80_FR_76984
Page Range | 76747-76853 | |
FR Document | 2015-30069 |
[Federal Register Volume 80, Number 237 (Thursday, December 10, 2015)] [Proposed Rules] [Pages 76747-76853] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-30069] [[Page 76747]] Vol. 80 Thursday, No. 237 December 10, 2015 Part II National Credit Union Administration ----------------------------------------------------------------------- 12 CFR Part 701 Chartering and Field of Membership Manual; Proposed Rule Federal Register / Vol. 80 , No. 237 / Thursday, December 10, 2015 / Proposed Rules [[Page 76748]] ----------------------------------------------------------------------- NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Part 701 RIN 3133-AE31 Chartering and Field of Membership Manual AGENCY: National Credit Union Administration (NCUA). ACTION: Proposed rule with request for comments. ----------------------------------------------------------------------- SUMMARY: The NCUA Board proposes to comprehensively amend its chartering and field of membership rules to put them in a more efficient framework and to maximize access to federal credit union services to the extent permitted by law. The amendments will implement changes in policy affecting: The definition of a local community, a rural district, and an underserved area; the expansion of multiple common bond credit unions and members' proximity to them; the expansion of single common bond credit unions based on a trade, industry or profession; and the process for applying to charter or expand a federal credit union. DATES: Comments must be received on or before February 8, 2016. ADDRESSES: You may submit comments by any of the following methods (Please send comments by one method only):Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. NCUA Web site: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the instructions for submitting comments. Email: Address to regcomments@ncua.gov. Include ``[Your name] Comments on Notice of Proposed Rulemaking Regarding Associational Common Bond'' in the email subject line. Fax: (703) 518-6319. Use the subject line described above for email. Mail: Address to Gerard S. Poliquin, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. Hand Delivery/Courier: Same as mail address. Public Inspection: You may view all public comments on NCUA's Web site at http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx as submitted, except for those we cannot post for technical reasons. NCUA will not edit or remove any identifying or contact information from the public comments submitted. You may inspect paper copies of comments in NCUA's law library at 1775 Duke Street, Alexandria, Virginia 22314, by appointment weekdays between 9 a.m. and 3 p.m. To make an appointment, call (703) 518-6546 or send an email to OGCMail@ncua.gov. FOR FURTHER INFORMATION CONTACT: Matthew Biliouris, Deputy Director, or Robert Leonard, Director, Division of Consumer Access, or Rita Woods, Director, Division of Consumer Access South, Office of Consumer Protection, at the above address or telephone (703) 518-1140; or Senior Staff Attorney Steven Widerman or Staff Attorney Marvin Shaw, Office of General Counsel, at the above address or telephone (703) 518-6540. SUPPLEMENTARY INFORMATION: I. Background A. Overview NCUA's Chartering and Field of Membership Manual, incorporated as appendix B to part 701 of its regulations (``Chartering and FOM Manual''),\1\ implements the field of membership (``FOM'') requirements established by the Federal Credit Union Act (``the FCU Act'') for federal credit unions (``FCUs'').\2\ An FOM consists of those persons and entities eligible for membership according to an FCU's type of charter. --------------------------------------------------------------------------- \1\ Appendix B to 12 CFR part 701(``appendix B''). \2\ 12 U.S.C. 1759. --------------------------------------------------------------------------- In adopting the Credit Union Membership Access Act of 1998 (``CUMAA''), Congress reiterated its longstanding support for credit unions, noting their ``specif[ic] mission of meeting the credit and savings needs of consumers, especially persons of modest means.'' \3\ As amended by CUMAA, the FCU Act provides a choice among three charter types: A single group sharing a single occupational or associational common bond; \4\ a multiple common bond, with each group having a distinct occupational or associational common bond among group members; \5\ and a community common bond among persons or organizations within a well-defined local community, neighborhood or rural district.\6\ --------------------------------------------------------------------------- \3\ Pub. L. 105-219, Section 2, 112 Stat. 913 (Aug 7, 1998). \4\ 12 U.S.C. 1759(b)(1). \5\ Id. Section 1759(b)(2)(A). \6\ Id. Section 1759(b)(3). --------------------------------------------------------------------------- Based on NCUA's experience in processing applications for initial approval and subsequent expansion of all three types of charters, the Board periodically updates and revises the Chartering and FOM Manual to ensure adherence to the statutory criteria, limitations and special rules that apply to each charter type, to reflect contemporary practice, and to enhance the user-friendliness of the Chartering and FOM Manual for the benefit of those seeking to charter an FCU, as well as for existing credit unions. B. Why is NCUA Proposing this Rule? The proposed rule will modify the Board's policies affecting the definition of a local community, a rural district, and an underserved area; group members' proximity to multiple common bond FCUs when they expand; and expansion of single common bond FCUs that serve a trade, industry or profession; and the process for applying to charter or expand an FCU. Consistent with its responsibility under CUMAA to facilitate access to credit unions and their delivery of services, the Board is proposing these policy modifications in order to accomplish several objectives. The first is to ease any undue burdens and restrictions on an FCU's ability to provide services to consumers who are eligible for FCU membership, particularly those of modest means and those who may not currently be members of a credit union. The second is to enhance the menu of strategic options for FOM expansions. The third is to maximize competitive parity between federal and state charters, to the extent allowed by law, while respecting the national system of dual chartering. The Board invites public comments addressing all aspects of the proposed rule. II. Summary of the Proposed Rule A. Community Common Bond As amended in 1998, the FCU Act limits membership in a community credit union to ``[p]ersons or organizations within a well-defined local community, neighborhood or rural district.'' \7\ It directs the Board to define what constitutes a well-defined local community, neighborhood or rural district for purposes of ``making any determination'' regarding a community credit union,\8\ and to establish applicable criteria for any such determination.\9\ To qualify as a well-defined local community or rural district, the Board requires the proposed area to have ``specific geographic boundaries,'' such as those of ``a city, township, county (single or multiple portions of a county) or their political equivalent, school districts or a clearly [[Page 76749]] identifiable neighborhood.'' \10\ The boundaries themselves may consist of political borders, streets, rivers, railroad tracks, or other static geographical feature.\11\ The Board continues to emphasize interaction and common interests among residents within those boundaries as essential to the viability of a local community. --------------------------------------------------------------------------- \7\ Id. Section 1759(b). \8\ Id. Section 1759(g)(1)(A). \9\ Id. Section 1759(g)(1)(B). \10\ Appendix B, Ch. 2, Section V.A.2. \11\ Appendix B, Ch. 2, Section V.A.5. --------------------------------------------------------------------------- Since 2010, the Board has provided credit unions the option of two uniform, nationally-recognized, objective geographic units that, by definition, meet the statutory criteria of a well-defined local community, neighborhood or rural district. The first is a ``Single Political Jurisdiction . . . or any contiguous portion thereof,'' regardless of population.