80_FR_26011 80 FR 25924 - Chartering and Field of Membership Manual

80 FR 25924 - Chartering and Field of Membership Manual

NATIONAL CREDIT UNION ADMINISTRATION

Federal Register Volume 80, Issue 87 (May 6, 2015)

Page Range25924-25931
FR Document2015-10548

The NCUA Board (Board) is issuing a final regulation to amend the associational common bond provisions of NCUA's chartering and field of membership requirements. Specifically, the amendments establish a threshold requirement which provides that, in order for an association to qualify to be part of a federal credit union's (FCU) field of membership (FOM), the association must not have been formed primarily for the purpose of expanding credit union membership. The amendments also expand the criteria in NCUA's current totality of the circumstances test, which is a regulatory tool used to determine if an association, after satisfying the above-referenced threshold requirement, also satisfies the associational common bond requirements necessary to qualify for inclusion in an FCU's FOM. The amendments will better ensure that FCUs comply with established membership requirements. Additionally, NCUA is granting automatic membership qualification under the associational common bond requirements to certain categories of associations that NCUA has routinely approved for FCU membership in the past. For ease of reading, NCUA uses the terms ``association'' and ``group'' interchangeably in this rulemaking.

Federal Register, Volume 80 Issue 87 (Wednesday, May 6, 2015)
[Federal Register Volume 80, Number 87 (Wednesday, May 6, 2015)]
[Rules and Regulations]
[Pages 25924-25931]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-10548]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701

RIN 3133-AE31


Chartering and Field of Membership Manual

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: The NCUA Board (Board) is issuing a final regulation to amend 
the associational common bond provisions of NCUA's chartering and field 
of membership requirements. Specifically, the amendments establish a 
threshold requirement which provides that, in order for an association 
to qualify to be part of a federal credit union's (FCU) field of 
membership (FOM), the association must not have been formed primarily 
for the purpose of expanding credit union membership. The amendments 
also expand the criteria in NCUA's current totality of the 
circumstances test, which is a regulatory tool used to determine if an 
association, after satisfying the above-referenced threshold 
requirement, also satisfies the associational common bond requirements 
necessary to qualify for inclusion in an FCU's FOM. The amendments will 
better ensure that FCUs comply with established membership 
requirements. Additionally, NCUA is granting automatic membership 
qualification under the associational common bond requirements to 
certain categories of associations that NCUA has routinely approved for 
FCU membership in the past. For ease of reading, NCUA uses the terms 
``association'' and ``group'' interchangeably in this rulemaking.

DATES: This rule is effective July 6, 2015.

FOR FURTHER INFORMATION CONTACT: Robert Leonard, Director, Division of 
Consumer Access, and Rita Woods, Director, Division of Consumer 
Access--South, Office of Consumer Protection, at 1775 Duke Street, 
Alexandria, VA 22314, or by telephone (703) 518-1140; or Frank 
Kressman, Associate General Counsel, Office of General Counsel, at the 
above address, or by telephone (703) 518-6540.

SUPPLEMENTARY INFORMATION:

I. Legal Background and Summary of the April 2014 Proposal
II. Summary of the Public Comments and the Final Rule
III. Regulatory Procedures

[[Page 25925]]

I. Legal Background and Summary of the April 2014 Proposal

A. Legal Background

    NCUA has implemented the Federal Credit Union Act's (FCU Act) FOM 
requirements \1\ in NCUA's Chartering and Field of Membership Manual 
(Chartering Manual), which is incorporated as Appendix B to part 701 of 
NCUA's regulations.\2\ NCUA also has published the Chartering Manual as 
an Interpretative Ruling and Policy Statement (IRPS), the current 
version of which is published as IRPS 08-2, as amended by IRPS 10-1.
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    \1\ 12 U.S.C. 1759.
    \2\ 12 CFR part 701, appendix B.
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    Section 109 of the FCU Act provides for three types of FCU 
charters: (1) Single common bond (occupational or associational); (2) 
multiple common bond (multiple groups); and (3) community.\3\ Section 
109 of the FCU Act also describes the individual membership criteria 
for each of these three types of charters.\4\ Further, each type of 
charter is subject to, and shaped by, certain applicable limitations.
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    \3\ 12 U.S.C. 1759(b).
    \4\ Id.
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    An FOM consists of those persons and entities eligible for 
membership for each type of charter, respectively. The Chartering 
Manual provides that a single common bond FCU consists of one group 
having a common bond of occupation or association.\5\ A multiple common 
bond FCU consists of more than one group, each of which has a common 
bond of occupation or association.\6\
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    \5\ 12 CFR part 701, appendix B (Chapter 2, Section I.A.1). A 
community FCU consists of persons or organizations within a well-
defined local community, neighborhood, or rural district.
    \6\ Id. This final rule does not affect the current requirements 
for occupational common bond FCUs.
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Associational Common Bond
    A single associational common bond consists of individuals (natural 
persons) and/or groups (non-natural persons) whose members participate 
in activities developing common loyalties, mutual benefits, and mutual 
interests.\7\ Separately chartered associational groups can establish a 
single common bond relationship with each other if those groups are 
integrally related and share common goals and purposes.\8\ The 
Chartering Manual more specifically enumerates the individuals and 
groups eligible for membership in a single associational common bond 
credit union. Eligible individuals and groups are natural and non-
natural person members of the association, employees of the 
association, and the association itself.\9\
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    \7\ 12 CFR part 701, appendix B (Chapter 2, Section III.A.1).
    \8\ Id.
    \9\ Id.
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    Under NCUA's current FOM regulations, NCUA determines if a group 
satisfies the associational common bond requirements, for purposes of 
qualifying for membership in an FCU, by applying the below factors, 
commonly referred to as the totality of the circumstances test.\10\ The 
test consists of the following seven factors: \11\
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    \10\ Id.
    \11\ Id.
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    (1) Whether members pay dues;
    (2) Whether members participate in the furtherance of the goals of 
the association;
    (3) Whether the members have voting rights; \12\
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    \12\ To meet this requirement, members do not have to vote 
directly for an officer, but may vote for a delegate who in turn 
represents the members' interests.
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    (4) Whether the association maintains a membership list;
    (5) Whether the association sponsors other activities;
    (6) The association's membership eligibility requirements; and
    (7) The frequency of meetings.
    Additionally, the Chartering Manual specifies certain examples of 
associations that may or may not qualify as having an associational 
common bond. It states that educational groups, student groups, and 
consumer groups may qualify as having an associational common bond.\13\ 
Associations based primarily on a client-customer relationship, 
however, do not satisfy the associational common bond requirements.\14\
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    \13\ 12 CFR part 701, appendix B (Chapter 2, Section III.A.1).
    \14\ Id.
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B. Summary of the April 2014 Proposal

    In April 2014, NCUA issued a proposal to amend the associational 
common bond requirements in the Chartering Manual.\15\ The following is 
a summary of the proposed amendments.
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    \15\ 79 FR 24623 (May 1, 2014).
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Threshold Requirement Regarding the Purpose for Which an Association Is 
Formed
    The proposal established a threshold requirement that, in order for 
an association to qualify to be part of an FCU's FOM, the association 
must not have been formed primarily for the purpose of expanding credit 
union membership. As part of the chartering analysis, NCUA would 
determine if an association has been formed primarily for the purpose 
of expanding credit union membership. If NCUA determines it has, then 
the association is denied inclusion in the FCU's FOM. If NCUA 
determines that the association was formed to serve some other 
organizational function, not primarily to expand credit union 
membership, then NCUA will continue the analysis by applying the 
totality of the circumstances test to determine if the association 
satisfies the associational common bond requirements. As part of 
satisfying the threshold requirement, the proposal would have required 
that the association being reviewed must have been operating as an 
independent organization for at least one year prior to the request to 
add the association to the FCU's FOM.
    As discussed more fully below in the section summarizing the public 
comments and the final rule, NCUA, as a result of the comments, is 
amending the threshold requirement to provide additional regulatory 
relief to FCUs.
Totality of the Circumstances Test
    NCUA proposed to amend the totality of the circumstances test, as 
discussed more fully below. The proposal noted that by clarifying and 
expanding the test, NCUA would be better able to ensure that only an 
association that satisfies the associational common bond requirements 
would be eligible for inclusion in an FCU's FOM.
    More specifically, NCUA proposed to enhance the totality of the 
circumstances test by adding to it an additional factor regarding 
corporate separateness. NCUA would review whether corporate 
separateness exists between an FCU and the association the FCU wishes 
to add to its FOM. To satisfy this proposed additional factor, the FCU 
and the association must operate in a way that demonstrates the 
separate corporate existence of each entity. NCUA proposed to consider 
the degree to which the following factors are present to determine if 
corporate separateness exists:
     The FCU's and the association's respective business 
transactions, accounts, and records are not intermingled;
     Each observes the formalities of its separate corporate 
procedures;
     Each is adequately financed as a separate entity in light 
of normal obligations reasonably foreseeable in a business of its size 
and character;
     Each is held out to the public as a separate enterprise; 
and
     The association maintains a separate physical location, 
which does not include a P.O. Box or other mail drop, and not on 
premises owned or

[[Page 25926]]

leased by the FCU. Acknowledged exceptions to this factor include 
associations located on the premises of a labor union or church.
    The presence or absence of any one of these factors is not 
determinative.
    The proposed rule stated that qualified associations already within 
an FCU's FOM are grandfathered and would not be subject to the 
corporate separateness factor.
    As discussed more fully below in the section summarizing the public 
comments and the final rule, NCUA, as a result of the comments, is 
amending the totality of the circumstances test with respect to the 
corporate separateness factor to provide additional regulatory relief 
to FCUs.
    While NCUA proposed to add this additional factor to the totality 
of the circumstances test, NCUA did not propose to remove any of the 
current criteria from the test. However, the Board clarified in the 
proposal that, after examining an association's purpose as a threshold 
matter, NCUA's primary focus under the totality of the circumstances 
test will be on the following factors: (1) Whether the association 
provides opportunities for its members to participate in the 
furtherance of the goals of the association; \16\ (2) whether the 
association maintains a membership list; (3) whether the association 
sponsors other activities; and (4) whether the association's membership 
eligibility requirements are authoritative.\17\
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    \16\ With respect to this factor, the underlined portion is 
additional language that clarifies that the factor is satisfied if 
the association provides a member with opportunities to participate 
in the furtherance of the association's goals even if the member 
does not choose to participate. This change in language is simply a 
clarification reflecting how NCUA interprets this provision. This 
also provides additional flexibility to an association that wishes 
to be included in an FCU's FOM.
    \17\ Prior to this final rule, the factor regarding an 
association's membership eligibility requirements did not contain 
the word ``authoritative.'' However, NCUA has long interpreted this 
factor to assess if an association's membership eligibility 
requirements are authoritative. The addition of the word 
``authoritative'' to this factor is simply a clarification of NCUA's 
longstanding interpretation and practices, and not the imposition of 
any new requirement.
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    As part of applying the totality of the circumstances test, NCUA 
also proposed to consider whether an FCU enrolls a member in an 
association without the member's knowledge or consent. This practice 
would reflect negatively on the association's qualification for FCU 
membership because it suggests that the members do not truly support 
the goals and mission of the association given they may not even know 
they are members. However, an FCU may pay a member's associational dues 
if the member has given his or her consent to do so.
Automatic Approval of Certain Categories of Associations
    Historically, NCUA has approved certain categories of associations 
almost without exception because their structures, practices, and 
functions so clearly demonstrate compliance with the Chartering 
Manual's associational common bond requirements. By their very nature, 
these categories of associations are comprised of members who 
consistently participate in activities developing common loyalties, 
mutual benefits, and mutual interests to further the goals and purposes 
of the associations.
    Accordingly, the proposed rule provided for the automatic 
membership approval of the following categories of associations into an 
FCU's FOM, if the FCU chooses to add one or more to its FOM: (1) 
Religious organizations including churches; (2) homeowner associations; 
(3) scouting groups; (4) electric cooperatives; (5) alumni 
associations; and (6) labor unions. Additionally, for the reasons 
stated above, NCUA proposed to automatically approve associations that 
have a mission based on preserving or furthering the culture of a 
particular national or ethnic origin. However, with respect to all of 
these associations, NCUA proposed not to include in the automatic 
approval those individuals who are considered to be honorary members or 
other classes of non-regular members of the associations.
    The automatic approval of the above-referenced associations will 
provide regulatory relief for FCUs, as they will no longer be required 
to devote resources to the regular approval process. It also will 
enable NCUA to more efficiently use its own resources. This aspect of 
the proposed rule is adopted as proposed, and as discussed below, 
additional categories of associations are to be automatically approved.
Grandfathering Members
    NCUA proposed to grandfather in existing FCU members who attained 
FCU membership by virtue of their membership in an association 
currently part of an FCU's FOM.

