that such a list is merely for 
illustrative purposes and it is not intended to be all-inclusive. 
Accordingly, the final rule incorporates staff commentary that provides 
examples of such conduct.
    As the Board noted in the proposed rule, it believes that, without 
question, certain actions warrant immediate limitation of services 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. Other actions, such as rude behavior or 
potential threats of violence, may warrant limitation of services or 
restrictions on access to credit union facilities based on the specific 
facts and circumstances. 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 in which 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 added new language under Section 1 to provide 
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 clarified 
that FCUs have options regarding whether to require all members to 
maintain a regular share account or to permit members to base their 
qualification for membership on some other type of account. Additional 
staff commentary elaborated more fully on this option. The proposed 
rule revised the text of Article III to incorporate plain English 
writing principles and deleted unnecessary provisions.
    Commenters to the ANPR requested that the Board provide additional 
guidance on trust accounts. New staff commentary in the proposed rule 
addressed 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 clarified 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 staff commentary clarified 
that the NCUA requires the settlor to join the

[[Page 53282]]

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 noted 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. One commenter asked for 
the FCU Bylaws to define the term settlor. The Board believes the term 
is well defined by its customary usage.
    In contrast, the staff commentary clarified 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, 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 received a comment 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 noted 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. Some commenters asked 
clarifying questions on whether a trust must be a member in its own 
right and whether an FCU must view the trust as a separate legal 
entity. In addition, several other commenters included specific 
questions on trusts. These questions generally required more 
information or knowledge of state trust laws to answer and generally 
went beyond the scope of the rule.
    Commenters that responded to this aspect of the proposed rule 
appreciated the representative examples that an FCU may choose from in 
establishing the par values of different classes of membership and the 
additional flexibility for establishing membership through one or more 
of these accounts. Commenters also appreciated the clarifications 
regarding trust accounts in the staff commentary. As a result, the 
Board is adopting this aspect of the proposed rule without amendment.

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 made 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 required that the notice for the 
annual meeting be posted in a conspicuous place in the FCU's physical 
office, such as at 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 FCU then 
maintains a website. An FCU is not required to establish and maintain a 
website solely for this purpose, however. Most commenters stated that 
an FCU should be required either to post the notice in a conspicuous 
place or on its website, but not both. The Board disagrees. 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. One commenter also asked if posting a meeting notice 
on its online calendar was considered conspicuous. The Board is 
clarifying that adding it as a date on a credit union calendar is 
considered conspicuous, so long as the calendar is easily accessible 
from the FCU's main web page.
    The proposed rule also deleted the option to waive prior notice if 
all members entitled to vote waived the notice requirement. The Board 
did not receive any comment on this section and is finalizing it as 
proposed.
    A few other commenters also recommended removing the provision 
setting the maximum amount of notice that may be provided to members of 
an annual meeting. The Board is declining to remove the maximum amount 
of notice because notice that is reasonably close to the meeting is 
important to encourage member engagement. The Board notes, however, 
that nothing precludes an FCU from providing additional notice.
    In the staff commentary, the proposed rule encouraged 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 encouraged 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. A few 
commenters objected to encouraging FCUs to provide a live webcast of 
annual and special meetings. One commenter believed this would be 
confusing, as members could not vote or participate in the meeting, but 
could only passively view the webcast. The Board believes members would 
benefit from having a webcast of the meeting because it supports member 
engagement. If an FCU is concerned about member confusion, it may 
include a disclaimer that viewing the webcast does not permit the 
member to vote. The Board is finalizing this provision as proposed.
    The proposed rule also adjusted the quorum requirement for 
meetings. It required twelve members, excluding the board, credit union 
staff, and officials, for a quorum. Commenters were generally opposed 
to this provision and did not believe it would achieve the Board's goal 
of additional member engagement, although a minority of commenters 
supported the proposed policy. Several commenters stated that the 
quorum changes treat board members and staff as inferior members 
because their presence at the meeting would be insufficient to 
establish quorum. One commenter believed that forcing attendance would 
lead to added expense, such as for food, entertainment, and prizes. 
Another commenter stated that happy members usually do not attend 
meetings. Other commenters were concerned this change would cause most 
annual meetings to be adjourned for a lack of quorum, followed by 
decisions reached by a less than optimal sub-quorum at a subsequent 
meeting. Finally, one commenter recommended that the NCUA allow a 
quorum to consist of a proportionate number of members who are 
directors and employees so long as a certain number of members who are 
not directors and employees are also present.
    The Board has reconsidered its policy and is not adopting this 
proposed change. The Board proposed this change in a desire to 
encourage FCUs to have wider participation from members, rather than 
allowing staff and board members to control all corporate decision 
making within the FCU. The