\12\ The second is a single U.S. Census Bureau-designated Core Based Statistical Area or one or more Metropolitan Divisions within, or a well-defined portion of either one, subject in any case to a 2.5 million population limit that applies to the Core Based Statistical Area as a whole.\13\ Under either well- defined local community option, a credit union must be able to serve the proposed community or rural district, as demonstrated by its business and marketing plans that must accompany an application for charter approval, expansion or conversion.\14\ --------------------------------------------------------------------------- \12\ Appendix B, Ch. 2, Section V.A.2. \13\ Appendix B, Ch. 2, Section V.A.2. \14\ Appendix B, Ch. 2, Section V.A.4. --------------------------------------------------------------------------- 1. Core Based Statistical Area Population Limit. As explained above, a Core Based Statistical Area qualifies as a well-defined local community only if its population does not exceed 2.5 million. By design, this population limit conforms to the population parameter by which OMB recognizes metropolitan divisions with a Core Based Statistical Area.\15\ Upon further consideration in connection with this rule, the Board has decided to retain the 2.5 million population limit, but nonetheless invites public comment on whether to adjust the limit, by what amount, and for what specific reasons. --------------------------------------------------------------------------- \15\ https://www.whitehouse.gov/sites/default/files/omb/bulletins/2015/15-01.pdf (at page 62). --------------------------------------------------------------------------- 2. ``Core Area'' Service Requirement. Since 2010, NCUA has required that when a credit union applies to serve a community consisting of a portion of a Core Based Statistical Area, that portion must include the Core Based Statistical Area's ``core area,'' which NCUA defines as the most populated county or named municipality in the Core Based Statistical Area's title.\16\ The primary purpose of this requirement was to acknowledge the core area of a Core Based Statistical Area as the typical focal point for common interests and interaction among residents. An additional purpose was to extend FCU services to low- income persons and underserved areas, both typically located primarily in the core area of a Core Based Statistical Area. NCUA's review of progress under approved FCUs' business and marketing plans over the last five years indicates that those credit unions are adequately serving low-income persons and underserved areas without regard to their location within the community. Accordingly, NCUA proposes to repeal the core area requirement as an indicator of service to low- income persons and underserved areas, in favor of its practice of annually reviewing the progress of business and marketing plans for three years following charter approval or expansion, and relying on those plans to assess those service objectives within an original or an expanded community. --------------------------------------------------------------------------- \16\ 75 FR 36257, 36260 (June 25, 2010). --------------------------------------------------------------------------- 3. Population Limit as Applied to a Well-Defined Portion of a Core Based Statistical Area. The Board presently permits a well-defined portion of a Core Based Statistical Area to qualify as a well-defined local community provided the population of the Core Based Statistical Area as a whole does not exceed the 2.5 million population limitation,\17\ disregarding whether the portion a credit union seeks to serve alone meets that limitation. A review of requests to serve a portion of a Core Based Statistical Area that were denied because the population of the whole Core Based Statistical Area exceeded 2.5 million has convinced the Board that this is an unnecessarily broad application of the population cap that produces unintended consequences. --------------------------------------------------------------------------- \17\ Appendix B, Ch. 2, Section V.A.2. (``statistical area'' definition). --------------------------------------------------------------------------- To target the 2.5 million population limit strictly to the community a credit union seeks to serve, the Board proposes to modify its ``statistical area'' definition to specify that ``a Core Based Statistical Area, Metropolitan Division, or well-defined portion of either one, must itself have a population of 2.5 million or fewer people.'' This will ensure that a portion of a Core Based Statistical Area, or a Metropolitan Division within, qualifies as a well-defined local community when it meets the population limit solely as applied to that portion, even if the Core Based Statistical Area as a whole exceeds the limit. 4. ``Combined Statistical Area'' as a Single Well-Defined Local Community. As explained above, a Core Based Statistical Area or a Metropolitan Division within a Core Based Statistical Area, or a well- defined portion of either one, qualifies as a well-defined local community subject to a population limit.\18\ Acknowledging the interdependence among adjacent Core Based Statistical Areas, the Office of Management and Budget (``OMB'') has recognized 169 Combined Statistical Areas consisting of contiguous Core Based Statistical Areas, and Metropolitan and Micropolitan Statistical Areas within, that complement one another according to objective measurements of social and economic integration among an area's residents.\19\ --------------------------------------------------------------------------- \18\ 75 FR 36257 (June 25, 2010). \19\ OMB Bulletin No. 15-01 to Heads of Executive Departments and Establishments (July 15, 2015) defines a Combined Statistical Area as ``two or more Metropolitan Statistical Areas, a Metropolitan Statistical Area and a Micropolitan Statistical Area, two or more Micropolitan Statistical Areas, or multiple Metropolitan and Micropolitan Statistical Areas that have social and economic ties as measured by commuting, but at lower levels than are found among counties within Metropolitan and Micropolitan Statistical Areas.'' OMB characterizes Core Based Statistical Areas as ``representing larger regions that reflect broader social and economic interactions, such as wholesaling, commodity distribution, and weekend recreation activities, and are likely to be of considerable interest to regional authorities and the private sector.'' https://www.whitehouse.gov/sites/default/files/omb/bulletins/2015/15-01.pdf --------------------------------------------------------------------------- OMB's approach in designating Combined Statistical Areas is consistent with that of the Board in relying on residents' interactions and common interests to define a local community. Accordingly, the Board proposes to expand the existing single Core Based Statistical Area definition of a well-defined local community to include Combined Statistical Areas as designated by OMB, subject to the 2.5 million population limit. Additionally, in evaluating expansion requests, NCUA will continue its practice of reviewing each FCU's business and marketing plans to determine its capability and success in serving its original and previously expanded community. 5. Addition of an Adjacent Area to a Well-Defined Local Community. Despite the convenience, certainty and staff efficiency of using a Single Political Jurisdiction, a Core Based Statistical Area or a Combined Statistical Area to form a well-defined local community or rural district, areas adjacent to the perimeter of these objective geographic units may lack a credit union presence and/or lack sufficient access to financial services, even though residents on both sides of the perimeter may routinely interact or share common interests with [[Page 76750]] each other. To enable residents of those adjacent areas to access credit union services, the Board proposes to permit the addition of such an area to a community consisting of a Single Political Jurisdiction, Core Based Statistical Area, Combined Statistical Area, or rural district, upon a showing by subjective evidence that residents on both sides of the perimeter interact or share common interests. The expanded community would be subject to the proposed population limits for community charters (2.5 million) and rural district charters (1 million).