II. Summary of the Public Comments and the Final Rule

    NCUA received forty-three comments on the proposed rule. The 
comments were received from one bankers association, twenty-three FCUs, 
three federally insured, state-chartered credit unions, three law 
firms, and thirteen credit union trade associations. Most of the 
commenters supported the intent of the proposed rule, but, for various 
reasons, did not agree with the substance of the rule.

General Comments

    Five commenters generally supported the proposed rule as written. 
These commenters noted that the rule is consistent with the intent of 
the FCU Act and reinforces the common bond relationship that is central 
to credit union membership. In addition, these commenters stated that 
the proposed amendments, if strictly enforced, would thwart any attempt 
to expand an FCU's FOM beyond appropriate limits.
    About half of the commenters articulated strong concerns with some 
aspect of the proposed rule. Four commenters recommended that NCUA 
enforce the proposed chartering provisions through guidance or as part 
of the supervisory process, rather than by rulemaking. Eight commenters 
stated that NCUA should withdraw the proposed rule. These commenters 
maintained that the proposed rule is a reaction to the behavior of only 
a few FCUs, but that it will cause unintended and undue hardship on all 
FCUs. A number of commenters urged NCUA to provide further 
clarification on certain aspects of the proposal and/or to reconsider 
them. Additionally, several commenters asked NCUA to consider changes 
outside of the scope of the proposed rule. The Board will consider such 
changes as part of its broader initiative to review policies and 
procedures governing FOM expansions and conversions.

Automatic Approval of Certain Categories of Associations

    In the proposed rule, NCUA asked commenters to recommend certain 
categories of associations, in addition to those NCUA specifically 
identified in the proposal, which NCUA could consider for automatic 
approval. Almost thirty commenters were supportive of NCUA's proposal 
to automatically approve certain associations. In response to NCUA's 
request, a majority of these commenters suggested other categories of 
associations to be added to the list of automatically approved 
associations. Some of the most common examples include:
     Groups formed for support of school-based, school-
sponsored, or community-based sports teams; extracurricular club 
activities; fraternal organizations; and social clubs.

[[Page 25927]]

     Parent-teacher associations, military-affiliated 
associations, and 501(c)(3) nonprofits.
     Historical societies, library associations, and museum 
associations.
     YMCAs, local chamber and rotary affiliates (and other 
civic organizations), and industry groups.
     Farmer cooperatives.
    The Board appreciates the suggestions made by the commenters. After 
considering the recommendations and further evaluating the agency's 
history of approving associational groups, the Board has determined to 
include additional types of groups that will automatically satisfy the 
associational common bond requirements. The Board clarifies that when a 
group ``automatically'' satisfies the associational common bond 
requirements, it means that the group will not be reviewed under the 
totality of the circumstances test. The Chartering Manual's other 
prerequisites for an FCU's charter expansion, including an FCU's 
capitalization level and safety and soundness record, must still be 
satisfied.\18\
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    \18\ Chartering Manual, Chapter 2, IV.B.2--Numerical Limitation 
of Select Groups. An existing multiple common bond FCU that submits 
a request to amend its charter must provide documentation to 
establish that the multiple common bond requirements have been met. 
The NCUA must approve all amendments to a multiple common bond 
credit union's field of membership. NCUA will approve groups to a 
credit union's field of membership if the agency determines in 
writing that the following criteria are met:
     The credit union has not engaged in any unsafe or 
unsound practice, as determined by the NCUA, which is material 
during the one year period preceding the filing to add the group;
     The credit union is ``adequately capitalized.'' NCUA 
defines adequately capitalized to mean the credit union has a net 
worth ratio of not less than six percent. For low-income credit 
unions or credit unions chartered less than ten years, the NCUA may 
determine that a net worth ratio of less than six percent is 
adequate if the credit union is making reasonable progress toward 
meeting the six percent net worth requirement. For any other credit 
union, the NCUA may determine that a net worth ratio of less than 
six percent is adequate if the credit union is making reasonable 
progress toward meeting the six percent net worth requirement, and 
the addition of the group would not adversely affect the credit 
union's capitalization level;
     The credit union has the administrative capability to 
serve the proposed group and the financial resources to meet the 
need for additional staff and assets to serve the new group;
     Any potential harm the expansion may have on any other 
credit union and its members is clearly outweighed by the probable 
beneficial effect of the expansion. With respect to a proposed 
expansion's effect on other credit unions, the requirements on 
overlapping fields of membership are also applicable; and
     If the formation of a separate credit union by such 
group is not practical and consistent with reasonable standards for 
the safe and sound operation of a credit union.
    A detailed analysis is required for groups of 3,000 or more 
primary potential members requesting to be added to a multiple 
common bond credit union. It is incumbent upon the credit union to 
demonstrate that the formation of a separate credit union by such a 
group is not practical. The group must provide evidence that it 
lacks sufficient volunteer and other resources to support the 
efficient and effective operations of a credit union or does not 
meet the economic advisability criteria outlined in Chapter 1. If 
this can be demonstrated, the group may be added to a multiple 
common bond credit union's field of membership.
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    The following additional types of groups will automatically satisfy 
the associational common bond provisions:
     Parent teacher associations (PTAs) organized at the local 
level to serve a single school district;
     Chamber of commerce groups (members only and not employees 
of members);
     Athletic booster clubs whose members have voting rights;
     Fraternal organizations or civic groups with a mission of 
community service whose members have voting rights; and
     Organizations promoting social interaction or educational 
initiatives among persons sharing a common occupational profession.
    The table below provides samples of the types of groups that will 
and will not automatically satisfy the associational common bond 
requirements:

------------------------------------------------------------------------
                                                           Will not
          Type of group           Will automatically     automatically
                                        qualify             qualify
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Parent Teacher Association......  Anytown Chapter of  National Council
                                   the Parent          of Parent Teacher
                                   Teacher             Associations in
                                   Association of      Anytown,
                                   Anytown, Virginia.  Virginia.
Chamber of Commerce.............  Members of the      Employees of
                                   Jonesboro,          Members of the
                                   Georgia Chamber     Liverpool, New
                                   of Commerce.        York Chamber of
                                                       Commerce.
Athletic Booster Club...........  Voting members of   Members of PDQ
                                   the XYZ High        Booster Club who
                                   School Booster      become members by
                                   Club in Hometown,   paying onetime
                                   Florida.            dues and do not
                                                       have voting
                                                       rights.
Fraternal Organization..........  Members of the ABC  Persons becoming
                                   Fraternal           members of ABC
                                   Organization who    Fraternal
                                   have voting         Association who
                                   rights.             do not have
                                                       voting rights.
Professional Organization.......  Voting members of   Members of the
                                   the National        National
                                   Association of      Association of
                                   XYZ Profession.     XYZ Profession
                                                       who do not have
                                                       voting rights.
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    Further, commenters suggested some groups for automatic approval 
that NCUA has not regularly approved. For instance, NCUA has long held 
that health clubs, such as YMCAs, do not meet the associational common 
bond requirements because they are based primarily on a client-customer 
relationship.\19\ While fraternal organizations with broad missions or 
museum associations may, under some circumstances, satisfy the 
associational common bond criteria, these groups often are not 
structured in a way that would warrant automatic approval into an FCU's 
FOM.
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    \19\ 79 FR 24623, 24625 (May 1, 2014).
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    The Board received several comments recommending that NCUA consider 
automatically approving farmer cooperatives. After fully considering 
the agency's experience with farmer cooperatives, the Board has 
determined not to include them as a category of associations receiving 
automatic approval. The Board is concerned that farmer cooperatives are 
not as easily identifiable as other associations, such as religious 
groups or labor unions. While there is a National Association of Farmer 
Cooperatives, both it and the United States Department of Agriculture 
acknowledge that there are a variety of types of farmer cooperatives. 
The Board does not believe farmer cooperatives can be objectively 
classified and sufficiently described to support automatic approval as 
associations that satisfy the associational common bond requirements.
    Further, NCUA has approved numerous farmer cooperatives as 
occupational groups, but has only approved one farmer cooperative as an 
associational group. Farmer cooperatives also often have 
characteristics of a customer-client relationship. In many cases, 
farmer members pay for the services the cooperative provides and the 
members do not typically interact with one another. As a result, farmer 
cooperatives will not be automatically approved, but NCUA welcomes the 
opportunity to evaluate FCU requests to serve

[[Page 25928]]

individual farm cooperatives on a case-by-case basis.
    It is important to highlight that a credit union interested in 
serving a group which does not fall under the automatic approval 
categories can still submit documentation to NCUA to support how the 
group is a valid association. This provides for flexibility in 
considering unique circumstances when appropriate and may help to 
identify other groups which may automatically qualify in the future.

Service Areas and Reasonable Proximity

    Thirteen commenters strongly suggested that NCUA should revisit the 
definitions of ``service areas'' and ``reasonable proximity'' as those 
terms relate to multiple common bond credit unions. These commenters 
suggested that NCUA should reconsider its interpretation of both 
definitions in light of the technological advancements now available to 
credit unions. These comments relate to multiple common bond expansion, 
an issue not addressed by the April 2014 proposed rulemaking, and which 
is outside the scope of this final rule. Therefore, this issue will not 
be part of the final rule but will be considered as part of NCUA's 
current review of FOM policies.

Threshold Requirement and Independent Organization for One Year

    Twenty-six commenters expressed concern with the proposed threshold 
requirement. As described above, at the beginning of NCUA's 
associational evaluation process, NCUA would determine if the 
association was formed primarily for the purpose of expanding credit 
union membership. These commenters were concerned that NCUA was not 
specific enough about how it would apply the threshold requirement. 
These commenters also strongly urged NCUA to provide additional 
guidance in this regard.
    Eleven commenters specifically stated their opposition to the 
proposed threshold requirement. These commenters posited that the 
threshold requirement seems particularly arbitrary, overly restrictive, 
and unnecessary. Some of these commenters believed that the NCUA could 
use its current totality of the circumstances test, or a modified 
version of that test, to determine if an association was or was not 
formed primarily for the purpose of expanding credit union membership.
    The Board disagrees with the commenters' characterization of the 
threshold requirement. The threshold requirement will serve as an 
effective gatekeeper to prevent unqualified associations from joining 
FCUs. The Board emphasizes that only those groups that are formed 
primarily to expand credit union membership will fail to satisfy the 
threshold requirement. In addition, as discussed in the preamble to the 
proposed rule, NCUA is concerned that the current totality of the 
circumstances test may not be sufficiently filtering out those groups 
that do not meet the associational common bond requirements.
    Six commenters expressed concern about the use of the term 
``primarily'' in the phrase ``primarily for the purpose of expanding 
credit union membership'' in the proposed threshold requirement. These 
commenters noted that the term ``primarily'' is subjective and 
undefined in NCUA's regulations. Four of these commenters recommended 
NCUA change ``primarily'' to ``solely.'' The Board intends for the word 
``primarily'' to be given its plain English definition. For purposes of 
this rule ``primarily'' means: For the most part; essentially; mostly; 
chiefly; principally.\20\
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    \20\ See Dictionary.com and m-w.com (Merriam-Webster online).
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    Twenty commenters had questions or expressed concern about the 
``one-year'' requirement. In the proposed rule, as part of the 
discussion of the threshold requirement, NCUA stated that ``[i]n 
furtherance of this [threshold] requirement, the association must have 
been operating as an organization independent from the requesting FCU 
for at least one year prior to the request to add the group to the 
FCU's FOM.'' \21\ These commenters questioned NCUA's reasoning for the 
one-year requirement and requested further clarification on what this 
requirement means. In addition, eleven of these commenters specifically 
stated their opposition to the one-year requirement. These commenters 
stated that NCUA did not provide a basis for this minimum time 
requirement, and the commenters did not believe that it should matter 
how long the association has been in existence if it serves its members 
and meets the criteria of the totality of the circumstances test.
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    \21\ 79 FR 24625 (footnote 17) (May 1, 2014).
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    Almost half of the commenters who opposed the one-year requirement 
believed the requirement would have adverse effects on FCU membership. 
These commenters maintained that it would cause the unintended 
consequence of preventing FCUs from being able to serve and support 
their communities. They also believed that this would create a 
competitive disadvantage for FCUs.
    While the Board continues to believe that associations that have 
operated independently for at least one year are more likely to be 
associations that exist for organizational purposes beyond primarily 
expanding credit union membership,\22\ the Board acknowledges the 
concerns raised by the commenters in this regard. Accordingly, the 
Board is taking action to relieve the regulatory burden that commenters 
associated with the one-year requirement. Specifically, the Board is 
eliminating the one-year requirement from the threshold test so that 
the one-year requirement is no longer a condition of satisfying the 
threshold test. This change will provide additional flexibility and 
opportunity for an association to qualify under the totality of the 
circumstances test. For example, even if an association has not 
operated independently for at least one year, the association may still 
qualify for FCU membership under the totality of the circumstances 
test.
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    \22\ 59 FR 29066, 29076 (June 3, 1994).
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Totality of the Circumstances Test

    As discussed in more detail below, eighteen commenters expressed 
various concerns with the proposed amendments to the totality of the 
circumstances test. These commenters generally found the current 
totality of the circumstances test sufficient. In addition, four 
commenters requested that NCUA publish guidance to further explain how 
NCUA will apply the totality of the circumstances test in practice.
    Four commenters had concerns with the criterion that assesses the 
degree to which an association's membership eligibility requirements 
are authoritative. NCUA clarified this criterion in the proposed rule 
to emphasize the importance that an association's particular membership 
requirements be authoritative. These commenters stated that the term 
``authoritative'' was ambiguous and requested further clarification. 
The Board added the term ``authoritative'' to this criterion in the 
proposal to further stress NCUA's long held position that it is 
important for an association to avoid having lax enrollment standards, 
as that undercuts its ability to satisfy the associational common bond 
requirements.
    Three commenters supported the criterion that an FCU may pay a 
member's associational dues if the member has given consent. Two 
commenters expressed concern with this criterion, suggesting that this 
transaction could indicate a lack of corporate separateness or that 
NCUA

[[Page 25929]]

should not dictate what an association's business model should look 
like.
    The Board believes it is important to continue the policy of 
allowing an FCU to pay its member's associational dues, if the member 
has given his or her consent. The Board believes this policy helps to 
facilitate the appropriate use of qualified associations by providing 
FCUs with this additional flexibility. If an association is 
automatically approved or approved because it satisfies the totality of 
the circumstances test, then this practice is permissible for FCUs, but 
is not mandatory.