[[Page 53283]]

Board continues to believe that wide member engagement is important and 
that FCUs should be creative in ways to expand member involvement in 
FCU decision-making. The Board, however, has reconsidered whether this 
provision would effectively achieve its objective to increase member 
engagement. Therefore, under the final rule, any 15 members of the FCU 
establish a quorum at an annual or special meeting.
    The proposed rule did 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 stated that special meetings 
are expensive and time-consuming to conduct and, thus, should be 
reserved for matters of interest to a broad group of members. One 
commenter specifically requested requiring a percentage based on the 
number of members instead of providing a fixed number of maximum 
signatures. These comments are well taken and the Board believes that 
in some instances a percentage based on the number of members may be 
appropriate as long as it does not disenfranchise members. The Board 
does not generally favor adopting a blanket percentage in all 
circumstances, however, given its potential to disenfranchise members 
of smaller FCUs. The Board believes that a preferable approach is to 
continue the NCUA's current practice of considering requests from 
individual FCUs on a case-by-case basis.
    Finally, the proposed rule did not generally allow an FCU to 
conduct a virtual or hybrid (combined virtual and in-person) annual or 
special meeting. Commenters were almost universally against this policy 
and 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 finds commenters' arguments persuasive.
    The Board continues to believe that the best way to support member 
engagement with the FCU is to require in-person meetings generally. The 
Board, however, recognizes that offering a chance to participate 
virtually, as a complement to an in person meeting, has the potential 
to increase overall member attendance and governance. Therefore, all 
FCUs have authority to conduct hybrid meetings. The Board cautions that 
FCUs should conduct hybrid meetings only if they have the operational 
capacity to utilize the necessary technology successfully. The Board is 
concerned that members may choose to forgo in-person attendance and 
then, due to technological difficulties, be unable to participate 
virtually. If technological difficulties prevent members from engaging 
in the meeting as anticipated, the Board expects FCUs to provide 
another similar opportunity for member engagement. Additionally, any 
FCU that chooses to conduct hybrid meetings should ensure adequate 
cybersecurity protections. One commenter suggested offering a 
registration link whereby a member's identity could be confirmed or 
using multifactor authentication to ensure a sufficient level of 
privacy and security protections are in place to prevent instances of 
identity fraud. The Board believes that only FCUs with the appropriate 
infrastructure and capabilities should conduct hybrid meetings.
    At this time, the Board does not favor completely virtual meetings. 
The Board notes that a movement towards completely virtual meetings in 
an effort to increase member access to meetings could unintentionally 
result in member disenfranchisement. The Board is particularly 
concerned with the rights of members who do not have access to 
electronic devices or who may live in areas without access to broadband 
internet. To avoid the possibility of member disenfranchisement, the 
Board is not allowing a virtual meeting to completely supplant a member 
meeting. Therefore, as stated above, 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. For each of the four options for conducting nominations 
and elections, the proposed rule amended the procedures for the 
nominating committee, including adding a requirement that the 
nominating committee widely publicize the call for nominations to all 
members and interview every member who volunteers. The Board sought 
specific comments on this change. Commenters were divided on whether to 
widely publicize to all FCU members the call for nominations. Most 
commenters objected to this policy, though a few supported it as 
encouraging member participation. In addition, the Board sought 
comments on whether the secretary should post the nominations by 
petition along with those of the nominating committee on the FCU's 
website (if the credit union maintains a website). A few commenters 
stated that posting the nominations in a conspicuous place in each FCU 
office and on the FCU's website was unduly burdensome. The Board 
continues to believe that widely publicizing the nomination process and 
posting the nominations by petition on the FCU's website is only a 
nominal burden, but will provide more opportunities for member 
participation. Therefore, the Board is finalizing this provision as 
proposed.
    The proposed rule also required the nominating committee to 
interview each member who volunteers. Commenters unanimously objected 
to the proposal that the nominating committee interview every 
applicant, arguing that such a requirement would unduly burden the 
nomination process. Commenters generally stated that requiring all 
candidates to be interviewed requires significant time from the 
nomination committee, and interviews would have to be completed within 
30 days of appointment, which would not be feasible in certain 
circumstances. One commenter noted that it recently received between 50 
and 60 applications for one position. The credit union interviewed 
several people, but it would have been burdensome, according to the 
credit union, if it were required to interview every person that 
volunteered. The Board has reconsidered its position, as