\20\ The more expansive the adjacent area, theoretically even surrounding the original community's entire perimeter, the more challenging and burdensome it may be for a credit union to, first, subjectively demonstrate a sufficient totality of indicia of interaction or common interests among residents of the expanded community,\21\ and then to establish through the credit union's business and marketing plans its ability and commitment to serve the entire expanded community. --------------------------------------------------------------------------- \20\ See Rural District Definition discussion later in this same section. \21\ The proposed rule incorporates guidance identifying compelling indicia of common interests and interaction that would be relevant when a credit union chooses to submit a narrative to NCUA to demonstrate that the residents of the expanded community meet the requirements of a well-defined local community. --------------------------------------------------------------------------- The Board recognizes that credit unions seeking to add bordering areas to their existing community or rural district charters historically have already established a proven track record of serving an existing community or rural district and should not be subject to the same requirements as those for a credit union seeking to convert to a community or rural district charter. Therefore, the Board proposes to require a federal credit union seeking to add a bordering area to follow a streamlined set of business plan requirements contained in this rule. The Board seeks comment on the appropriateness of the proposed set of streamlined requirements, and if any specific items should be added or removed from the proposed criteria. The Board also seeks comment on the existing comprehensive business and marketing plan requirements. Finally, the Board is considering whether to limit the availability of this streamlined approach to a federal credit union seeking a certain maximum percentage increase in its field of membership, and is interested in receiving public comment on this aspect of the proposal. 6. Individual Congressional District as a Well-Defined Local Community. Since 1999, the Board has maintained that neither a Congressional district nor a whole state qualifies as a well-defined local community, despite recognizing that both are well-defined.\22\ These restrictions were never imposed by statute; rather, the Board disallowed whole states and Congressional districts solely as a matter of policy.\23\ When imposing these restrictions, the Board recognized that-- --------------------------------------------------------------------------- \22\ 63 FR 72013, 72037 (December 30, 1998); Appendix B, Ch. 2, Section V.A.2. \23\ 63 FR at 72037. See also 75 FR at 36258 (affirming that entire state is not acceptable as WDLC) in general, a large population in a small geographic area or a small population in a large geographic area, may meet community chartering requirements. Conversely, . . . a large population in a large geographic area will not normally meet community chartering requirements. In so doing, however, the Board has not summarily dismissed or prejudged any potential application. While an area with a large population may require additional documentation, it still may meet the definition of a local community.\24\ --------------------------------------------------------------------------- \24\ 63 FR at 72012. A significant change in circumstances has prompted the Board to reconsider this policy as it applies to Congressional districts--namely that, NCUA has, since 1999, approved 21 Single Political Jurisdictions that each have a population in excess of 1 million, while the average population of the United States' 435 Congressional districts is 710,767.\25\ --------------------------------------------------------------------------- \25\ http://www.census.gov/fastfacts. --------------------------------------------------------------------------- The most populous of the 435 districts is the ``at large'' district serving the state of Montana, with a population of 1,023,579; Rhode Island has the smallest average district size at 523,028.\26\ As measured by population, it is appropriate to recognize each individual Congressional district, as well as the District of Columbia and each U.S. territory represented by a non-voting delegate,\27\ as local when compared to Single Political Jurisdictions as large in population as Los Angeles County, California (9.6 million), approved by the Board in 2003, and Harris County, Texas (3.45 million), approved by the Board in 2007. --------------------------------------------------------------------------- \26\ Id. Seven states presently are comprised of a single Congressional district, effectively giving each a state-wide FOM: Alaska, Delaware, Montana, North Dakota, South Dakota, Vermont and Wyoming. \27\ American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. --------------------------------------------------------------------------- Among residents of Single Political Jurisdictions comprised of towns, cities and counties, the focal point of common interests and interaction tends be local services, resources and facilities (e.g., taxes, schools, police and fire protection). The proposal acknowledges that Congressional districts, structured for purposes of federal representation, reflect interaction and common interests among each district's constituents based on issues and matters decided at the federal level that affect them locally (e.g., economic, agricultural, and environmental). Based on this rationale, the Board proposes to recognize each individual Congressional district as a Single Political Jurisdiction, thus qualifying it as a well-defined local community without regard to population.\28\ --------------------------------------------------------------------------- \28\ Appendix B, Ch. 2, Section V.A.1. --------------------------------------------------------------------------- As in the case of any community charter application, a credit union that applies to serve a Congressional district must submit a business and marketing plan demonstrating its ability and commitment to serve the entire community. The larger the Congressional district, the more challenging and burdensome it may be for an applicant to satisfy this requirement. If, as a result of redistricting, the boundaries of an individual Congressional district were to be redrawn, the FOM consisting of the original Congressional district would no longer be available to be served by any other FCU. Only an FCU that was approved to serve an FOM comprised of an individual Congressional district would be grandfathered to continue serving that area. B. Rural District Definition The Board has, since 2013, imposed two requirements for a proposed area to qualify as a well-defined ``Rural District.'' The first is that the area's total population cannot exceed the greater of either 250,000 people or 3 percent of the population of the state in which the majority of the proposed Rural District's residents would be located.\29\ The second is that either at least 50 percent of the proposed Rural District's population must reside in census blocks or other geographic units the U.S. Census Bureau (``U.S. Census'') designates as ``rural,'' or the proposed Rural District's population density cannot exceed 100 persons per square mile.\30\ Independently of these well-defined local community requirements, a credit union must be able to serve the proposed Rural District, as demonstrated by its business and marketing plans that must accompany [[Page 76751]] an application for charter approval, expansion or conversion.