Corporate Separateness

    There was little support among the commenters for the proposed 
corporate separateness requirement, although there was support for 
grandfathering a qualified association already within an FCU's FOM so 
it would not need to satisfy the corporate separateness requirement.
    Two commenters had specific concerns about this criterion. One 
commenter believed that this provision would have the unintended 
consequence of discouraging qualified associations from seeking FCU 
membership. Another commenter suggested that smaller credit unions and 
their affiliated associations generally do not have the resources to 
meet these additional requirements, which could unfairly restrict their 
membership base. In addition, seven commenters maintained that it is 
inappropriate to measure the independence of an association by 
evaluating whether it maintains a separate physical location. These 
same seven commenters stated that the physical location of an 
association has no bearing on its separate corporate existence from an 
FCU.
    The Board has carefully considered these concerns and agrees with 
commenters that the corporate separateness criterion may be too 
burdensome as presented in the proposed rule. The Board still believes 
that an association's degree of corporate separateness is a reasonable 
factor to consider in determining if an association satisfies the 
associational common bond requirements and that it is a useful 
indicator of the true purpose of an association. However, the Board 
acknowledges that the numerous factors comprising the corporate 
separateness criterion, as listed in the proposed rule, may be too 
difficult for some FCUs and associations to demonstrate. Accordingly, 
as a result of the comments, to simplify the final rule and provide 
regulatory relief to FCUs, the Board is reducing the multiple corporate 
separateness factors listed in the proposed rule to just one factor in 
the final rule. The sole factor to be included in the final rule, which 
is an easier standard for FCUs and associations to meet, is if an FCU's 
and an association's respective business transactions, accounts, and 
records are not intermingled. Also, in the final rule, the Board is 
adding the word ``corporate'' to describe what records are not to be 
intermingled. This addition is purely for clarification and adds no new 
burden.
    The Board reiterates that, in reviewing this less burdensome 
corporate separateness factor along with the other seven factors that 
constitute the totality of the circumstances test, no one factor is 
determinative. Additionally, as noted above, the April 2014 proposed 
rule stated that qualified associations already within an FCU's FOM are 
grandfathered in this regard and will not be subject to the corporate 
separateness factor.

Quality Assurance Reviews

    Over half of the commenters expressed concern about the quality 
assurance reviews that NCUA's Office of Consumer Protection (OCP) is 
conducting on currently approved associations. As discussed in the 
proposed rule, these reviews are intended to ensure that an association 
currently included in an FCU's FOM continues to satisfy the 
associational common bond requirements that are required for continued 
membership. These commenters noted specific concerns about how the 
reviews are being and will be conducted and what could result from 
them. The commenters requested that NCUA ensure these reviews are 
conducted using objective and transparent standards. In addition, some 
of these commenters noted they did not support NCUA reviewing currently 
approved associations.
    Four commenters specifically questioned if NCUA would allow 
associations, determined to be out of compliance with the associational 
common bond requirements, the opportunity to get back into compliance, 
and, if so, how long would those associations have to do so. They also 
asked if NCUA's OCP would provide any assistance in that regard. Six 
commenters also asked if there would be a process by which an FCU could 
appeal an action by NCUA to remove an association from an FCU's FOM. 
These commenters recommended such an appeals process. These commenters 
suggested that an appeals process should establish time frames in which 
certain actions must be taken and that an FCU should be able to 
continue to add new members during the appeals process.
    Ten commenters recommended that NCUA clearly articulate that, 
regardless of the outcome of a quality assurance review, existing FCU 
members, including those who qualified for FCU membership through 
membership in the subject qualified association, would be grandfathered 
and their memberships unaffected. The Board has long held the position 
that once a person attains membership in an FCU, he or she always 
remains a member of that FCU, unless expelled by the FCU or upon 
voluntary withdrawal.\23\ Accordingly, the Board confirms that all 
existing FCU members discussed above are grandfathered and their 
memberships are unaffected by the results of any quality assurance 
review.
---------------------------------------------------------------------------

    \23\ 12 U.S.C. 1759(e).
---------------------------------------------------------------------------

    Twelve commenters stated that they did not support NCUA taking 
action to remove a currently approved association for any reason. Three 
of these commenters argued that any new associational common bond 
standards must only apply to associations seeking membership subsequent 
to the effective date of this final rule. In addition, six of these 
commenters requested that NCUA provide guidance on the process for 
removing an association from an FCU's FOM, including notice, timing, 
and appeals information. The Board agrees that such guidance is 
appropriate and has directed OCP to publish guidance in the near 
future. As noted below, however, NCUA considers removal of an 
association from an FCU's FOM a last resort.
    Four commenters argued that a quality assurance review could usurp 
the rights of a currently approved association because the review could 
result in NCUA removing the association from an FCU's FOM without due 
process. These commenters noted that NCUA failed to cite to or 
reference the statutory authority on which NCUA relies to conduct these 
reviews. These commenters also stated that NCUA failed to provide 
sufficient notice to associations and FCUs that the agency continues to 
monitor associations' compliance with NCUA associational common bond 
requirements. In addition, these commenters argued that NCUA lacks the 
direct authority to remove an association from an FCU's FOM.
    Many commenters have misinterpreted the purpose of the quality 
assurance reviews. They are intended to protect the integrity of NCUA's 
FOM requirements, not disrupt an FCU's ability to serve its members or

[[Page 25930]]

to hamper an FCU's ability to thrive. NCUA will work cooperatively with 
FCUs and associations to ensure FOM compliance. Further, the Board 
emphasizes that quality assurance reviews are not a new phenomenon. 
NCUA's regional offices conducted them for many years and only ceased 
doing so once OCP assumed responsibility for field of membership 
processing and chartering activities after its inception in 2010.
    OCP currently has in place quality control processes to review 
associations added to an FCU's FOM. OCP does not plan to change these 
processes following the adoption of this final rule. OCP's current 
quality assurance processes require its staff to review for compliance 
with NCUA's chartering regulations all new FCU requests, including 
required documentation, to serve groups prior to OCP making a final 
decision on the request. Specifically for associational groups, OCP has 
established a checklist for reviewing an association's bylaws and other 
associational documentation to ensure that OCP reviews all requests in 
a consistent manner. This process includes reviewing groups added 
through the Field of Membership Internet Application (FOMIA) 
system.\24\ OCP staff reviews data entered by FCU officials, and, if 
necessary, OCP staff contacts FCU officials for additional 
documentation. Through the FOMIA system, OCP also randomly selects 
certain groups with no red flags for review. This sampling process 
helps ensure that FCU officials using the FOMIA system are using it as 
it was intended to be used.
---------------------------------------------------------------------------

    \24\ FOMIA is an online system that multiple common bond credit 
unions can use to add associational and/or occupational groups of 
2,999 potential members or less as well as the non-natural person 
corporate account associated with that group.
---------------------------------------------------------------------------

    NCUA does not envision the referenced processes or the quality 
assurance processes will change following the adoption of the final 
rule. In addition, whether with respect to a new request for an FOM 
addition or as part of a post-approval quality assurance review, OCP 
will work closely with FCU officials to determine if there are 
compliance problems and, if so, how to satisfactorily address those 
problems. NCUA considers the removal of an association from an FCU's 
FOM an action of last resort.

Geographic Limitation

    Thirteen commenters raised concerns that certain language in the 
preamble to the proposed rule appeared to indicate that NCUA was 
seeking to impose a geographic limitation on associational groups, 
similar to the geographic limitation placed on multiple common bond 
FCUs. The Board clarifies that nothing in the preamble to the proposed 
rule was intended to impose such a geographic limitation. The Board 
reiterates that the Chartering Manual clearly states that single 
associational common bond FCUs do not have a geographic limitation.\25\
---------------------------------------------------------------------------

    \25\ 12 CFR part 701, appendix B (Chapter 2, Section III.A.1).
---------------------------------------------------------------------------

III. Regulatory Procedures

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a regulation may have on a 
substantial number of small entities.\26\ For purposes of this 
analysis, NCUA considers small credit unions to be those having under 
$50 million in assets.\27\ This rule focuses on the structure and 
operations of independent associations who wish to join an FCU's FOM. 
To the extent there is any cost to small entities to voluntarily 
participate in the determination of whether the association satisfies 
NCUA's associational common bond requirements, those costs are minimal 
and they are incurred infrequently. Because this final rule would 
affect relatively few small entities and the associated costs are 
minimal, NCUA certifies the rule will not have a significant economic 
impact on small entities.
---------------------------------------------------------------------------

    \26\ 5 U.S.C. 603(a).
    \27\ Interpretive Ruling and Policy Statement 03-2, 68 FR 31949 
(May 29, 2003), as amended by Interpretative Ruling and Policy 
Statement 13-1, 78 FR 4032 (Jan. 18, 2013).
---------------------------------------------------------------------------

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency by rule creates a new paperwork burden on regulated 
entities or modifies an existing burden.\28\ For purposes of the PRA, a 
paperwork burden may take the form of either a reporting or a 
recordkeeping requirement, both referred to as information collections. 
This final rule amends the criteria NCUA will use to evaluate if an 
association satisfies NCUA's associational common bond requirements, 
but it requires essentially the same information from an FCU that was 
previously required and changes none of the relevant forms identified 
in the Chartering Manual. Therefore, this final rule will not create 
new paperwork burdens or modify any existing paperwork burdens.
---------------------------------------------------------------------------

    \28\ 44 U.S.C. 3507(d); 5 CFR part 1320.
---------------------------------------------------------------------------

C. Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. In 
adherence to fundamental federalism principles, NCUA, an independent 
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies 
with the executive order. This rule applies only to federally chartered 
credit unions. It does not apply to state-chartered credit unions, 
which are subject to the FOM requirements of their respective states. 
Accordingly, this rule will not have a substantial direct effect on the 
states, on the connection between the national government and the 
states, or on the distribution of power and responsibilities among the 
various levels of government. NCUA has determined this 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

    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.\29\
---------------------------------------------------------------------------

    \29\ Public Law 105-277, 112 Stat. 2681 (1998).
---------------------------------------------------------------------------

E. Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 \30\ 
(SBREFA) provides generally for congressional review of agency rules. A 
reporting requirement is triggered in instances where NCUA issues a 
final rule as defined by Section 551 of the Administrative Procedure 
Act.\31\ NCUA does not believe this final rule is a ``major rule'' 
within the meaning of the relevant sections of SBREFA. NCUA has 
submitted the rule to the Office of Management and Budget for its 
determination in that regard.
---------------------------------------------------------------------------

    \30\ Public Law 104-121, 110 Stat. 857 (1996).
    \31\ 5 U.S.C. 551.
---------------------------------------------------------------------------

List of Subjects in 12 CFR Part 701

    Credit, Credit unions, Reporting and recordkeeping requirements.

    By the National Credit Union Administration Board on April 30, 
2015.
Gerard S. Poliquin,
Secretary of the Board.