[[Page 53284]]

commenters presented reasonable arguments that such a requirement could 
unduly burden the nomination process. Under the final rule, the 
nominating committee is not required to interview every candidate and 
instead is required to interview only the applicants that meet certain 
objective qualifications established by the nominating committee. The 
Board believes this approach provides flexibility to FCUs while also 
encouraging greater member participation. For example, under the final 
rule, if a nominating committee receives a large number of 
applications, it has the flexibility to adopt selective criteria to 
determine which applicants to interview. The Board encourages each 
nominating committee to consider establishing criteria to promote 
diversity on the FCU's board in a manner consistent with applicable 
law.
    The proposed rule also provided staff commentary clarifying 
electronic voting. The staff commentary stated 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 did not allow an FCU to adopt an entirely electronic 
voting process. Commenters overwhelmingly requested electronic-only 
voting as a standard option. 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 who do not 
have access to electronic devices or who may live in areas without 
access to reliable internet service. Specifically, electronic-only 
voting presents substantial concerns regarding member 
disenfranchisement, particularly in rural areas with lack of access to 
reliable internet. The Board also believes that the differences in 
operational capacities among FCUs are too great to allow electronic-
only voting as a standard option. The NCUA will, however, consider 
bylaw amendment requests allowing for electronic-only voting on a case-
by-case basis.
    The Board also specifically sought 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. Commenters expressed 
support for including such flexibility in the FCU Bylaws. One credit 
union stated that permitting members to vote online, in person at a 
branch, or by requesting a ballot, increased the percentage of its 
membership participating in elections by an average of 250 percent 
compared to the five years prior. The Board has declined to expand the 
FCU Bylaws to include this option. The Board believes that not all FCUs 
have the operational capacity to use a combination of voting methods 
successfully. Therefore, the final rule will continue to require FCUs 
that want to combine voting methods to make individual requests to the 
NCUA.
    The proposed rule included a recommendation that FCUs use an age 
not greater than 21 years as the minimum age for holding elective or 
appointive office. One commenter stated that encouraging a minimum age 
higher than 21 years could have the unintended consequence of rendering 
fewer members--who would otherwise be qualified and eager candidates--
able to participate in the governance of the credit union. Further, to 
assist with the development and recruitment of board members, a credit 
union may be looking to cultivate young and talented members. In order 
to facilitate greater flexibility, the commenter recommended that the 
NCUA remove the instructions specifically encouraging the adoption of a 
resolution regarding the minimum age. The Board has not amended the 
recommendation, but is clarifying that it has no objections if an FCU 
uses an age younger than 21 years.
    The proposed rule also provided staff commentary clarifying 
procedures for uncontested elections. The staff commentary noted 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. 
Therefore, a petition is the only way to nominate a candidate not on 
the nominating committee's slate. The staff commentary also highlighted 
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. The Board is finalizing this provision as 
proposed.

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.
    In the proposed rule, the Board noted its agreement 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 
included a new section 10 that an FCU may adopt to create such 
positions. It also included specific staff commentary to this section 
that stated 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 clarified 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 clarified, through staff commentary, that 
an FCU may establish associate director positions through board policy. 
The staff commentary noted 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

[[Page 53285]]

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. Commenters to this aspect of the proposed rule 
overwhelmingly favored these changes to Article VI of the FCU Bylaws. 
As a result, the Board is adopting these aspects of the proposed rule 
without amendment. The Board notes that one commenter suggested that 
the NCUA offer free training and volunteer education sessions for board 
members and associate directors. The Board notes that it has published 
resources for volunteer board members, including a description of the 
duties of directors.\17\
---------------------------------------------------------------------------

    \17\ See Letter to Credit Unions 11-FCU-02, Duties of Federal 
Credit Union Boards of Directors (Feb. 2011).
---------------------------------------------------------------------------