\31\ --------------------------------------------------------------------------- \29\ Appendix B, Ch. 2, Section V.A.2. \30\ Id. \31\ Appendix B, Ch. 2, Section V.A.4. --------------------------------------------------------------------------- 1. Population Limits. The 250,000 persons/3 percent population limits were based on the view that a Rural District should have a relatively small, widely disbursed population. However, a compelling countervailing factor continues to weigh against this view: To make the area attractive as a strategic option, a Rural District must have a population sufficient to enable credit unions to achieve a sufficient level of operating efficiencies and scale to deliver products and services. Balancing these opposing population considerations, NCUA proposes to modify the Rural District definition to increase the population limit to 1 million persons. Because the increased population limit would exceed 3 percent of a state's population in all states but one (California), making that alternative redundant, the proposed rule omits it. The Board invites public comment on whether to adjust the proposed 1 million population limit, by what amount, and for what specific reasons. 2. Multi-State Expansion Limit. In 1998, the Board conceded that ``While an area with a large population may require additional documentation, it still may meet the definition of a local community. Similarly, multiple counties, particularly in rural areas, may qualify for a community charter.'' \32\ To achieve consistency with U.S. Census recognition of expansive rural areas, the proposed rule modifies the option for an area to qualify as a Rural District either because it is among the ``rural counties'' identified by the Consumer Financial Protection Bureau (``CFPB''),\33\ or because the area has a sparse population density of no more than 100 people per square mile. These criteria truly reflect an area's rural character regardless of its physical size, as shown by the eight states in which the U.S. Census identifies more than 40 percent of the state population as ``rural.'' \34\ --------------------------------------------------------------------------- \32\ 63 FR at 72012. \33\ See CFPB's ``Rural or underserved counties list'' available at: http://www.consumerfinance.gov/guidance/#ruralunderserved. \34\ https://www.census.gov/geo/reference/ua/urban-rural-2010.html (List of Population, Land Area and Percent Urban and Rural in 2010 and Changes from 2000 to 2010). --------------------------------------------------------------------------- As revised, the Rural District definition--a 1 million population limit, and either a sparse population density or ``rural'' designation--would continue to permit a Rural District to extend beyond a single state's boundaries. To prevent the overexpansion of Rural Districts, however, the Board proposes to prohibit a single well- defined Rural District from exceeding the boundaries of the states that are immediately contiguous to the state in which the FCU serving the Rural District is headquartered (i.e., not to exceed the outer perimeter of the layer of states immediately bordering the headquarters state). C. Underserved Areas The FCU Act authorizes the NCUA Board to allow multiple common bond credit unions to serve members residing in an ``underserved area,'' provided the FCU establishes and maintains a facility in the area.\35\ For an area to be ``underserved,'' it must qualify: (1) As a well- defined local community, neighborhood or rural district; \36\ (2) as an ``investment area'' under the Community Development Banking and Financial Institutions Act (``CDFI Act''); \37\ and (3) as ``underserved'' by other depository institutions (as defined [by the CDFI Act]) ``based on data of the Board and the Federal banking agencies.'' \38\ Other than to limit the sources of data and to define ``depository institutions,'' the FCU Act prescribes no specific test or criteria to assess ``underservice.'' Within this broad authority, the Board seeks to refine the data used in its concentration of facilities ratio, first introduced in 2008,\39\ to determine whether a proposed area is underserved by other depository institutions, as well as to propose for comment alternative methodologies and metrics as options for making that determination. --------------------------------------------------------------------------- \35\ 12 U.S.C. 1759(c)(2). \36\ Id. \37\ Id. Section 4702(16). \38\ Id. Section 1759(c)(2)(A) citing id. Section 461(b)(1)(A). By definition, a ``depository institution'' is insured and includes credit unions. Id. Section 461(b)(1)(A)(iv). \39\ 73 FR 73392 (Dec. 2, 2008). Using census tracts as the unit of measure, the concentration of facilities ratio compares the concentration of depository institution facilities among the population within the non-``distressed'' portions of the proposed area against the concentration of such facilities among the population of the area as a whole. 73 FR at 73396. Ch.3, Section III.B.3.of appendix B. An area qualifies as underserved by other depository institutions when the concentration of facilities ratio within its non-``distressed'' census tracts exceeds the concentration of facilities ratio within the census tracts of the area as a whole. --------------------------------------------------------------------------- 1. Exclusion of Non-Depository Institutions and Non-Community Credit Unions from Concentration of Facilities Ratio. It has been NCUA's practice to calculate an area's concentration of facilities ratio on behalf of a credit union seeking approval to serve it as an underserved area. To assess the presence of banks and savings associations within geographic units that do not already qualify as ``distressed'' under the CDFI Act, NCUA has relied upon data compiled by the Federal Deposit Insurance Corporation (``FDIC'') in its Summary of Deposits Survey,\40\ and on NCUA data to assess the presence of credit unions. The Board proposes to exclude two data components from the ratio, on a contingent basis, to prevent the concentration of facilities ratio from being diluted or distorted by over-inclusive data, as well as to ensure compliance with the letter and the spirit of the ``depository institutions'' definition the FCU Act references.\41\ --------------------------------------------------------------------------- \40\ FDIC's ``Summary of Deposits Survey,'' e.g., https://www.fdic.gov/news/news/financial/2015/fil15024.pdf. \41\ 12 U.S.C. 461(b)(1)(A). --------------------------------------------------------------------------- The first component is NCUA data reflecting the presence of non- community credit unions, such as multiple common bond credit unions-- other than those already serving the proposed area as an underserved area--because they would be unable to serve the general public of a underserved area (i.e., unable to serve anyone not within its select groups). The second component is FDIC data reflecting the presence of non-depository institutions, such as trust companies, which do not accept deposits from the general public. Excluding data reflecting the presence of institutions that would not be capable of serving a proposed area, either by definition or in fact, will preclude the unwarranted denial of an application to serve an underserved area. It would be impracticable and an inefficient use of resources for NCUA to segregate bank and credit union data on a nationwide scale to exclude non-depository bank and non-community credit union data. However, in the event an initial concentration of facilities ratio calculation fails to identify a proposed area as underserved by other depository institutions, the proposed rule would require NCUA to then exclude the non-depository bank and non-community credit union data and recalculate the ratio. This will ensure the integrity of the result, as well as maximize the identification of areas that would benefit from the introduction of credit union service to compensate for the lack of service by other depository institutions. This approach also will conserve NCUA resources that otherwise would be consumed in routinely excluding this data without regard to whether an initial concentration of facilities ratio calculation without those exclusions would yield a positive result. [[Page 76752]] 2. Alternatives to Identify Areas ``Underserved by Other Depository Institutions.'' While the concentration of facilities ratio has generally proven to be an effective measure of underservice by other depository institutions, it has some inherent limitations: It accounts for the physical presence of depository institutions in a given area, but it does not necessarily evaluate the benefit or quality of services these institutions deliver.