    For the reasons stated above, NCUA amends 12 CFR part 701, appendix 
B as follows:

[[Page 25931]]

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. Section III.A.1 of Chapter 2 of appendix B to part 701 is revised to 
read as follows:

Appendix B to Part 701--Chartering and Field of Membership Manual

* * * * *
Chapter 2
* * * * *

III.A.1--General

    A single associational federal credit union may include in its 
field of membership, regardless of location, all members and 
employees of a recognized association. A single associational common 
bond consists of individuals (natural persons) and/or groups (non-
natural persons) whose members participate in activities developing 
common loyalties, mutual benefits, and mutual interests. Separately 
chartered associational groups can establish a single common bond 
relationship if they are integrally related and share common goals 
and purposes. For example, two or more churches of the same 
denomination, Knights of Columbus Councils, or locals of the same 
union can qualify as a single associational common bond.
    Individuals and groups eligible for membership in a single 
associational credit union can include the following:
     Natural person members of the association (for example, 
members of a union or church members);
     Non-natural person members of the association;
     Employees of the association (for example, employees of 
the labor union or employees of the church); and
     The association.
    Generally, a single associational common bond does not include a 
geographic definition and can operate nationally. However, a 
proposed or existing federal credit union may limit its field of 
membership to a single association or geographic area. NCUA may 
impose a geographic limitation if it is determined that the 
applicant credit union does not have the ability to serve a larger 
group or there are other operational concerns. All single 
associational common bonds should include a definition of the group 
that may be served based on the association's charter, bylaws, and 
any other equivalent documentation.
    Applicants for a single associational common bond federal credit 
union charter or a field of membership amendment to include an 
association must provide, at the request of NCUA, a copy of the 
association's charter, bylaws, or other equivalent documentation, 
including any legal documents required by the state or other 
governing authority.
    The associational sponsor itself may also be included in the 
field of membership--e.g., ``Sprocket Association''--and will be 
shown in the last clause of the field of membership.

III.A.1.a--Threshold Requirement Regarding the Purpose for Which an 
Associational Group Is Formed and the Totality of the Circumstances 
Criteria

    As a threshold matter, when reviewing an application to include 
an association in a federal credit union's field of membership, NCUA 
will determine if the association has been formed primarily for the 
purpose of expanding credit union membership. If NCUA makes such a 
determination, then the analysis ends and the association is denied 
inclusion in the federal credit union's field of membership. If NCUA 
determines that the association was formed to serve some other 
separate function as an organization, then NCUA will apply the 
following totality of the circumstances test to determine if the 
association satisfies the associational common bond requirements. 
The totality of the circumstances test consists of the following 
factors:
    1. Whether the association provides opportunities for members to 
participate in the furtherance of the goals of the association;
    2. Whether the association maintains a membership list;
    3. Whether the association sponsors other activities;
    4. Whether the association's membership eligibility requirements 
are authoritative;
    5. Whether members pay dues;
    6. Whether the members have voting rights; To meet this 
requirement, members need not vote directly for an officer, but may 
vote for a delegate who in turn represents the members' interests;
    7. The frequency of meetings; and
    8. Separateness--NCUA reviews if there is corporate separateness 
between the group and the federal credit union. The group and the 
federal credit union must operate in a way that demonstrates the 
separate corporate existence of each entity. Specifically, this 
means the federal credit union's and the group's respective business 
transactions, accounts, and corporate records are not intermingled.
    No one factor alone is determinative of membership eligibility 
as an association. The totality of the circumstances controls over 
any individual factor in the test. However, NCUA's primary focus 
will be on factors 1-4.

III.A.1.b--Pre-Approved Groups

    NCUA automatically approves the below groups as satisfying the 
associational common bond provisions. NCUA only approves regular 
members of an approved group. Honorary, affiliate, or non-regular 
members do not qualify.
    These groups are:
    (1) Alumni associations;
    (2) Religious organizations, including churches or groups of 
related churches;
    (3) Electric cooperatives;
    (4) Homeowner associations;
    (5) Labor unions;
    (6) Scouting groups;
    (7) Parent teacher associations (PTAs) organized at the local 
level to serve a single school district;
    (8) Chamber of commerce groups (members only and not employees 
of members);
    (9) Athletic booster clubs whose members have voting rights;
    (10) Fraternal organizations or civic groups with a mission of 
community service whose members have voting rights;
    (11) Organizations having a mission based on preserving or 
furthering the culture of a particular national or ethnic origin; 
and
    (12) Organizations promoting social interaction or educational 
initiatives among persons sharing a common occupational profession.

III.A.1.d--Additional Information

    A support group whose members are continually changing or whose 
duration is temporary may not meet the single associational common 
bond criteria. Each class of member will be evaluated based on the 
totality of the circumstances. Individuals or honorary members who 
only make donations to the association are not eligible to join the 
credit union.
    Student groups (e.g., students enrolled at a public, private, or 
parochial school) may constitute either an associational or 
occupational common bond. For example, students enrolled at a church 
sponsored school could share a single associational common bond with 
the members of that church and may qualify for a federal credit 
union charter. Similarly, students enrolled at a university, as a 
group by itself, or in conjunction with the faculty and employees of 
the school, could share a single occupational common bond and may 
qualify for a federal credit union charter.
    Tenant groups, consumer groups, and other groups of persons 
having an ``interest in'' a particular cause and certain consumer 
cooperatives may also qualify as an association.
    Associations based primarily on a client-customer relationship 
do not meet associational common bond requirements. Health clubs are 
an example of a group not meeting associational common bond 
requirements, including YMCAs. However, having an incidental client-
customer relationship does not preclude an associational charter as 
long as the associational common bond requirements are met. For 
example, a fraternal association that offers insurance, which is not 
a condition of membership, may qualify as a valid associational 
common bond.
* * * * *

[FR Doc. 2015-10548 Filed 5-5-15; 8:45 am]
 BILLING CODE 7535-01-P



                                            25924                  Federal Register / Vol. 80, No. 87 / Wednesday, May 6, 2015 / Rules and Regulations

                                                                                                                                                                  Baseline energy        Energy cost       Energy cost
                                                                                                                                          Energy savings
                                                 State                     Location                          Climate zone                                              costs               savings           savings
                                                                                                                                               (%)                 ($/unit/year)         ($/unit/year)         (%)

                                                                Guymon .........................                                   4A                     3.6                1,374                 42.32                 3.1
                                                                Average .........................        ..............................                   2.6                1,349                 31.79                 2.4
                                            SD ..............   Yankton .........................                                  5A                     4.1                1,409                 32.49                 2.3
                                                                Pierre .............................                               6A                     4.2                1,411                 32.14                 2.3
                                                                Average .........................        ..............................                   4.2                1,410                 32.32                 2.3
                                            TN ..............   Memphis ........................                                   3A                     3.4                1,174                 35.68                 3.0
                                                                Nashville ........................                                 4A                     3.2                1,221                 25.12                 2.1
                                                                Average .........................        ..............................                   3.3                1,198                 30.40                 2.5
                                            WY .............    Torrington ......................                                  5B                     4.2                1,316                 31.21                 2.4
                                                                Cheyenne ......................                                    6B                     4.5                1,347                 33.72                 2.5
                                                                Rock Springs .................                                     7B                     4.7                1,372                 35.20                 2.6
                                                                Average .........................        ..............................                   4.5                1,345                 33.38                 2.5



                                            Appendix 3. TDC Adjustment Factors                                     Appendix 5. Estimated Total Costs and             order for an association to qualify to be
                                            For States That Have Not Adopted                                       Energy Cost Savings From Adoption of              part of a federal credit union’s (FCU)
                                            ASHRAE 90.1–2007                                                       ASHRAE 90.1–2007                                  field of membership (FOM), the
                                                                                                                                                                     association must not have been formed
                                                                  TDC Limit              TDC adjust-                                Total incre-      Total energy   primarily for the purpose of expanding
                                                State                                                                               mental cost/     cost savings/
                                                                    ($)                  ment factor *                  State          state              state      credit union membership. The
                                            AK .............            245,882                          1.11                           ($)             ($/year)     amendments also expand the criteria in
                                            AZ .............            171,058                          0.77                                                        NCUA’s current totality of the
                                                                                                                   AK .............        25,945              3,069 circumstances test, which is a regulatory
                                            CO ............             178,241                          0.80
                                                                                                                   AZ * ...........        87,658            13,956
                                            HI ..............           239,412                          1.08      CO * ..........         63,873              5,762 tool used to determine if an association,
                                            KS .............            170,213                          0.77      KS .............        11,860              2,074 after satisfying the above-referenced
                                            ME ............             187,802                          0.85      ME 82 .........               0                 0 threshold requirement, also satisfies the
                                            MN ............             207,475                          0.94      MN ............       107,396               8,749 associational common bond
                                            MO ............             184,221                          0.83      MO ............       247,930             17,948 requirements necessary to qualify for
                                            OK .............            155,578                          0.70      OK .............      402,972             28,271
                                                                                                                                                                     inclusion in an FCU’s FOM. The
                                            SD .............            159,576                          0.72      SD .............        44,159              4,909
                                            TN .............            160,222                          0.72      TN .............        74,960              6,009 amendments will better ensure that
                                            WY ............             160,431                          0.72      WY ............         25,871              2,669 FCUs comply with established
                                            Avg. ...........            185,009         ........................                                                     membership requirements.
                                                                                                                         Total ...     1,092,624             93,416 Additionally, NCUA is granting
                                              * Uses New York TDC as baseline; assumes
                                            average 2–BR multifamily unit.                                            * AZ and CO statewide estimates adjusted automatic membership qualification
                                                                                                                   by 70 percent and 90 percent, respectively, to under the associational common bond
                                            Appendix 4. Estimated Total Costs and                                  reflect estimated adoption rate of code by requirements to certain categories of
                                                                                                                   home rule municipalities.
                                            Energy Cost Savings From Adoption of                                                                                     associations that NCUA has routinely
                                            2009 IECC                                                              [FR Doc. 2015–10380 Filed 5–5–15; 8:45 am]        approved for FCU membership in the
                                                                                                                   BILLING CODE 4210–67–P                            past. For ease of reading, NCUA uses the
                                                                 Total incre-            Total energy                                                                terms ‘‘association’’ and ‘‘group’’
                                                                 mental cost             cost savings                                                                interchangeably in this rulemaking.
                                                State             per state                per state               NATIONAL CREDIT UNION
                                                                     ($)                 ($ per year)                                                                DATES  : This rule is effective July 6,
                                                                                                                   ADMINISTRATION
                                                                                                                                                                     2015.
                                            AK .............            282,940                   107,457
                                                                                                                   12 CFR Part 701
                                            AR .............          1,330,890                   211,233                                                            FOR FURTHER INFORMATION CONTACT:
                                            AZ * ...........          1,394,963                   247,493          RIN 3133–AE31                                     Robert Leonard, Director, Division of
                                            CO * ..........             190,953                    28,368
                                                                                                                   Chartering and Field of Membership                Consumer Access, and Rita Woods,
                                            HI ..............           622,050                   125,367
                                                                                                                   Manual                                            Director, Division of Consumer
                                            KS .............            424,050                   135,696
                                            ME ............             291,200                    97,600                                                            Access—South, Office of Consumer
                                                                                                                   AGENCY: National Credit Union                     Protection, at 1775 Duke Street,
                                            MN ............           1,840,895                   432,425
                                                                                                                   Administration (NCUA).                            Alexandria, VA 22314, or by telephone
                                            MO ............           1,158.043                   302,568
                                            MS ............           1,263,525                   174,416          ACTION: Final rule.                               (703) 518–1140; or Frank Kressman,
                                            OK .............          1,892,952                   295,728          SUMMARY: The NCUA Board (Board) is
                                                                                                                                                                     Associate General Counsel, Office of
                                            SD .............            258,962                    58,408
                                                                                                                   issuing a final regulation to amend the           General Counsel, at the above address,
                                            TN .............          1,313,649                   292,149                                                            or by telephone (703) 518–6540.
                                                                                                                   associational common bond provisions
                                            UT .............          1,579,900                   218,624
                                                                                                                   of NCUA’s chartering and field of                          SUPPLEMENTARY INFORMATION:
                                            WI .............            865,761                   201,477
                                            WY ............             306,210                    53,630
                                                                                                                   membership requirements. Specifically,
                                                                                                                                                                              I. Legal Background and Summary of the
tkelley on DSK3SPTVN1PROD with RULES




                                                                                                                   the amendments establish a threshold
                                                                                                                                                                                    April 2014 Proposal
                                                  Total ...         15,016,943                 2,982,639           requirement which provides that, in
                                                                                                                                                                              II. Summary of the Public Comments and the
                                               * AZ and CO statewide estimates were ad-                              82 No units were produced under affected
                                                                                                                                                                                    Final Rule
                                            justed by 70 percent and 90 percent, respec-                           programs in Maine in FY 2011, the baseline year            III. Regulatory Procedures
                                            tively, to reflect estimated adoption rate of                          used for this analysis; therefore, no estimated costs
                                            code by home rule municipalities.                                      or savings are shown for this State.