    To provide FCUs with greater flexibility to address concerns 
regarding director and credit committee member attendance at monthly 
meetings, the proposed rule amended the option for FCUs to remove a 
director or a credit committee member for failure to attend regular 
meetings. The current FCU Bylaws language allows FCUs to remove a 
director or credit committee member who has missed meetings for 3 
consecutive months or 4 meetings in a calendar year. Under the proposed 
rule, an FCU could remove a director or credit committee member for 
missing meetings for 3 consecutive months or for missing 4 meetings 
within any 12 consecutive months. The Board believed this change would 
provide FCUs with greater flexibility to address situations in which a 
director or credit committee member misses a substantial number of 
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 added language to allow FCUs to choose whether 
directors or credit committee members may be paid employees after such 
positions end. Commenters to this aspect of the proposed rule also 
favored these changes to Article VI of the FCU Bylaws. As a result, the 
Board is adopting this aspect of the proposed rule without amendment.
    The proposed rule also added 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 additional clarity, the 
proposed rule stated 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 believed that this clarification would provide additional 
guidance to FCUs on this restriction. Commenters to this aspect of the 
proposed rule favored these changes as providing additional clarity 
regarding the existing restriction on the number of employees and 
family members of employees who may simultaneously serve on the board. 
As a result, the Board is adopting this aspect of the proposed rule 
substantively as proposed.\18\
---------------------------------------------------------------------------

    \18\ There is a minor wording change for clarification that does 
not change the substance of this provision.
---------------------------------------------------------------------------

    For FCUs that elect not to have a specifically appointed credit 
committee, the proposed rule added 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.\19\ 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 allowed for FCUs to choose 
different ways to form the committee and select terms for the committee 
members.
---------------------------------------------------------------------------

    \19\ 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 FCU 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 must 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. A few 
commenters favored the inclusion of these two options to provide FCUs 
with additional flexibility in addressing an applicant's request for 
review of a denied loan application. As a result, the Board is adopting 
these options in the final rule without amendment.
    One commenter suggested that the language permitting a board to 
take action and vote on resolutions without a meeting should occur 
outside of special meeting parameters. The Board is clarifying that 
this provision is not limited to special meetings and is for any action 
that has unanimous consent.
    The proposed rule also added staff commentary that encouraged FCUs 
to form a board of directors that reflects the FCU's field of 
membership. Commenters to this aspect of the proposed rule objected 
that the Board should not mandate diversity on FCU boards. The Board 
notes that the staff commentary does not create any requirements for an 
FCU's board of directors. This policy encourages FCUs to consider all 
members in its leadership. 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 added staff commentary that encourages 
FCUs to notify members, through a website

[[Page 53286]]

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 teller windows or on the FCU's front doors. Commenters to this 
aspect of the proposed rule argued that such a requirement would be 
unduly burdensome on credit unions. The Board does not believe that 
notifying members through existing online channels presents an undue 
burden on credit unions and is adopting this aspect of the proposed 
rule.

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 made 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, modified the definition of ``financial officer'' in Article 
XVIII to mean ``treasurer.'' The proposed rule also updated 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 added 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 clarified 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 also added 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 noted 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.
    One commenter requested additional clarity on the interaction 
between the FCU's board of directors and its supervisory committee. The 
commenter recommended clarifying that the supervisory committee is a 
committee of the board and that it must submit its audits to the FCU's 
board and the NCUA. The Board believes the FCU Act is clear that the 
supervisory committee must submit a report of its audit to the board of 
directors and that additional clarity in the FCU Bylaws is 
unnecessary.\20\
---------------------------------------------------------------------------

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

    The Board did not receive many comments on this section, but the 
ones received were generally favorable. Accordingly, the Board is 
adopting these changes as proposed in the final rule.

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 modernized the language of this Article and incorporated plain 
English writing principles. In addition, the proposed rule incorporated 
into the FCU Bylaws several NCUA Office of General Counsel opinion 
letters permitting FCUs to use automated systems to process, 
underwrite, and fund loans under certain conditions. Commenters to this 
aspect of the proposed rule favored this approach. One commenter, 
however, objected to the requirement that if an FCU uses an automated 
lending system, a credit committee or loan officer must review a sample 
of the loans for fraud. The Board believes this is an important safety 
and soundness function. In addition, the Board notes that this 
requirement will present only a minimal amount of burden, as it 
requires reviewing only a sample of approved loans. As a result, the 
Board is adopting these changes in the final rule without amendment. 
The Board also notes that in addition to ensuring the automated system 
is functioning within the lending policies the board has established, 
the credit committee or loan officer should ensure the automated system 
is compliant with all applicable laws.