\42\ Accordingly, the Board proposes two alternatives to the concentration of facilities ratio that may reflect underservice by other depository institutions more comprehensively. The first would be the designation of ``underserved counties'' by the CFPB,\43\ which has rulemaking authority over Federal banking agencies' collection of Home Mortgage Disclosure Act (``HMDA'') data used to make those designations.\44\ The second would be a metric of a credit union's own choosing that it would submit as evidence of underservice in a proposed area, provided the metric is based on ``data of the Board and the Federal banking agencies.''\45\ --------------------------------------------------------------------------- \42\ The benefit and quality of services depository institutions deliver is addressed by the ``distress'' criterion requiring the area to have ``significant unmet need for loans and financial services.'' 12 U.S.C. 4702(16)(A)(ii). \43\ Although CFPB's annual ``Rural or underserved counties list'' does not segregate ``rural'' and ``underserved'' counties, NCUA will use the data collected by CFPB to produce and make available a list that identifies ``underserved areas'' exclusively. \44\ 12 U.S.C. 1813(z). Financial institutions, including national banks, Federal savings associations, state member banks, and FCUs report mortgage related data to their respective Federal regulator -OCC, the Fed, FDIC and NCUA. \45\ E.g., FDIC ``Summary of Deposits Survey.'' --------------------------------------------------------------------------- The Board invites commenters to identify other methodologies and Federal banking agency data that would be useful in identifying areas ``underserved by other depository institutions'' in an objective manner. Examples include data from Community Reinvestment Act examination reports prepared by the FDIC, Office of the Comptroller of the Currency (``OCC'') or the Board of Governors of the Federal Reserve System (``the Fed''),\46\ and HMDA data collected by these agencies. The Board encourages commenters to suggest why and how any specific methodology and supporting data recommended for consideration would establish an objective basis for analysis of underservice by other depository institutions. --------------------------------------------------------------------------- \46\ E.g., http://www.ffiec.gov/cra/default.htm. --------------------------------------------------------------------------- D. Multiple Common Bond As amended in 1998, the FCU Act restored the Board's multiple common bond policy, permitting a multiple common bond credit union to serve a combination of distinct, definable occupational and/or associational groups, each having its own common bond among group members.\47\ --------------------------------------------------------------------------- \47\ 63 FR 71998, December 30, 1998; 12 U.S.C. 1759(b)(2)(A). See NCUA v. First National Bank & Trust Co., 522 U.S. 479 (1988). --------------------------------------------------------------------------- 1. Credit Union's ``Reasonable Proximity'' through Members' Online Access to Services. The FCU Act authorizes multiple common bond credit unions to expand through the addition of select groups having dissimilar common bonds, provided such a group does not exceed 3,000 members.\48\ To add a group that exceeds that limit, the group must meet other criteria the FCU Act prescribes to establish that it ``could not feasibly or reasonably establish a new single common bond credit union.'' \49\ Regardless of group size, the FCU Act further requires the Board, in deciding whether to approve a multiple common bond expansion, ``to encourage the formation of separately chartered credit unions . . . whenever practicable and consistent with reasonable standards for the safe and sound operation of the credit union,'' based on approval criteria the FCU Act prescribes.\50\ --------------------------------------------------------------------------- \48\ Id. Section 1759(d)(1). \49\ Id. Section 1759(d)(2)(A). \50\ Id. Section 1759(f)(1)(A). --------------------------------------------------------------------------- When formation of a stand-alone single common bond credit union either is not practicable, or would be inconsistent with reasonable standards of safety and soundness, the FCU Act requires ``inclusion of the group in the [FOM] of a credit union that is within reasonable proximity to the location of the group whenever practicable and consistent with reasonable standards for the safe and sound operation of the credit union.'' \51\ The Chartering and FOM Manual implements both the stand-alone feasibility criteria and the multiple common bond expansion approval criteria. --------------------------------------------------------------------------- \51\ Id. Section 1759(f)(1)(B) (emphasis added). --------------------------------------------------------------------------- In 1998, the Board acknowledged that ``reasonable proximity'' is an essential factor in determining whether a select group can be added to a multiple common bond credit union.\52\ However, the Board did not require an added group's location to be within reasonable proximity of the credit union's main office, but rather, within the service area of a ``service facility'' of the credit union. As currently defined, a ``service facility'' includes a credit union branch, a shared branch, a mobile branch that visits the same location on a weekly basis, and a credit union-owned electronic facility.\53\ To qualify as a service facility, a group's members must be able to deposit funds, apply for a loan or obtain funds on approved loans.\54\ --------------------------------------------------------------------------- \52\ 63 FR 71998, 72002 (December 30, 1998). \53\ Appendix B, Ch.2, Section IV.A.1 and appendix 1 (glossary). \54\ Appendix B, Ch.2, Section IV.A.1. --------------------------------------------------------------------------- To recognize the role of advancing technologies in enabling reasonable proximity between a credit union and the groups it serves, the Board proposes to revise the definition of a ``service facility'' to extend it to members of occupational select groups, and members of pre-approved associational groups,\55\ who have access to their credit union's products and services through an online internet channel such as a transactional Web site. This proposed change would apply solely to meet the ``reasonable proximity'' requirement that applies to a multiple common bond credit union and its select occupational and associational groups; it would not apply to meet the requirement that a credit union serving an underserved area ``must establish and maintain an office or facility in [the underserved area].'' \56\ To provide the same functionality currently required for a service facility, the online internet channel must be capable of accepting shares for those members' accounts and loan applications from them, or disbursing loan proceeds to them. The Board emphasizes that this proposed change would allow access to online financial services only by already existing members of multiple common bond credit unions; it would not permit an individual to qualify remotely for membership in a community credit union based on electronic access to it from outside its well-defined local community. --------------------------------------------------------------------------- \55\ Appendix B, Ch. 2, Section III.A.1.B. \56\ 12 U.S.C. 1759(c)(1)(B). --------------------------------------------------------------------------- To support its proposal to incorporate online financial services in the definition of ``service facility'' through online internet channels via access to laptop computers, personal computers and mobile devices, the Board has reviewed data from FCUs regarding consumer needs and preferences. By all measures, the use of online financial services has increased dramatically in the past 15 years. Federally insured credit unions' Call Report data indicates that the proportion of members using transactional Web sites has steadily increased from 27 percent of members in the fourth quarter of 2006 (23.2 million) to 45 percent in the second quarter of 2015 (40.5 million)--an increase of 17.3 million users. [[Page 76753]] Among FCUs, only 22 percent offered home banking via an internet Web site in 2000. This share increased to 68 percent in the fourth quarter of 2011 (4,846 out of 7,094), and 75 percent by the second quarter of 2015 (4,612 out of 6,159). There has been similarly significant growth in the use of smart phones and tablets to conduct mobile banking transactions. With such technology non-existent as late as 2008, only 6 percent of FCUs offered mobile banking in 2009. This share increased to 16 percent in 2011, and 47 percent by the second quarter of 2015. Similarly, data collected by the Boston Consulting Group (``BCG'') indicates actual consumer use of online delivery channels has increased significantly.