                                       VerDate Sep<11>2014      19:04 May 05, 2015        Jkt 235001       PO 00000        Frm 00028      Fmt 4700   Sfmt 4700   E:\FR\FM\06MYR1.SGM   06MYR1


                                                               Federal Register / Vol. 80, No. 87 / Wednesday, May 6, 2015 / Rules and Regulations                                         25925

                                            I. Legal Background and Summary of                      members of the association, employees                 for the purpose of expanding credit
                                            the April 2014 Proposal                                 of the association, and the association               union membership. If NCUA determines
                                                                                                    itself.9                                              it has, then the association is denied
                                            A. Legal Background
                                                                                                       Under NCUA’s current FOM                           inclusion in the FCU’s FOM. If NCUA
                                              NCUA has implemented the Federal                      regulations, NCUA determines if a                     determines that the association was
                                            Credit Union Act’s (FCU Act) FOM                        group satisfies the associational                     formed to serve some other
                                            requirements 1 in NCUA’s Chartering                     common bond requirements, for                         organizational function, not primarily to
                                            and Field of Membership Manual                          purposes of qualifying for membership                 expand credit union membership, then
                                            (Chartering Manual), which is                           in an FCU, by applying the below                      NCUA will continue the analysis by
                                            incorporated as Appendix B to part 701                  factors, commonly referred to as the                  applying the totality of the
                                            of NCUA’s regulations.2 NCUA also has                   totality of the circumstances test.10 The             circumstances test to determine if the
                                            published the Chartering Manual as an                   test consists of the following seven                  association satisfies the associational
                                            Interpretative Ruling and Policy                        factors: 11                                           common bond requirements. As part of
                                            Statement (IRPS), the current version of                   (1) Whether members pay dues;                      satisfying the threshold requirement, the
                                            which is published as IRPS 08–2, as                        (2) Whether members participate in                 proposal would have required that the
                                            amended by IRPS 10–1.                                   the furtherance of the goals of the                   association being reviewed must have
                                              Section 109 of the FCU Act provides                   association;                                          been operating as an independent
                                            for three types of FCU charters: (1)                       (3) Whether the members have voting                organization for at least one year prior
                                            Single common bond (occupational or                     rights; 12                                            to the request to add the association to
                                            associational); (2) multiple common                        (4) Whether the association maintains              the FCU’s FOM.
                                            bond (multiple groups); and (3)                         a membership list;                                       As discussed more fully below in the
                                            community.3 Section 109 of the FCU                         (5) Whether the association sponsors               section summarizing the public
                                            Act also describes the individual                       other activities;                                     comments and the final rule, NCUA, as
                                            membership criteria for each of these                      (6) The association’s membership                   a result of the comments, is amending
                                            three types of charters.4 Further, each                 eligibility requirements; and                         the threshold requirement to provide
                                            type of charter is subject to, and shaped                  (7) The frequency of meetings.                     additional regulatory relief to FCUs.
                                            by, certain applicable limitations.                        Additionally, the Chartering Manual
                                              An FOM consists of those persons and                                                                        Totality of the Circumstances Test
                                                                                                    specifies certain examples of
                                            entities eligible for membership for each                                                                       NCUA proposed to amend the totality
                                                                                                    associations that may or may not qualify
                                            type of charter, respectively. The                                                                            of the circumstances test, as discussed
                                                                                                    as having an associational common
                                            Chartering Manual provides that a                                                                             more fully below. The proposal noted
                                                                                                    bond. It states that educational groups,
                                            single common bond FCU consists of                                                                            that by clarifying and expanding the
                                                                                                    student groups, and consumer groups
                                            one group having a common bond of                                                                             test, NCUA would be better able to
                                                                                                    may qualify as having an associational
                                            occupation or association.5 A multiple                                                                        ensure that only an association that
                                                                                                    common bond.13 Associations based
                                            common bond FCU consists of more                                                                              satisfies the associational common bond
                                                                                                    primarily on a client-customer
                                            than one group, each of which has a                                                                           requirements would be eligible for
                                                                                                    relationship, however, do not satisfy the
                                            common bond of occupation or                                                                                  inclusion in an FCU’s FOM.
                                                                                                    associational common bond
                                            association.6                                                                                                   More specifically, NCUA proposed to
                                                                                                    requirements.14
                                            Associational Common Bond                                                                                     enhance the totality of the
                                                                                                    B. Summary of the April 2014 Proposal                 circumstances test by adding to it an
                                              A single associational common bond
                                                                                                      In April 2014, NCUA issued a                        additional factor regarding corporate
                                            consists of individuals (natural persons)
                                                                                                    proposal to amend the associational                   separateness. NCUA would review
                                            and/or groups (non-natural persons)
                                                                                                    common bond requirements in the                       whether corporate separateness exists
                                            whose members participate in activities
                                                                                                    Chartering Manual.15 The following is a               between an FCU and the association the
                                            developing common loyalties, mutual
                                                                                                    summary of the proposed amendments.                   FCU wishes to add to its FOM. To
                                            benefits, and mutual interests.7
                                                                                                                                                          satisfy this proposed additional factor,
                                            Separately chartered associational                      Threshold Requirement Regarding the                   the FCU and the association must
                                            groups can establish a single common                    Purpose for Which an Association Is
                                            bond relationship with each other if                                                                          operate in a way that demonstrates the
                                                                                                    Formed                                                separate corporate existence of each
                                            those groups are integrally related and
                                            share common goals and purposes.8 The                     The proposal established a threshold                entity. NCUA proposed to consider the
                                            Chartering Manual more specifically                     requirement that, in order for an                     degree to which the following factors
                                            enumerates the individuals and groups                   association to qualify to be part of an               are present to determine if corporate
                                            eligible for membership in a single                     FCU’s FOM, the association must not                   separateness exists:
                                                                                                    have been formed primarily for the                      • The FCU’s and the association’s
                                            associational common bond credit
                                                                                                    purpose of expanding credit union                     respective business transactions,
                                            union. Eligible individuals and groups
                                            are natural and non-natural person                      membership. As part of the chartering                 accounts, and records are not
                                                                                                    analysis, NCUA would determine if an                  intermingled;
                                              1 12                                                  association has been formed primarily                   • Each observes the formalities of its
                                                     U.S.C. 1759.
                                              2 12   CFR part 701, appendix B.
                                                                                                                                                          separate corporate procedures;
                                               3 12 U.S.C. 1759(b).                                   9 Id.                                                 • Each is adequately financed as a
                                               4 Id.                                                  10 Id.                                              separate entity in light of normal
                                               5 12 CFR part 701, appendix B (Chapter 2, Section      11 Id.                                              obligations reasonably foreseeable in a
                                            I.A.1). A community FCU consists of persons or            12 To meet this requirement, members do not have
                                                                                                                                                          business of its size and character;
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                                            organizations within a well-defined local               to vote directly for an officer, but may vote for a     • Each is held out to the public as a
                                            community, neighborhood, or rural district.             delegate who in turn represents the members’
                                               6 Id. This final rule does not affect the current    interests.
                                                                                                                                                          separate enterprise; and
                                            requirements for occupational common bond FCUs.           13 12 CFR part 701, appendix B (Chapter 2,            • The association maintains a
                                               7 12 CFR part 701, appendix B (Chapter 2, Section    Section III.A.1).                                     separate physical location, which does
                                            III.A.1).                                                 14 Id.                                              not include a P.O. Box or other mail
                                               8 Id.                                                  15 79 FR 24623 (May 1, 2014).                       drop, and not on premises owned or


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                                            25926               Federal Register / Vol. 80, No. 87 / Wednesday, May 6, 2015 / Rules and Regulations

                                            leased by the FCU. Acknowledged                          members. However, an FCU may pay a                   federally insured, state-chartered credit
                                            exceptions to this factor include                        member’s associational dues if the                   unions, three law firms, and thirteen
                                            associations located on the premises of                  member has given his or her consent to               credit union trade associations. Most of
                                            a labor union or church.                                 do so.                                               the commenters supported the intent of
                                               The presence or absence of any one of                                                                      the proposed rule, but, for various
                                                                                                     Automatic Approval of Certain
                                            these factors is not determinative.                      Categories of Associations                           reasons, did not agree with the
                                               The proposed rule stated that                                                                              substance of the rule.
                                            qualified associations already within an                    Historically, NCUA has approved
                                                                                                     certain categories of associations almost            General Comments
                                            FCU’s FOM are grandfathered and
                                            would not be subject to the corporate                    without exception because their                        Five commenters generally supported
                                            separateness factor.                                     structures, practices, and functions so              the proposed rule as written. These
                                               As discussed more fully below in the                  clearly demonstrate compliance with                  commenters noted that the rule is
                                            section summarizing the public                           the Chartering Manual’s associational                consistent with the intent of the FCU
                                            comments and the final rule, NCUA, as                    common bond requirements. By their                   Act and reinforces the common bond
                                            a result of the comments, is amending                    very nature, these categories of                     relationship that is central to credit
                                            the totality of the circumstances test                   associations are comprised of members                union membership. In addition, these
                                            with respect to the corporate                            who consistently participate in                      commenters stated that the proposed
                                            separateness factor to provide additional                activities developing common loyalties,              amendments, if strictly enforced, would
                                            regulatory relief to FCUs.                               mutual benefits, and mutual interests to             thwart any attempt to expand an FCU’s
                                               While NCUA proposed to add this                       further the goals and purposes of the                FOM beyond appropriate limits.
                                            additional factor to the totality of the                 associations.                                          About half of the commenters
                                            circumstances test, NCUA did not                            Accordingly, the proposed rule                    articulated strong concerns with some
                                            propose to remove any of the current                     provided for the automatic membership                aspect of the proposed rule. Four
                                            criteria from the test. However, the                     approval of the following categories of              commenters recommended that NCUA
                                            Board clarified in the proposal that,                    associations into an FCU’s FOM, if the               enforce the proposed chartering
                                            after examining an association’s purpose                 FCU chooses to add one or more to its                provisions through guidance or as part
                                            as a threshold matter, NCUA’s primary                    FOM: (1) Religious organizations                     of the supervisory process, rather than
                                            focus under the totality of the                          including churches; (2) homeowner                    by rulemaking. Eight commenters stated
                                            circumstances test will be on the                        associations; (3) scouting groups; (4)               that NCUA should withdraw the
                                            following factors: (1) Whether the                       electric cooperatives; (5) alumni                    proposed rule. These commenters
                                            association provides opportunities for                   associations; and (6) labor unions.                  maintained that the proposed rule is a
                                            its members to participate in the                        Additionally, for the reasons stated                 reaction to the behavior of only a few
                                            furtherance of the goals of the                          above, NCUA proposed to automatically                FCUs, but that it will cause unintended
                                            association; 16 (2) whether the                          approve associations that have a                     and undue hardship on all FCUs. A
                                            association maintains a membership                       mission based on preserving or                       number of commenters urged NCUA to
                                            list; (3) whether the association                        furthering the culture of a particular               provide further clarification on certain
                                            sponsors other activities; and (4)                       national or ethnic origin. However, with             aspects of the proposal and/or to
                                            whether the association’s membership                     respect to all of these associations,                reconsider them. Additionally, several
                                            eligibility requirements are                             NCUA proposed not to include in the                  commenters asked NCUA to consider
                                            authoritative.17                                         automatic approval those individuals                 changes outside of the scope of the
                                               As part of applying the totality of the               who are considered to be honorary                    proposed rule. The Board will consider
                                            circumstances test, NCUA also proposed                   members or other classes of non-regular              such changes as part of its broader
                                            to consider whether an FCU enrolls a                     members of the associations.                         initiative to review policies and
                                            member in an association without the                        The automatic approval of the above-
                                                                                                                                                          procedures governing FOM expansions
                                            member’s knowledge or consent. This                      referenced associations will provide
                                                                                                                                                          and conversions.
                                            practice would reflect negatively on the                 regulatory relief for FCUs, as they will
                                            association’s qualification for FCU                      no longer be required to devote                      Automatic Approval of Certain
                                            membership because it suggests that the                  resources to the regular approval                    Categories of Associations
                                            members do not truly support the goals                   process. It also will enable NCUA to
                                                                                                                                                            In the proposed rule, NCUA asked
                                            and mission of the association given                     more efficiently use its own resources.
                                                                                                                                                          commenters to recommend certain
                                            they may not even know they are                          This aspect of the proposed rule is
                                                                                                                                                          categories of associations, in addition to
                                                                                                     adopted as proposed, and as discussed
                                                                                                                                                          those NCUA specifically identified in
                                              16 With respect to this factor, the underlined         below, additional categories of
                                                                                                                                                          the proposal, which NCUA could
                                            portion is additional language that clarifies that the   associations are to be automatically
                                                                                                                                                          consider for automatic approval. Almost
                                            factor is satisfied if the association provides a        approved.
                                            member with opportunities to participate in the                                                               thirty commenters were supportive of
                                            furtherance of the association’s goals even if the       Grandfathering Members                               NCUA’s proposal to automatically
                                            member does not choose to participate. This change                                                            approve certain associations. In
                                            in language is simply a clarification reflecting how       NCUA proposed to grandfather in
                                            NCUA interprets this provision. This also provides       existing FCU members who attained                    response to NCUA’s request, a majority
                                            additional flexibility to an association that wishes     FCU membership by virtue of their                    of these commenters suggested other
                                            to be included in an FCU’s FOM.                          membership in an association currently               categories of associations to be added to
                                              17 Prior to this final rule, the factor regarding an
                                                                                                     part of an FCU’s FOM.                                the list of automatically approved
                                            association’s membership eligibility requirements                                                             associations. Some of the most common
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                                            did not contain the word ‘‘authoritative.’’ However,     II. Summary of the Public Comments
                                            NCUA has long interpreted this factor to assess if                                                            examples include:
                                            an association’s membership eligibility                  and the Final Rule                                     • Groups formed for support of
                                            requirements are authoritative. The addition of the         NCUA received forty-three comments                school-based, school-sponsored, or
                                            word ‘‘authoritative’’ to this factor is simply a
                                            clarification of NCUA’s longstanding interpretation
                                                                                                     on the proposed rule. The comments                   community-based sports teams;
                                            and practices, and not the imposition of any new         were received from one bankers                       extracurricular club activities; fraternal
                                            requirement.                                             association, twenty-three FCUs, three                organizations; and social clubs.