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.\21\ The NCUA has assigned additional duties to FCUs' 
supervisory committees, including having them serve as an initial forum 
for hearing FCU members' complaints.\22\
---------------------------------------------------------------------------

    \21\ 12 U.S.C. 1761d.
    \22\ See 12 CFR 715.3.
---------------------------------------------------------------------------

    The proposed rule modernized the language of this Article. In 
addition, the proposed rule deleted 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 to 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 an FCU director or credit committee 
member. These requested changes require statutory amendments to the FCU 
Act, so the proposed rule did not include any other substantive changes 
to this Article. One commenter asked that FCUs be permitted to add 
alternative supervisory committee

[[Page 53287]]

members. The Board is unaware of an existing problem with supervisory 
committee members requiring alternatives and does not believe 
alternative members are necessary at this time. The Board did not 
receive any other comments regarding these specific changes.\23\ As a 
result, the Board is adopting these changes as proposed.
---------------------------------------------------------------------------

    \23\ The Board received a number of helpful recommendations from 
one commenter that primarily represents credit unions. 
Unfortunately, those recommendations are outside the scope of the 
proposed rule. However, the Board will keep these recommendations on 
file and may consider them in a future rulemaking.
---------------------------------------------------------------------------

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 included 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. One commenter suggested eliminating this article for all 
established FCUs. The Board does not believe retaining the article for 
five years presents any burden to FCUs. Therefore, the Board is 
adopting this change as proposed.

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 edited the language 
of this Article for readability, but did not make other substantive 
changes. The Board received no comments on this Article and is adopting 
this change as proposed.

Article XII. Dividends

    Article XII establishes the power of the board to declare 
dividends. The proposed rule slightly edited the language of this 
Article for readability. There were no other substantive changes. The 
Board received no comments on this Article is adopting this change as 
proposed.

Article XIII. Reserved

    The proposed rule did not make changes to this Article. The Board 
did not receive any comments regarding this Article and will not make 
any changes in the final rule.

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 be accomplished only in accordance with the 
procedures set forth in the FCU Act. An FCU may expel a member only 
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.\24\ 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.
---------------------------------------------------------------------------

    \24\ 12 U.S.C. 1764.
---------------------------------------------------------------------------

    The proposed rule incorporated new staff commentary to this Article 
reiterating 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 
procedure 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 clarified that, short of expulsion, an 
FCU has a wide range of measures available to address abusive or 
disruptive members, and it specifically referenced Article XVI, Section 
1 of the FCU Bylaws, which addresses situations when members use their 
accounts for unlawful purposes.
    Many commenters recommended that the Board make the expulsion of a 
disruptive member easier to accomplish. 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. Commenters responding 
to this aspect of the proposed rule almost unanimously objected to the 
Board's reading of the term ``nonparticipation'' in the proposed rule, 
which the commenters perceived as unreasonably restrictive and narrow. 
These commenters argued that the Board has broad discretion to 
interpret the term ``nonparticipation'' to include certain violent, 
disruptive, abusive, or belligerent conduct. The Board disagrees. The 
Board believes the most reasonable interpretation of the term 
``nonparticipation'' is a person not being involved with or 
participating in something. The Board believes interpreting the term to 
include other disruptive conduct goes beyond the plain meaning of the 
term. Accordingly, the Board will not adopt a more expansive definition 
of ``nonparticipation'' in the final rule. The Board is adopting 
Article XIV and related staff commentary as proposed.
    One commenter asked what information the FCU must provide in the 
special meeting to expel a member. The Board notes that the FCU Bylaws 
do not require any specific information to be provided. It provides 
only that the member be afforded an opportunity to be heard, in 
addition to a two-thirds vote, at a special meeting.
    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 that the 
member has received adequate notice of the FCU's limitation of services 
policy.\25\ Neither the FCU Act nor the NCUA's regulations prohibit an 
FCU, as it deems appropriate, from denying 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 expel a member immediately 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 union, its employees, or other members in the FCU or its 
surrounding property.
---------------------------------------------------------------------------

    \25\ 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

[[Page 53288]]

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 edited the language 
of this Article for readability, but there are no other substantive 
changes. Commenters did not raise issues with this aspect of the 
proposed rule. Consequently, the Board is adopting this aspect of the 
FCU Bylaws as proposed.