\57\ Specifically, online consumer contacts with banks nearly doubled from 2004 to 2012. Mobile and internet banking increased from 5 percent of customer contacts in 2004 to about 48 percent by 2012. In contrast, the share of contacts conducted in branches fell from 75 percent to 30 percent during this period. The BCG study noted that mobile and internet banking transaction volume advanced not only due to the increase in the number of overall contacts, but because banking transactions accounted for a larger share of total activity. The BCG study emphasized that to compete effectively in the financial sector, financial institutions need to establish business plans that make ``interactions across multiple channels simple--not disjointed or constrained by internal organizational boundaries in a way that leads customers to dead ends. Channels should support each other, not compete.'' \58\ In addition, the BCG study predicted that internet contacts as a percentage of all contacts would increase to about 66 percent by 2020. --------------------------------------------------------------------------- \57\ Maguire, Andy, et. al., Distribution 2020: The Next Big Journey for Retail Banking (March 2013): https://www.bcgperspectives.com/content/articles/financial_institutions_sales_channels_distribution_2020/?chapter=2. \58\ American Bankers Association Press Release: More Consumers Turning to Mobile Banking (August 11, 2015). --------------------------------------------------------------------------- The dramatic increase in FCUs offering mobile banking service is consistent with the use of internet and mobile banking services by consumers generally. An annual study sponsored by the American Bankers Association, and conducted by Ipsos Public Affairs for 2015, surveyed 1,000 adults about their banking preferences among the following choices: Internet banking (laptop or personal computer), mobile devices (cell phone, Blackberry, PDA, tablet), brick and mortar branches, ATMs, telephone, and mail. A primary question was, ``Which method do you use most often to manage your bank accounts?'' The table below indicates that 41 percent of customers preferred internet or mobile banking. In contrast, only 21 percent preferred branch banking. These preferences were similar in 2013 and in 2014. The study sponsor further stated that ``This is the sixth year in a row [2008-2014] that customers named the Internet as their favorite way of conducting their banking business.'' \59\ --------------------------------------------------------------------------- \59\ Id. at 2. ------------------------------------------------------------------------ Type of banking 2014 2013 ------------------------------------------------------------------------ Online channels (laptop or PC).......... 31% 39% Branches................................ 21% 18% ATMs.................................... 14% 11% Mobile (cell phone, Blackberry, PDA, 10% 8% IPad).................................. Telephone............................... 7% 7% Mail.................................... 6% 7% Don't Know/Not sure..................... 11% 10% ------------------------------------------------------------------------ Similarly, government-sponsored studies indicate dramatic increases in online banking in the past few years. Since 2011, the Fed has conducted an annual survey that focuses on one channel of online banking: Smart phone technology for mobile banking.\60\ That survey illustrates the increased reliance of smart phone technology for mobile banking. The March 2015 Report of a December 2014 survey stated, ``Thirty nine percent of all mobile phone owners with a bank account have used mobile banking in the 12 months prior to the survey, up from 33 percent in 2013 and 29 percent in 2012.'' Further, ``Fifty two percent of smartphone owners with a bank account used mobile banking in the past 12 months, up from 51 percent in 2013.'' The Federal Reserve survey further found that another 11 percent of mobile phone users think that they will use smart phones for online banking within 12 months.\61\ --------------------------------------------------------------------------- \60\ Federal Reserve Consumers and Mobile Financial Services (March 2015). \61\ Id. Executive Summary at 4. --------------------------------------------------------------------------- The Federal Reserve Bank of Atlanta studied the use of mobile banking by banks and credit unions to determine the level of and type of mobile financial services offered by financial institutions.\62\ Of 189 respondents in Georgia, Alabama, Florida, and parts of Mississippi, Louisiana, and Tennessee, which included banks and credit unions of all asset sizes, only six (3 percent) did not currently offer or, plan to offer mobile banking services. Further, the study noted, ``There was very little difference between the bank and CU responses.'' The study also confirmed a significant trend toward offering mobile banking, given that 23 percent of the respondents began offering mobile banking within the past year and 15 percent were planning to offer such services within the next two years. --------------------------------------------------------------------------- \62\ Mobile Banking and Payments Survey of Financial Institutions of the Sixth District, Lott, David (March 2015). --------------------------------------------------------------------------- The strong consumer preference for online financial services, as well as for integration of online banking into financial institutions' overall business and marketing plans indicates the need to amend the Chartering and FOM Manual to facilitate current credit union members' access to such online services. Accordingly, to put multiple common bond credit unions and members of the groups they serve within reasonable proximity of each other, as required by law, as well as to put them in parity with their depository institution competitors, the Board is proposing to amend the definition of ``service facility'' to include online financial services, including computer-based and mobile phone channels meeting certain criteria for access. In addition to the proposal to include a transactional Web site in the definition of ``service facility,'' the Board is considering modifying the definition of ``service area'' to include one or more discreet political jurisdictions such as a county or city. While the Board historically has discouraged using mileage and distance factors exclusively to define reasonable proximity,\63\ it acknowledges that there may be an appropriate level of certainty in also defining reasonable proximity to [[Page 76754]] encompass a city or county jurisdiction. The Board invites comments on options to modify the definition of ``service area.'' --------------------------------------------------------------------------- \63\ 63 FR 71998, 72003 (December 30, 1998). --------------------------------------------------------------------------- 2. Inclusion of Select Employee Group Contractors in a Multiple Common Bond. The Board presently includes within the definition of a single occupational common bond the persons who work regularly for an entity that is under contract to the sponsor of the select employee group (``SEG'') listed in its charter, provided the contractor has a ``strong dependency relationship'' with that sponsor.