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                                                                   Federal Register / Vol. 80, No. 87 / Wednesday, May 6, 2015 / Rules and Regulations                                                            25927

                                               • Parent-teacher associations,                                 clarifies that when a group                                • Chamber of commerce groups
                                            military-affiliated associations, and                             ‘‘automatically’’ satisfies the                         (members only and not employees of
                                            501(c)(3) nonprofits.                                             associational common bond                               members);
                                               • Historical societies, library                                requirements, it means that the group                      • Athletic booster clubs whose
                                            associations, and museum associations.                            will not be reviewed under the totality                 members have voting rights;
                                               • YMCAs, local chamber and rotary                              of the circumstances test. The                             • Fraternal organizations or civic
                                            affiliates (and other civic organizations),                       Chartering Manual’s other prerequisites                 groups with a mission of community
                                            and industry groups.                                              for an FCU’s charter expansion,                         service whose members have voting
                                               • Farmer cooperatives.                                         including an FCU’s capitalization level                 rights; and
                                               The Board appreciates the suggestions                          and safety and soundness record, must                      • Organizations promoting social
                                            made by the commenters. After                                     still be satisfied.18                                   interaction or educational initiatives
                                            considering the recommendations and                                                                                       among persons sharing a common
                                            further evaluating the agency’s history                              The following additional types of                    occupational profession.
                                            of approving associational groups, the                            groups will automatically satisfy the                      The table below provides samples of
                                            Board has determined to include                                   associational common bond provisions:                   the types of groups that will and will
                                            additional types of groups that will                                 • Parent teacher associations (PTAs)                 not automatically satisfy the
                                            automatically satisfy the associational                           organized at the local level to serve a                 associational common bond
                                            common bond requirements. The Board                               single school district;                                 requirements:

                                                                  Type of group                                            Will automatically qualify                           Will not automatically qualify

                                            Parent Teacher Association ..............................         Anytown Chapter of the Parent Teacher Asso-             National Council of Parent Teacher Associa-
                                                                                                                ciation of Anytown, Virginia.                           tions in Anytown, Virginia.
                                            Chamber of Commerce .....................................         Members of the Jonesboro, Georgia Chamber               Employees of Members of the Liverpool, New
                                                                                                                of Commerce.                                            York Chamber of Commerce.
                                            Athletic Booster Club .........................................   Voting members of the XYZ High School                   Members of PDQ Booster Club who become
                                                                                                                Booster Club in Hometown, Florida.                      members by paying onetime dues and do
                                                                                                                                                                        not have voting rights.
                                            Fraternal Organization .......................................    Members of the ABC Fraternal Organization               Persons becoming members of ABC Fraternal
                                                                                                                who have voting rights.                                 Association who do not have voting rights.
                                            Professional Organization .................................       Voting members of the National Association of           Members of the National Association of XYZ
                                                                                                                XYZ Profession.                                         Profession who do not have voting rights.



                                              Further, commenters suggested some                              automatically approving farmer                          as associations that satisfy the
                                            groups for automatic approval that                                cooperatives. After fully considering the               associational common bond
                                            NCUA has not regularly approved. For                              agency’s experience with farmer                         requirements.
                                            instance, NCUA has long held that                                 cooperatives, the Board has determined                    Further, NCUA has approved
                                            health clubs, such as YMCAs, do not                               not to include them as a category of                    numerous farmer cooperatives as
                                            meet the associational common bond                                associations receiving automatic                        occupational groups, but has only
                                            requirements because they are based                               approval. The Board is concerned that                   approved one farmer cooperative as an
                                            primarily on a client-customer                                    farmer cooperatives are not as easily                   associational group. Farmer
                                            relationship.19 While fraternal                                   identifiable as other associations, such                cooperatives also often have
                                            organizations with broad missions or                              as religious groups or labor unions.                    characteristics of a customer-client
                                            museum associations may, under some                               While there is a National Association of                relationship. In many cases, farmer
                                            circumstances, satisfy the associational                          Farmer Cooperatives, both it and the                    members pay for the services the
                                            common bond criteria, these groups                                United States Department of Agriculture                 cooperative provides and the members
                                            often are not structured in a way that                            acknowledge that there are a variety of                 do not typically interact with one
                                            would warrant automatic approval into                             types of farmer cooperatives. The Board                 another. As a result, farmer cooperatives
                                            an FCU’s FOM.                                                     does not believe farmer cooperatives can                will not be automatically approved, but
                                              The Board received several comments                             be objectively classified and sufficiently              NCUA welcomes the opportunity to
                                            recommending that NCUA consider                                   described to support automatic approval                 evaluate FCU requests to serve
                                              18 Chartering Manual, Chapter 2, IV.B.2—                        determine that a net worth ratio of less than six       overlapping fields of membership are also
                                            Numerical Limitation of Select Groups. An existing                percent is adequate if the credit union is making       applicable; and
                                            multiple common bond FCU that submits a request                   reasonable progress toward meeting the six percent         • If the formation of a separate credit union by
                                            to amend its charter must provide documentation                   net worth requirement. For any other credit union,      such group is not practical and consistent with
                                            to establish that the multiple common bond                        the NCUA may determine that a net worth ratio of        reasonable standards for the safe and sound
                                            requirements have been met. The NCUA must                         less than six percent is adequate if the credit union   operation of a credit union.
                                            approve all amendments to a multiple common                       is making reasonable progress toward meeting the           A detailed analysis is required for groups of 3,000
                                            bond credit union’s field of membership. NCUA                     six percent net worth requirement, and the addition     or more primary potential members requesting to be
                                            will approve groups to a credit union’s field of                  of the group would not adversely affect the credit      added to a multiple common bond credit union. It
                                            membership if the agency determines in writing                                                                            is incumbent upon the credit union to demonstrate
                                                                                                              union’s capitalization level;
                                            that the following criteria are met:                                                                                      that the formation of a separate credit union by
                                                                                                                 • The credit union has the administrative
                                              • The credit union has not engaged in any unsafe                                                                        such a group is not practical. The group must
                                                                                                              capability to serve the proposed group and the
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                                            or unsound practice, as determined by the NCUA,                                                                           provide evidence that it lacks sufficient volunteer
                                            which is material during the one year period                      financial resources to meet the need for additional     and other resources to support the efficient and
                                            preceding the filing to add the group;                            staff and assets to serve the new group;                effective operations of a credit union or does not
                                              • The credit union is ‘‘adequately capitalized.’’                  • Any potential harm the expansion may have on       meet the economic advisability criteria outlined in
                                            NCUA defines adequately capitalized to mean the                   any other credit union and its members is clearly       Chapter 1. If this can be demonstrated, the group
                                            credit union has a net worth ratio of not less than               outweighed by the probable beneficial effect of the     may be added to a multiple common bond credit
                                            six percent. For low-income credit unions or credit               expansion. With respect to a proposed expansion’s       union’s field of membership.
                                            unions chartered less than ten years, the NCUA may                effect on other credit unions, the requirements on         19 79 FR 24623, 24625 (May 1, 2014).




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                                            25928              Federal Register / Vol. 80, No. 87 / Wednesday, May 6, 2015 / Rules and Regulations

                                            individual farm cooperatives on a case-                 associations from joining FCUs. The                     While the Board continues to believe
                                            by-case basis.                                          Board emphasizes that only those                      that associations that have operated
                                              It is important to highlight that a                   groups that are formed primarily to                   independently for at least one year are
                                            credit union interested in serving a                    expand credit union membership will                   more likely to be associations that exist
                                            group which does not fall under the                     fail to satisfy the threshold requirement.            for organizational purposes beyond
                                            automatic approval categories can still                 In addition, as discussed in the                      primarily expanding credit union
                                            submit documentation to NCUA to                         preamble to the proposed rule, NCUA is                membership,22 the Board acknowledges
                                            support how the group is a valid                        concerned that the current totality of the            the concerns raised by the commenters
                                            association. This provides for flexibility              circumstances test may not be                         in this regard. Accordingly, the Board is
                                            in considering unique circumstances                     sufficiently filtering out those groups               taking action to relieve the regulatory
                                            when appropriate and may help to                        that do not meet the associational                    burden that commenters associated with
                                            identify other groups which may                         common bond requirements.                             the one-year requirement. Specifically,
                                            automatically qualify in the future.                       Six commenters expressed concern                   the Board is eliminating the one-year
                                            Service Areas and Reasonable Proximity                  about the use of the term ‘‘primarily’’ in            requirement from the threshold test so
                                                                                                    the phrase ‘‘primarily for the purpose of             that the one-year requirement is no
                                               Thirteen commenters strongly                                                                               longer a condition of satisfying the
                                                                                                    expanding credit union membership’’ in
                                            suggested that NCUA should revisit the                                                                        threshold test. This change will provide
                                                                                                    the proposed threshold requirement.
                                            definitions of ‘‘service areas’’ and                                                                          additional flexibility and opportunity
                                            ‘‘reasonable proximity’’ as those terms                 These commenters noted that the term
                                                                                                    ‘‘primarily’’ is subjective and undefined             for an association to qualify under the
                                            relate to multiple common bond credit                                                                         totality of the circumstances test. For
                                            unions. These commenters suggested                      in NCUA’s regulations. Four of these
                                                                                                    commenters recommended NCUA                           example, even if an association has not
                                            that NCUA should reconsider its                                                                               operated independently for at least one
                                            interpretation of both definitions in                   change ‘‘primarily’’ to ‘‘solely.’’ The
                                                                                                    Board intends for the word ‘‘primarily’’              year, the association may still qualify for
                                            light of the technological advancements                                                                       FCU membership under the totality of
                                            now available to credit unions. These                   to be given its plain English definition.
                                                                                                    For purposes of this rule ‘‘primarily’’               the circumstances test.
                                            comments relate to multiple common
                                            bond expansion, an issue not addressed                  means: For the most part; essentially;                Totality of the Circumstances Test
                                            by the April 2014 proposed rulemaking,                  mostly; chiefly; principally.20                          As discussed in more detail below,
                                            and which is outside the scope of this                     Twenty commenters had questions or                 eighteen commenters expressed various
                                            final rule. Therefore, this issue will not              expressed concern about the ‘‘one-year’’              concerns with the proposed
                                            be part of the final rule but will be                   requirement. In the proposed rule, as                 amendments to the totality of the
                                            considered as part of NCUA’s current                    part of the discussion of the threshold               circumstances test. These commenters
                                            review of FOM policies.                                 requirement, NCUA stated that ‘‘[i]n                  generally found the current totality of
                                                                                                    furtherance of this [threshold]                       the circumstances test sufficient. In
                                            Threshold Requirement and                               requirement, the association must have                addition, four commenters requested
                                            Independent Organization for One Year                   been operating as an organization                     that NCUA publish guidance to further
                                              Twenty-six commenters expressed                       independent from the requesting FCU                   explain how NCUA will apply the
                                            concern with the proposed threshold                     for at least one year prior to the request            totality of the circumstances test in
                                            requirement. As described above, at the                 to add the group to the FCU’s FOM.’’ 21               practice.
                                            beginning of NCUA’s associational                       These commenters questioned NCUA’s                       Four commenters had concerns with
                                            evaluation process, NCUA would                          reasoning for the one-year requirement                the criterion that assesses the degree to
                                            determine if the association was formed                 and requested further clarification on                which an association’s membership
                                            primarily for the purpose of expanding                  what this requirement means. In                       eligibility requirements are
                                            credit union membership. These                          addition, eleven of these commenters                  authoritative. NCUA clarified this
                                            commenters were concerned that NCUA                     specifically stated their opposition to               criterion in the proposed rule to
                                            was not specific enough about how it                    the one-year requirement. These                       emphasize the importance that an
                                            would apply the threshold requirement.                  commenters stated that NCUA did not                   association’s particular membership
                                            These commenters also strongly urged                    provide a basis for this minimum time                 requirements be authoritative. These
                                            NCUA to provide additional guidance in                  requirement, and the commenters did                   commenters stated that the term
                                            this regard.                                            not believe that it should matter how                 ‘‘authoritative’’ was ambiguous and
                                              Eleven commenters specifically stated                 long the association has been in                      requested further clarification. The
                                            their opposition to the proposed                        existence if it serves its members and                Board added the term ‘‘authoritative’’ to
                                            threshold requirement. These                            meets the criteria of the totality of the             this criterion in the proposal to further
                                            commenters posited that the threshold                   circumstances test.                                   stress NCUA’s long held position that it
                                            requirement seems particularly                             Almost half of the commenters who                  is important for an association to avoid
                                            arbitrary, overly restrictive, and                      opposed the one-year requirement                      having lax enrollment standards, as that
                                            unnecessary. Some of these commenters                   believed the requirement would have                   undercuts its ability to satisfy the
                                            believed that the NCUA could use its                    adverse effects on FCU membership.                    associational common bond
                                            current totality of the circumstances                   These commenters maintained that it                   requirements.
                                            test, or a modified version of that test,               would cause the unintended                               Three commenters supported the
                                            to determine if an association was or                   consequence of preventing FCUs from                   criterion that an FCU may pay a
                                            was not formed primarily for the                        being able to serve and support their                 member’s associational dues if the
                                            purpose of expanding credit union                       communities. They also believed that                  member has given consent. Two
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                                            membership.                                             this would create a competitive                       commenters expressed concern with
                                              The Board disagrees with the                          disadvantage for FCUs.                                this criterion, suggesting that this
                                            commenters’ characterization of the                                                                           transaction could indicate a lack of
                                            threshold requirement. The threshold                     20 See Dictionary.com and m-w.com (Merriam-          corporate separateness or that NCUA
                                            requirement will serve as an effective                  Webster online).
                                            gatekeeper to prevent unqualified                        21 79 FR 24625 (footnote 17) (May 1, 2014).            22 59   FR 29066, 29076 (June 3, 1994).