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.\26\ The proposed rule added 
staff commentary explaining these requirements.
---------------------------------------------------------------------------

    \26\ 12 U.S.C. 1761d.
---------------------------------------------------------------------------

    The staff commentary also added new language regarding section 1 of 
this Article, which specifies that the FCU, 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 Board is adopting these 
aspects of the proposed rule without amendment.
    The proposed rule also amended section 6 to require FCUs with 
websites to post their bylaws on the website. The Board believed that 
adding this new requirement would 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.
    Commenters overwhelmingly disapproved of this proposed change. One 
commenter went so far as to suggest that such a requirement would open 
up FCUs to unnecessary lawsuits. One commenter raised concerns with 
privacy and cybersecurity. This commenter suggested requiring that the 
FCU post a disclosure of the right to inspect all books of account and 
records, including a copy of the bylaws. One commenter stated that 
posting bylaws online may present a burden for smaller FCUs, even if 
those FCUs maintain an online presence. The Board disagrees. Allowing 
members to access the FCU's bylaws on its website provides a 
significant benefit to members and assists them in fulfilling their 
oversight role as member-owners of the FCU. The Board also believes 
that the compliance burden for FCUs will be minimal. On balance, 
commenters have not presented persuasive arguments why the NCUA should 
not require an FCU to post its bylaws on its website (if it maintains a 
website). Accordingly, the Board is adopting this aspect of the 
proposed rule without amendment. One commenter requested clarification 
on whether the FCU could post a copy of the bylaws within a password-
protected, members-only access area of the website. The Board is 
clarifying that the bylaws can be posted in a password-protected, 
members-only access area of a FCU's website.
    Finally, the proposed rule added a new section 9 which clarified 
the use of singular and plural terms and pronouns in the FCU Bylaws. 
The NCUA has received questions in the past in this regard. New section 
9 clarified 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. The 
Board received no comments on this Article is adopting this aspect of 
the proposed rule without amendment.

Article XVII. Amendments of Bylaws and Charter

    Article XVII provides the requirements for amending an FCU's bylaws 
or charter. The proposed rule modernized the language of this Article 
and incorporated 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 required an FCU to update the posting if it amends its 
bylaws. One commenter requested a technical change to clarify that it 
is the board of directors that vote on bylaw amendments and not 
members. The Board has made this technical edit and is adopting the 
remainder of this provision as proposed in the final rule.

Article XVIII. Definitions

    Article XVIII lists the definitions applicable to all of the FCU 
Bylaws. The proposed rule made a few technical changes to this Article 
and added several new definitions, which the Board believed were useful 
for purposes of clarification. These included 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 included the term 
``Member,'' the definition of which identifies the characteristics and 
actions an individual must take to become a qualified member. Finally, 
the definitions included the term ``Management,'' which is defined to 
include the Board, Financial Officer, and Management Official. One 
commenter suggested several additional definitions, including 
electronic mail, mail, settlor, board associates, natural person, and 
alternate members to the supervisory committee. The Board does not 
believe these terms are sufficiently ambiguous to warrant definitions 
at this

[[Page 53289]]

time. The Board is adopting this provision without amendment in the 
final rule.

V. Regulatory Procedures

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires that, in 
connection with a final rulemaking, an agency prepare a final 
regulatory flexibility analysis that describes the impact of a final 
rule on small entities.\27\ A regulatory flexibility analysis is not 
required, however, if the agency certifies that the rule will not have 
a significant economic impact on a substantial number of small entities 
(defined for purposes of the RFA to include credit unions with assets 
less than $100 million) and publishes its certification and a short, 
explanatory statement in the Federal Register together with the rule.
    The 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 final rule. All FCUs are 
free to adopt the new bylaws, retain their current bylaws, or adopt 
some combination of the bylaws and their current bylaws. If an FCU 
elects to adopt the new version, that FCU only needs to adopt a board 
resolution to that effect. Accordingly, the NCUA hereby certifies this 
final rule will not have a significant economic impact on a substantial 
number of small credit unions.

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.) 
requires that the Office of Management and Budget (OMB) approve all 
collections of information by a Federal agency from the public before 
they can be implemented. Respondents are not required to respond to any 
collection of information unless it displays a current, valid OMB 
control number.
    In accordance with the PRA, the information collection requirements 
included in this final rule has been submitted to OMB for approval 
under control number 3133-0052.

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 final rule will apply to FCUs only. 
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 final 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).

E. Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. 104-121) (SBREFA) generally provides for congressional review 
of agency rules.\28\ A reporting requirement is triggered in instances 
where the NCUA issues a final rule as defined by Section 551 of the 
Administrative Procedure Act (APA).\29\ An agency rule, in addition to 
being subject to congressional oversight, may also be subject to a 
delayed effective date if the rule is a ``major rule.'' \30\ The NCUA 
does not believe this rule is a ``major rule'' within the meaning of 
the relevant sections of SBREFA. As required by SBREFA, the NCUA 
submitted this final rule to the Office of Management and Budget (OMB) 
for it to determine if the final rule is a ``major rule'' for purposes 
of SBREFA. OMB determined the final rule was not a major rule. The NCUA 
also will file appropriate reports with Congress and the Government 
Accountability Office so this rule may be reviewed.
---------------------------------------------------------------------------

    \28\ 5 U.S.C. 801-804.
    \29\ 5 U.S.C. 551.
    \30\ 5 U.S.C. 804(2).
---------------------------------------------------------------------------

List of Subjects

12 CFR Part 701

    Credit, Credit Unions, Federal Credit Union Bylaws

12 CFR Part 746

    Administrative practice and procedure, Claims, Credit Unions, 
Investigations.

    By the National Credit Union Administration Board on September 
19, 2019.
Gerard S. Poliquin,
Secretary of the Board.

    For the reasons stated above, the NCUA is amending 12 CFR parts 701 
and 746 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, 1786, 1787, 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

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 
January 2, 2020, it must adopt these revised bylaws.

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.

Bylaw Amendments

    1. 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.
    2. FCUs continue to have the flexibility to request bylaw 
amendments. The NCUA must approve all bylaw amendments except for 
the

[[Page 53290]]

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.
    3. The procedure for approval of a bylaw amendment is as 
follows:
    a. The FCU must submit its request to the Office of Credit Union 
Resources and Expansion (CURE).
    b. 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.
    c. CURE will advise the credit union within 60 days if it 
approved the proposed amendment after its review and, if necessary, 
consultation with the NCUA's Office of General Counsel. If CURE does 
not reach a decision within 60 days, the proposed amendment is 
considered to be denied unless CURE requests an extension of time 
from the federal credit union and the credit union agrees to such a 
request. If CURE reaches an adverse decision or CURE fails to render 
a decision within the agreed timeframe, the credit union may appeal 
that decision in accordance with the procedures set out in subpart B 
to part 746 of this chapter. If CURE fails to render a timely 
decision, within thirty days it must provide the FCU with a written 
notice of its failure to render a timely decision and a statement of 
any concerns that CURE has with the bylaw amendment request.
    4. 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.\1\ Opinions issued after April 2006 include the 
language of the approved amendment.
---------------------------------------------------------------------------

    \1\ http://www.ncua.gov/Legal/Pages/BylawByYear.aspx.
---------------------------------------------------------------------------

    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.

The Nature of the FCU Bylaws

    1. The Federal Credit Union Act requires the NCUA Board to 
prepare bylaws for federal credit unions.\2\ 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.
---------------------------------------------------------------------------

    \2\ 12 U.S.C. 1758.
---------------------------------------------------------------------------

    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.
    2. 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.
    3. 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 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.
    (a) Once a member, always a member. 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.
    (b) Limitation of services. Notwithstanding any provision of 
these bylaws, the board of directors may adopt a policy that limits 
credit union services to any member not in good standing.
    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 significantly 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 caused a financial loss to this 
credit union; and who has not engaged in violent, belligerent, 
disruptive, or abusive activities, such as:
    (1) Violence, intimidation, threats, harassment, or physical or 
verbal abuse of

[[Page 53291]]

duly elected or appointed officials or employees of the credit 
union, members, or agents of the credit union. This includes actions 
while on credit union premises and through use of telephone, mail, 
email or other electronic method.
    (2) Causes or threatens damage to credit union property.
    (3) Unauthorized use or access of credit union property.
    (4) Knowingly disseminating incorrect, misleading, confidential, 
or proprietary information regarding the credit union.
    (5) Any actions that may cause material risk or financial harm 
to the credit union.
    A credit union may limit services for violent, belligerent, 
disruptive, or abusive activities only if there is a logical 
relationship between the objectionable activities and the services 
to be suspended. In the event of a suspension of service, the member 
will be notified of what accounts or services have been 
discontinued.
    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 [square] full-time or 
[square] 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.
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.
__ 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 established members 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 2. 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 3. 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 4. 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 5. 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 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 6. Trusts. Shares may be issued in a revocable or 
irrevocable trust, subject to the following:
    Shares issued in a revocable trust--the settlor must be a member 
of this credit union in his or her own right.
    Shares issued in an irrevocable trust--either the settlor or the 
beneficiary must be a member of this credit union.
    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.
    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 7. 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. This credit union may permit virtual 
attendance and participation in the annual meeting, provided that an 
in-person meeting complying with the geographic requirements of this 
paragraph is also held.
    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

[[Page 53292]]

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, 15 members 
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 that meets any 
qualifications established by the nominating committee.
    Section 2. Election procedures. After placing the nominations of 
the nominating committee before the members, the chair calls for 
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 that meets any 
qualifications established by the nominating committee.
    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. 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 that meets any 
qualifications established by the nominating committee.
    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.