\64\ This definition relies on the presence of a ``strong dependency relationship'' between the SEG sponsor and its contractor to establish the ``common bond of occupation'' the FCU Act requires for a group to be included in either a single or a multiple common bond credit union.\65\ There being no distinction between a single and a multiple common bond credit union for purposes of recognizing the occupational affinity between a SEG sponsor's own employees and those of each sponsor's contractors, the Board proposes to extend to multiple occupational common bond credit unions the ability to add persons who work regularly for an entity that is under contract to any of the multiple SEG sponsors listed in its charter, provided the contractor has a ``strong dependency relationship'' with the sponsor in each case. --------------------------------------------------------------------------- \64\ Appendix B, Ch. 2, Section II.A.1. \65\ 12 U.S.C. 1759(b)(1) & (2). --------------------------------------------------------------------------- 3. Inclusion of Office/Industrial Park Tenants in a Multiple Common Bond. In the past, NCUA has recognized industrial parks as a special type of community charter.\66\ As an alternative to extend credit union service to persons who work in an office or industrial park, the Board now proposes to also permit a multiple common bond credit union to include as a SEG the employees of a park's tenants (e.g., retail tenants of a shopping mall, business tenants of an office building or complex). The group listed in the charter would be the office/ industrial park itself; it would not be necessary to individually list each tenant as a group sponsor. Inclusion of such office/industrial park groups within a multiple common bond credit union would be subject to two conditions: Each tenant within the group must have fewer than 3,000 employees working at a facility within the park, and only those employees who work regularly at the park during their employer's tenancy would be eligible for FCU membership. New tenants to the industrial park would be eligible for membership subject to the above conditions. --------------------------------------------------------------------------- \66\ Appendix B, Ch. 2, Section V.A.6 (special community charters). --------------------------------------------------------------------------- The option of including a tenants' SEG within a multiple common bond would allow those FCUs to more efficiently offer services to employees of small businesses, avoiding an extensive outlay of resources to obtain letters from each group requesting credit union service. Instead, a multiple common bond credit union could serve employees of an office/industrial park's tenants by obtaining a letter from an authorized representative of the park itself, such as its leasing agent. 4. Streamlined Determination of Stand-Alone Feasibility of Groups Greater than 3,000. Based on NCUA's experience in assessing the stand- alone feasibility of groups in excess of 3,000 members, and data regarding the failure rate of credit unions during a 12-year period,\67\ a trend has emerged: 80 percent of credit union failures occurred in credit unions with fewer than 5,000 members. In view of this trend, the Board has decided to modify NCUA's process for assessing the stand-alone feasibility of groups that seek to be added to the FOM of an existing multiple common bond credit union, rather than forming the group's own single common bond credit union. Accordingly, the Board proposes to reorganize and streamline the application process for multiple common bond expansions according a group's size. --------------------------------------------------------------------------- \67\ Credit union failures according to asset size and membership as reflected in final Call Reports for 2003Q1-2015Q2. --------------------------------------------------------------------------- Groups of fewer than 3,000 members will be subject to the existing application process, consisting of the following: A written request using the Application for Field of Membership (NCUA 4015 EZ), a letter from the group requesting credit union service and indicating the desire to be added to the FCU's field of membership; the number of persons included in the group to be added; and the group's proximity to the credit union's nearest service facility. Applicants do not need to support these groups' lack of ability to form their own credit union. Since the statute presumes a group of 3,000 or more members can form a credit union, there is a higher burden of proof to establish that such a group cannot form its own credit union. When a group has between 3,000 and 5,000 members and displays evidence of a lack of available subsidies, disinterest among the group's members, and an overall lack of sufficient resources, the Board has historically determined that the group could not feasibly or reasonably establish a new single common bond credit union. In such cases the Board will accept a written statement indicating these conditions exist as sufficient documentation the group cannot form its own credit union. Consistent with current policy on incidental overlaps, the Board will no longer require an overlap analysis of a group between 3,000 and 5,000 members, given that groups in this size range rarely have been able to form a stand-alone credit union. Groups with more than 5,000 members will be subject to the existing standard application process, requiring a group to fully describe its inability to establish a new single common bond credit union. However, the Board is particularly interested in comments on whether to consider a larger number than 5,000 for this threshold. While 80 percent of failures occurred in credit unions with fewer than 5,000 actual members, the number of potential members of those credit unions was significantly larger. Therefore, if 5,000 actual credit union members were deemed to be the minimum number needed to charter a viable new credit union, the number of potential members needed to reach 5,000 actual members would be larger. For example, if the average penetration rate of actual members to potential members at the smallest multiple-group credit unions is 50 percent, a group of 10,000 potential members may be needed to reach 5,000 actual members. The Board welcomes comments on how many actual members are needed to charter a viable new credit union, and how many potential members would be needed in order to reach that minimum number of actual members. There are three benefits to the proposed three-tiered process for assessing a group's stand-alone feasibility. First, it conforms to the stand-alone feasibility criteria the FCU Act prescribes for groups in excess of 3,000, and the approval criteria it prescribes for the addition of a group, regardless of its size, to an existing multiple common bond credit union.\68\ Second, it will minimize the resource burden on individual groups and credit unions in compiling information and documentation to support an application to add a group, as well as on the NCUA staff in assessing the application. Finally, it will allow NCUA to more effectively allocate its resources by focusing its scrutiny on individual groups based on the record of survival of newly chartered credit unions having [[Page 76755]] more than 5,000 members when formed. This would enhance the agency's ability to conduct an appropriate level of due diligence in its reviews. --------------------------------------------------------------------------- \68\ Id. Section 1759 (d)(2) & (f)(1). --------------------------------------------------------------------------- E. Other Persons Eligible for Credit Union Membership NCUA has historically recognized a variety of persons who, by virtue of their relationship to a common bond group, have been entitled to credit union membership eligibility. Principal among these persons are members of the immediate family or household of a primary member of a credit union members (i.e., spouse, child, sibling, parent, grandparent, grandchild, including by step or adoptive relationship).