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                                                               Federal Register / Vol. 80, No. 87 / Wednesday, May 6, 2015 / Rules and Regulations                                            25929

                                            should not dictate what an association’s                separateness factors listed in the                    add new members during the appeals
                                            business model should look like.                        proposed rule to just one factor in the               process.
                                               The Board believes it is important to                final rule. The sole factor to be included               Ten commenters recommended that
                                            continue the policy of allowing an FCU                  in the final rule, which is an easier                 NCUA clearly articulate that, regardless
                                            to pay its member’s associational dues,                 standard for FCUs and associations to                 of the outcome of a quality assurance
                                            if the member has given his or her                      meet, is if an FCU’s and an association’s             review, existing FCU members,
                                            consent. The Board believes this policy                 respective business transactions,                     including those who qualified for FCU
                                            helps to facilitate the appropriate use of              accounts, and records are not                         membership through membership in the
                                            qualified associations by providing                     intermingled. Also, in the final rule, the            subject qualified association, would be
                                            FCUs with this additional flexibility. If               Board is adding the word ‘‘corporate’’ to             grandfathered and their memberships
                                            an association is automatically                         describe what records are not to be                   unaffected. The Board has long held the
                                            approved or approved because it                         intermingled. This addition is purely for             position that once a person attains
                                            satisfies the totality of the circumstances             clarification and adds no new burden.                 membership in an FCU, he or she
                                            test, then this practice is permissible for                The Board reiterates that, in reviewing            always remains a member of that FCU,
                                            FCUs, but is not mandatory.                             this less burdensome corporate                        unless expelled by the FCU or upon
                                                                                                    separateness factor along with the other              voluntary withdrawal.23 Accordingly,
                                            Corporate Separateness
                                                                                                    seven factors that constitute the totality            the Board confirms that all existing FCU
                                               There was little support among the                   of the circumstances test, no one factor              members discussed above are
                                            commenters for the proposed corporate                   is determinative. Additionally, as noted              grandfathered and their memberships
                                            separateness requirement, although                      above, the April 2014 proposed rule                   are unaffected by the results of any
                                            there was support for grandfathering a                  stated that qualified associations already            quality assurance review.
                                            qualified association already within an                 within an FCU’s FOM are grandfathered                    Twelve commenters stated that they
                                            FCU’s FOM so it would not need to                       in this regard and will not be subject to             did not support NCUA taking action to
                                            satisfy the corporate separateness                      the corporate separateness factor.                    remove a currently approved association
                                            requirement.                                                                                                  for any reason. Three of these
                                               Two commenters had specific                          Quality Assurance Reviews                             commenters argued that any new
                                            concerns about this criterion. One                        Over half of the commenters                         associational common bond standards
                                            commenter believed that this provision                  expressed concern about the quality                   must only apply to associations seeking
                                            would have the unintended                               assurance reviews that NCUA’s Office of               membership subsequent to the effective
                                            consequence of discouraging qualified                   Consumer Protection (OCP) is                          date of this final rule. In addition, six of
                                            associations from seeking FCU                           conducting on currently approved                      these commenters requested that NCUA
                                            membership. Another commenter                           associations. As discussed in the                     provide guidance on the process for
                                            suggested that smaller credit unions and                proposed rule, these reviews are                      removing an association from an FCU’s
                                            their affiliated associations generally do              intended to ensure that an association                FOM, including notice, timing, and
                                            not have the resources to meet these                    currently included in an FCU’s FOM                    appeals information. The Board agrees
                                            additional requirements, which could                    continues to satisfy the associational                that such guidance is appropriate and
                                            unfairly restrict their membership base.                common bond requirements that are                     has directed OCP to publish guidance in
                                            In addition, seven commenters                           required for continued membership.                    the near future. As noted below,
                                            maintained that it is inappropriate to                  These commenters noted specific                       however, NCUA considers removal of
                                            measure the independence of an                          concerns about how the reviews are                    an association from an FCU’s FOM a last
                                            association by evaluating whether it                    being and will be conducted and what                  resort.
                                            maintains a separate physical location.                 could result from them. The                              Four commenters argued that a
                                            These same seven commenters stated                      commenters requested that NCUA                        quality assurance review could usurp
                                            that the physical location of an                        ensure these reviews are conducted                    the rights of a currently approved
                                            association has no bearing on its                       using objective and transparent                       association because the review could
                                            separate corporate existence from an                    standards. In addition, some of these                 result in NCUA removing the
                                            FCU.                                                    commenters noted they did not support                 association from an FCU’s FOM without
                                               The Board has carefully considered                   NCUA reviewing currently approved                     due process. These commenters noted
                                            these concerns and agrees with                          associations.                                         that NCUA failed to cite to or reference
                                            commenters that the corporate                             Four commenters specifically                        the statutory authority on which NCUA
                                            separateness criterion may be too                       questioned if NCUA would allow                        relies to conduct these reviews. These
                                            burdensome as presented in the                          associations, determined to be out of                 commenters also stated that NCUA
                                            proposed rule. The Board still believes                 compliance with the associational                     failed to provide sufficient notice to
                                            that an association’s degree of corporate               common bond requirements, the                         associations and FCUs that the agency
                                            separateness is a reasonable factor to                  opportunity to get back into compliance,              continues to monitor associations’
                                            consider in determining if an                           and, if so, how long would those                      compliance with NCUA associational
                                            association satisfies the associational                 associations have to do so. They also                 common bond requirements. In
                                            common bond requirements and that it                    asked if NCUA’s OCP would provide                     addition, these commenters argued that
                                            is a useful indicator of the true purpose               any assistance in that regard. Six                    NCUA lacks the direct authority to
                                            of an association. However, the Board                   commenters also asked if there would                  remove an association from an FCU’s
                                            acknowledges that the numerous factors                  be a process by which an FCU could                    FOM.
                                            comprising the corporate separateness                   appeal an action by NCUA to remove an                    Many commenters have
                                            criterion, as listed in the proposed rule,              association from an FCU’s FOM. These                  misinterpreted the purpose of the
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                                            may be too difficult for some FCUs and                  commenters recommended such an                        quality assurance reviews. They are
                                            associations to demonstrate.                            appeals process. These commenters                     intended to protect the integrity of
                                            Accordingly, as a result of the                         suggested that an appeals process                     NCUA’s FOM requirements, not disrupt
                                            comments, to simplify the final rule and                should establish time frames in which                 an FCU’s ability to serve its members or
                                            provide regulatory relief to FCUs, the                  certain actions must be taken and that
                                            Board is reducing the multiple corporate                an FCU should be able to continue to                    23 12   U.S.C. 1759(e).



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                                            25930              Federal Register / Vol. 80, No. 87 / Wednesday, May 6, 2015 / Rules and Regulations