[[Page 53293]]

    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 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 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 that meets any 
qualifications established by the nominating committee.
    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;

[[Page 53294]]

    (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 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 by 
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.
__ (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.
__ (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.
    The total number of directors serving who fall into the 
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.
__ (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.

[[Page 53295]]

    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.
__ 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 months 
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 may 
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

[[Page 53296]]

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 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.
    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.
    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.
    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.
    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

[[Page 53297]]

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:

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

    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 not 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.

[[Page 53298]]

    However, all terms are for the same number of years and until 
the appointment and qualification of successors. Terms are 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.
    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. 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.
    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

[[Page 53299]]

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 paragraph (a) of this section 
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, board 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.
    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,\3\ 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

[[Page 53300]]

payment of at least one share (or installment) and uniform entrance 
fee, if applicable.
---------------------------------------------------------------------------

    \3\ See 12 U.S.C. 1761b.
---------------------------------------------------------------------------

    iii. Violent, belligerent, disruptive, or abusive members: 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.\4\ 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, members must receive notice. The FCU 
should disclose the policy to new members when they join and 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. Examples of violent, 
belligerent, disruptive, or abusive conduct include, but are not 
limited to, a member threatening physical harm to employees, a 
member repeatedly purchasing gifts for or asking tellers on dates, a 
member repeatedly cursing at employees, and a member threatening to 
follow a loan officer home for a denying loan.
---------------------------------------------------------------------------

    \4\ See OGC Op. No. 08-0431 (Aug. 12, 2008).
---------------------------------------------------------------------------

    FCUs should also make specific note of Article XIV, section 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.\5\ Furthermore, Article XVI 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 Article XVI provides more details on 
members using accounts for unlawful purposes.
---------------------------------------------------------------------------

    \5\ 12 U.S.C. 1764.
---------------------------------------------------------------------------

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 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, section 3 still 
apply. The member must maintain one share to remain a member.
    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, section 3. 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.
    v. Trusts: 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.\6\
---------------------------------------------------------------------------

    \6\ See OGC Op. No. 92-0522 (June 15, 1992).
---------------------------------------------------------------------------

    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.
    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.
    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.\7\ 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.
---------------------------------------------------------------------------

    \7\ 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.

[[Page 53301]]

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.
    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 by 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.\8\ 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.
---------------------------------------------------------------------------

    \8\ 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: 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.
    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.

[[Page 53302]]

    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

    i. Board officers: 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.
    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 with the Administration within ten days 
after election or appointment.\9\ 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.\10\
---------------------------------------------------------------------------

    \9\ 12 U.S.C. 1761(b).
    \10\ 12 CFR 741.6.
---------------------------------------------------------------------------

    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.
    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

    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.\11\ 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.
---------------------------------------------------------------------------

    \11\ See 12 U.S.C. 1764.
---------------------------------------------------------------------------

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; \12\
---------------------------------------------------------------------------

    \12\ 12 U.S.C. 1760.
---------------------------------------------------------------------------

     Members must have the opportunity to vote, at a 
meeting, on the Supervisory Committee's suspension of a director; 
\13\ and
---------------------------------------------------------------------------

    \13\ 12 U.S.C. 1761d.
---------------------------------------------------------------------------

     FCU members may be expelled by vote of members present 
at a meeting called for that purpose.\14\
---------------------------------------------------------------------------

    \14\ 12 U.S.C. 1764(a).
---------------------------------------------------------------------------

    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.

PART 746--APPEALS PROCEDURES

0
3. The authority for part 746 continues to read as follows:

    Authority:  12 U.S.C. 1766, 1787, and 1789.


Sec.  746.201   [Amended]

0
4. In Sec.  746.201, in paragraph (c), add the following words 
``appendix A to part 701 of this chapter,'' between ``701.34(a)(4),'' 
and ``appendix B to part 701 of this chapter''.

[FR Doc. 2019-20826 Filed 10-3-19; 8:45 am]
 BILLING CODE 7535-01-P