                                            to hamper an FCU’s ability to thrive.                   geographic limitation on associational                burdens or modify any existing
                                            NCUA will work cooperatively with                       groups, similar to the geographic                     paperwork burdens.
                                            FCUs and associations to ensure FOM                     limitation placed on multiple common
                                                                                                                                                          C. Executive Order 13132
                                            compliance. Further, the Board                          bond FCUs. The Board clarifies that
                                            emphasizes that quality assurance                       nothing in the preamble to the proposed                 Executive Order 13132 encourages
                                            reviews are not a new phenomenon.                       rule was intended to impose such a                    independent regulatory agencies to
                                            NCUA’s regional offices conducted                       geographic limitation. The Board                      consider the impact of their actions on
                                            them for many years and only ceased                     reiterates that the Chartering Manual                 state and local interests. In adherence to
                                            doing so once OCP assumed                               clearly states that single associational              fundamental federalism principles,
                                            responsibility for field of membership                  common bond FCUs do not have a                        NCUA, an independent regulatory
                                            processing and chartering activities after              geographic limitation.25                              agency as defined in 44 U.S.C. 3502(5),
                                            its inception in 2010.                                                                                        voluntarily complies with the executive
                                               OCP currently has in place quality                   III. Regulatory Procedures                            order. This rule applies only to federally
                                            control processes to review associations                A. Regulatory Flexibility Act                         chartered credit unions. It does not
                                            added to an FCU’s FOM. OCP does not                                                                           apply to state-chartered credit unions,
                                            plan to change these processes                             The Regulatory Flexibility Act                     which are subject to the FOM
                                            following the adoption of this final rule.              requires NCUA to prepare an analysis to               requirements of their respective states.
                                            OCP’s current quality assurance                         describe any significant economic                     Accordingly, this rule will not have a
                                            processes require its staff to review for               impact a regulation may have on a                     substantial direct effect on the states, on
                                            compliance with NCUA’s chartering                       substantial number of small entities.26               the connection between the national
                                            regulations all new FCU requests,                       For purposes of this analysis, NCUA                   government and the states, or on the
                                            including required documentation, to                    considers small credit unions to be                   distribution of power and
                                            serve groups prior to OCP making a final                those having under $50 million in                     responsibilities among the various
                                            decision on the request. Specifically for               assets.27 This rule focuses on the                    levels of government. NCUA has
                                            associational groups, OCP has                           structure and operations of independent               determined this rule does not constitute
                                            established a checklist for reviewing an                associations who wish to join an FCU’s                a policy that has federalism
                                            association’s bylaws and other                          FOM. To the extent there is any cost to               implications for purposes of the
                                            associational documentation to ensure                   small entities to voluntarily participate             executive order.
                                            that OCP reviews all requests in a                      in the determination of whether the
                                            consistent manner. This process                                                                               D. Assessment of Federal Regulations
                                                                                                    association satisfies NCUA’s
                                            includes reviewing groups added                                                                               and Policies on Families
                                                                                                    associational common bond
                                            through the Field of Membership                         requirements, those costs are minimal                   NCUA has determined that this final
                                            Internet Application (FOMIA) system.24                  and they are incurred infrequently.                   rule will not affect family well-being
                                            OCP staff reviews data entered by FCU                   Because this final rule would affect                  within the meaning of Section 654 of
                                            officials, and, if necessary, OCP staff                 relatively few small entities and the                 the Treasury and General Government
                                            contacts FCU officials for additional                   associated costs are minimal, NCUA                    Appropriations Act, 1999.29
                                            documentation. Through the FOMIA                        certifies the rule will not have a
                                            system, OCP also randomly selects                                                                             E. Small Business Regulatory
                                                                                                    significant economic impact on small                  Enforcement Fairness Act
                                            certain groups with no red flags for                    entities.
                                            review. This sampling process helps                                                                              The Small Business Regulatory
                                            ensure that FCU officials using the                     B. Paperwork Reduction Act                            Enforcement Fairness Act of 1996 30
                                            FOMIA system are using it as it was                                                                           (SBREFA) provides generally for
                                            intended to be used.                                       The Paperwork Reduction Act of 1995
                                                                                                                                                          congressional review of agency rules. A
                                               NCUA does not envision the                           (PRA) applies to rulemakings in which
                                                                                                                                                          reporting requirement is triggered in
                                            referenced processes or the quality                     an agency by rule creates a new
                                                                                                                                                          instances where NCUA issues a final
                                            assurance processes will change                         paperwork burden on regulated entities
                                                                                                                                                          rule as defined by Section 551 of the
                                            following the adoption of the final rule.               or modifies an existing burden.28 For
                                                                                                                                                          Administrative Procedure Act.31 NCUA
                                            In addition, whether with respect to a                  purposes of the PRA, a paperwork
                                                                                                                                                          does not believe this final rule is a
                                            new request for an FOM addition or as                   burden may take the form of either a
                                                                                                                                                          ‘‘major rule’’ within the meaning of the
                                            part of a post-approval quality assurance               reporting or a recordkeeping
                                                                                                                                                          relevant sections of SBREFA. NCUA has
                                            review, OCP will work closely with FCU                  requirement, both referred to as
                                                                                                                                                          submitted the rule to the Office of
                                            officials to determine if there are                     information collections. This final rule
                                                                                                                                                          Management and Budget for its
                                            compliance problems and, if so, how to                  amends the criteria NCUA will use to
                                                                                                                                                          determination in that regard.
                                            satisfactorily address those problems.                  evaluate if an association satisfies
                                            NCUA considers the removal of an                        NCUA’s associational common bond                      List of Subjects in 12 CFR Part 701
                                            association from an FCU’s FOM an                        requirements, but it requires essentially               Credit, Credit unions, Reporting and
                                            action of last resort.                                  the same information from an FCU that                 recordkeeping requirements.
                                                                                                    was previously required and changes
                                            Geographic Limitation                                   none of the relevant forms identified in                By the National Credit Union
                                                                                                    the Chartering Manual. Therefore, this                Administration Board on April 30, 2015.
                                              Thirteen commenters raised concerns
                                            that certain language in the preamble to                final rule will not create new paperwork              Gerard S. Poliquin,
                                            the proposed rule appeared to indicate                                                                        Secretary of the Board.
                                            that NCUA was seeking to impose a                         25 12 CFR part 701, appendix B (Chapter 2,
                                                                                                                                                            For the reasons stated above, NCUA
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                                                                                                    Section III.A.1).                                     amends 12 CFR part 701, appendix B as
                                              24 FOMIA is an online system that multiple              26 5 U.S.C. 603(a).
                                                                                                      27 Interpretive Ruling and Policy Statement 03–2,
                                                                                                                                                          follows:
                                            common bond credit unions can use to add
                                            associational and/or occupational groups of 2,999       68 FR 31949 (May 29, 2003), as amended by
                                                                                                                                                            29 Public Law 105–277, 112 Stat. 2681 (1998).
                                            potential members or less as well as the non-natural    Interpretative Ruling and Policy Statement 13–1, 78
                                            person corporate account associated with that           FR 4032 (Jan. 18, 2013).                                30 Public Law 104–121, 110 Stat. 857 (1996).
                                            group.                                                    28 44 U.S.C. 3507(d); 5 CFR part 1320.                31 5 U.S.C. 551.




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                                                               Federal Register / Vol. 80, No. 87 / Wednesday, May 6, 2015 / Rules and Regulations                                                25931

                                            PART 701—ORGANIZATION AND                               NCUA, a copy of the association’s charter,              (4) Homeowner associations;
                                            OPERATION OF FEDERAL CREDIT                             bylaws, or other equivalent documentation,              (5) Labor unions;
                                                                                                    including any legal documents required by               (6) Scouting groups;
                                            UNIONS
                                                                                                    the state or other governing authority.                 (7) Parent teacher associations (PTAs)
                                            ■ 1. The authority for part 701                            The associational sponsor itself may also          organized at the local level to serve a single
                                                                                                    be included in the field of membership—e.g.,
                                            continues to read as follows:                           ‘‘Sprocket Association’’—and will be shown
                                                                                                                                                          school district;
                                               Authority: 12 U.S.C. 1752(5), 1755, 1756,            in the last clause of the field of membership.          (8) Chamber of commerce groups (members
                                            1757, 1758, 1759, 1761a, 1761b, 1766, 1767,                                                                   only and not employees of members);
                                                                                                    III.A.1.a—Threshold Requirement Regarding
                                            1782, 1784, 1786, 1787, 1789. Section 701.6                                                                     (9) Athletic booster clubs whose members
                                                                                                    the Purpose for Which an Associational
                                            is also authorized by 15 U.S.C. 3717. Section                                                                 have voting rights;
                                                                                                    Group Is Formed and the Totality of the
                                            701.31 is also authorized by 15 U.S.C. 1601             Circumstances Criteria                                  (10) Fraternal organizations or civic groups
                                            et seq.; 42 U.S.C. 1981 and 3601–3610.                                                                        with a mission of community service whose
                                            Section 701.35 is also authorized by 42                    As a threshold matter, when reviewing an
                                                                                                                                                          members have voting rights;
                                            U.S.C. 4311–4312.                                       application to include an association in a
                                                                                                    federal credit union’s field of membership,             (11) Organizations having a mission based
                                            ■ 2. Section III.A.1 of Chapter 2 of                    NCUA will determine if the association has            on preserving or furthering the culture of a
                                            appendix B to part 701 is revised to read               been formed primarily for the purpose of              particular national or ethnic origin; and
                                            as follows:                                             expanding credit union membership. If                   (12) Organizations promoting social
                                                                                                    NCUA makes such a determination, then the             interaction or educational initiatives among
                                            Appendix B to Part 701—Chartering                       analysis ends and the association is denied           persons sharing a common occupational
                                            and Field of Membership Manual                          inclusion in the federal credit union’s field         profession.
                                            *      *     *       *      *                           of membership. If NCUA determines that the
                                                                                                    association was formed to serve some other            III.A.1.d—Additional Information
                                            Chapter 2
                                                                                                    separate function as an organization, then              A support group whose members are
                                            *      *     *       *      *                           NCUA will apply the following totality of the         continually changing or whose duration is
                                            III.A.1—General                                         circumstances test to determine if the                temporary may not meet the single
                                               A single associational federal credit union          association satisfies the associational               associational common bond criteria. Each
                                            may include in its field of membership,                 common bond requirements. The totality of
                                                                                                                                                          class of member will be evaluated based on
                                            regardless of location, all members and                 the circumstances test consists of the
                                                                                                    following factors:                                    the totality of the circumstances. Individuals
                                            employees of a recognized association. A                                                                      or honorary members who only make
                                            single associational common bond consists of               1. Whether the association provides
                                                                                                    opportunities for members to participate in           donations to the association are not eligible
                                            individuals (natural persons) and/or groups
                                                                                                    the furtherance of the goals of the                   to join the credit union.
                                            (non-natural persons) whose members
                                                                                                    association;                                            Student groups (e.g., students enrolled at a
                                            participate in activities developing common
                                                                                                       2. Whether the association maintains a             public, private, or parochial school) may
                                            loyalties, mutual benefits, and mutual
                                                                                                    membership list;                                      constitute either an associational or
                                            interests. Separately chartered associational
                                                                                                       3. Whether the association sponsors other          occupational common bond. For example,
                                            groups can establish a single common bond
                                                                                                    activities;                                           students enrolled at a church sponsored
                                            relationship if they are integrally related and
                                                                                                       4. Whether the association’s membership
                                            share common goals and purposes. For                                                                          school could share a single associational
                                                                                                    eligibility requirements are authoritative;
                                            example, two or more churches of the same                                                                     common bond with the members of that
                                                                                                       5. Whether members pay dues;
                                            denomination, Knights of Columbus                                                                             church and may qualify for a federal credit
                                                                                                       6. Whether the members have voting rights;
                                            Councils, or locals of the same union can               To meet this requirement, members need not            union charter. Similarly, students enrolled at
                                            qualify as a single associational common                vote directly for an officer, but may vote for        a university, as a group by itself, or in
                                            bond.                                                   a delegate who in turn represents the                 conjunction with the faculty and employees
                                               Individuals and groups eligible for                  members’ interests;                                   of the school, could share a single
                                            membership in a single associational credit                7. The frequency of meetings; and
                                            union can include the following:                                                                              occupational common bond and may qualify
                                                                                                       8. Separateness—NCUA reviews if there is           for a federal credit union charter.
                                               • Natural person members of the                      corporate separateness between the group
                                            association (for example, members of a union                                                                    Tenant groups, consumer groups, and other
                                                                                                    and the federal credit union. The group and
                                            or church members);                                                                                           groups of persons having an ‘‘interest in’’ a
                                                                                                    the federal credit union must operate in a
                                               • Non-natural person members of the                  way that demonstrates the separate corporate          particular cause and certain consumer
                                            association;                                            existence of each entity. Specifically, this          cooperatives may also qualify as an
                                               • Employees of the association (for                  means the federal credit union’s and the              association.
                                            example, employees of the labor union or                group’s respective business transactions,               Associations based primarily on a client-
                                            employees of the church); and                           accounts, and corporate records are not               customer relationship do not meet
                                               • The association.                                   intermingled.                                         associational common bond requirements.
                                               Generally, a single associational common                No one factor alone is determinative of            Health clubs are an example of a group not
                                            bond does not include a geographic                      membership eligibility as an association. The
                                            definition and can operate nationally.                                                                        meeting associational common bond
                                                                                                    totality of the circumstances controls over           requirements, including YMCAs. However,
                                            However, a proposed or existing federal                 any individual factor in the test. However,
                                            credit union may limit its field of                                                                           having an incidental client-customer
                                                                                                    NCUA’s primary focus will be on factors 1–
                                            membership to a single association or                                                                         relationship does not preclude an
                                                                                                    4.
                                            geographic area. NCUA may impose a                                                                            associational charter as long as the
                                            geographic limitation if it is determined that          III.A.1.b—Pre-Approved Groups                         associational common bond requirements are
                                            the applicant credit union does not have the               NCUA automatically approves the below              met. For example, a fraternal association that
                                            ability to serve a larger group or there are            groups as satisfying the associational                offers insurance, which is not a condition of
                                            other operational concerns. All single                  common bond provisions. NCUA only                     membership, may qualify as a valid
                                            associational common bonds should include               approves regular members of an approved               associational common bond.
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                                            a definition of the group that may be served            group. Honorary, affiliate, or non-regular
                                            based on the association’s charter, bylaws,             members do not qualify.                               *        *      *     *   *
                                            and any other equivalent documentation.                    These groups are:                                  [FR Doc. 2015–10548 Filed 5–5–15; 8:45 am]
                                               Applicants for a single associational                   (1) Alumni associations;
                                                                                                                                                          BILLING CODE 7535–01–P
                                            common bond federal credit union charter or                (2) Religious organizations, including
                                            a field of membership amendment to include              churches or groups of related churches;
                                            an association must provide, at the request of             (3) Electric cooperatives;



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Document Created: 2015-12-16 07:41:11
Document Modified: 2015-12-16 07:41:11
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionFinal rule.
DatesThis rule is effective July 6, 2015.
ContactRobert Leonard, Director, Division of Consumer Access, and Rita Woods, Director, Division of Consumer Access--South, Office of Consumer Protection, at 1775 Duke Street, Alexandria, VA 22314, or by telephone (703) 518-1140; or Frank Kressman, Associate General Counsel, Office of General Counsel, at the
FR Citation80 FR 25924 
RIN Number3133-AE31
CFR AssociatedCredit; Credit Unions and Reporting and Recordkeeping Requirements

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