\69\ Other such affinity groups include spouses of deceased credit union members, current credit union employees, pensioners and annuitants who have retired from credit union employment, and persons who perform volunteer work for a credit union.\70\ --------------------------------------------------------------------------- \69\ Appendix B, Ch.2, Sections II.H., IV.H., and appendix 1 (glossary definition of ``affinity''). \70\ Appendix B, Ch.2, Sections II.H., IV.H. --------------------------------------------------------------------------- Active duty and discharged military personnel and their families share a similar affinity, typically maintaining a close relationship with their active duty branch of service, largely through Armed Forces associations, publications and continued access to military bases, such as Veterans Administration facilities, base commissaries, post exchanges, and morale, welfare and recreation sponsored programs. To honor the contributions of those serving in the United States Armed Forces, and to give them the benefit of access to credit union service throughout their lives following active duty, the Board proposes to include within a credit union's common bond the honorably discharged veterans of any branch of the United States Armed Forces listed in its charter, continuing their eligibility for credit union membership beyond active duty. F. Trade, Industry or Profession (``TIP'') as a Single Common Bond A TIP is a single occupational common bond based on employment at any number of corporations or other legal entities that, while not under common ownership, still have a common bond by reason of producing similar products, providing similar services, sharing the same profession or trade, or participating in the same industry.\71\ To establish ``one group that has a common bond of occupation,'' as the FCU Act prescribes, a TIP-based FOM must reflect a narrow commonality of interests among those working within a specific trade, industry, or profession, and there must be a close nexus among the entities within the group.\72\ The commonality of interest and close nexus requirements preclude a TIP from including third-party vendors and other suppliers and contractors. As an example, an automobile TIP may include all workers manufacturing automobiles but may not include the steel suppliers or other component suppliers. --------------------------------------------------------------------------- \71\ 68 FR 18334, 18336 (April 15, 2003); Appendix B, Ch. 2, Section IIA.2. \72\ Id. --------------------------------------------------------------------------- Inclusion of ``Strong Dependency'' Vendors and Suppliers in TIP Definition. The Board already recognizes a single occupational common bond between a SEG sponsor's own employees and those of its contractors, provided there is a ``strong dependency relationship'' between the sponsor and the contractor. Similarly, NCUA proposes to clarify its definition of a TIP to include employees of types of entities that have a strong dependency relationship on, and whose employees work directly with employees of, other entities within the same industry. An example would be an FCU that serves employees of companies within the airline industry that have a strong dependency relationship with airlines or airports, and whose employees work directly with providers of air freight transportation, courier services, air passenger services, in-flight food services, airport security, baggage handling, and commercial janitorial, maintenance and repair services. The premise of a strong relationship between these providers and their airport and airline customers is the likelihood of a significant economic impact, if not equally between them, if one were unable to continue in its operations without doing business with the other. As expanded, the TIP definition would give credit unions the opportunity to demonstrate that an entity is ``strongly dependent'' on the others within a TIP, and shares a narrow commonality of interest with them, as necessary to be part of a TIP-based single occupational common bond. G. Technical Updates Apart from introducing substantive revisions to NCUA's FOM rules and policies, the proposed rule will update the Chartering and FOM Manual to enhance its accuracy and user-friendliness for the benefit of those seeking to charter a credit union, as well as for existing credit unions. To that end, the proposed rule substitutes certain references to regional office and regional director chartering responsibilities with references to the Office of Consumer Protection as the primary office for chartering matters within NCUA and, to address previous comments, substitutes the Board Secretary for the Office of Consumer Protection in reference to appeals of chartering decisions.\73\ Finally, the proposed rule corrects statutory and regulatory citations and cross-references, as well as typos; updates the appendices to the Chartering and FOM Manual to reflect current agency practices; and updates references to NCUA offices and industry trade associations. --------------------------------------------------------------------------- \73\ 87 FR 25924, 25929 (May 6, 2015). --------------------------------------------------------------------------- III. Regulatory Procedures Regulatory Flexibility Act The Regulatory Flexibility Act requires NCUA to prepare an analysis to describe any significant economic impact a regulation may have on a substantial number of small entities.\74\ For purposes of this analysis, NCUA considers small credit unions to be those having under $50 million in assets.\75\ Although this rule is anticipated to economically benefit FCUs that choose to expand their FOMs, NCUA certifies that it will not have a significant economic impact on small credit unions. --------------------------------------------------------------------------- \74\ 5 U.S.C. 603(a). \75\ Effective November 23, 2015, the asset ceiling for small credit unions will increase to $100 million. 80 FR 57512 (Sept. 24, 2015). --------------------------------------------------------------------------- Paperwork Reduction Act The Paperwork Reduction Act of 1995 (PRA) applies to collections of information through which an agency creates a paperwork burden on regulated entities or the public, or modifies an existing burden.\76\ 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. The Office of Management and Budget (OMB) previously approved the current information collection requirements for the Chartering and Field of Membership Manual and assigned them control number 3133-0015. --------------------------------------------------------------------------- \76\ 44 U.S.C. 3507(d); 5 CFR part 1320. --------------------------------------------------------------------------- The proposed rule creates new strategic options for FCUs, while requiring essentially the same information that the existing rule required to apply for and be granted a charter expansion or conversion, with two exceptions. It introduces a new form within an appendix to the [[Page 76756]] Chartering and Field of Membership Manual to condense the application process for adding certain groups to a multiple common bond FOM. This new form does not add any additional burden to FCUs. Regarding a community common bond, the proposed rule permits an FCU to add an area adjacent to the perimeter of its existing community consisting of a Single Political Jurisdiction, Core Based Statistical Area, Combined Statistical Area or rural district, upon a showing by subjective evidence that residents on both sides of the perimeter interact or share common interests. For that purpose, the rule provides guidance in identifying compelling indicia of interaction or common interests that would be relevant in drafting a narrative summarizing the indicia that demonstrate that the residents of the expanded community meet the requirements of a well-defined local community. NCUA has determined that the procedure for an FCU to assemble such subjective evidence of interaction or common interests, and to draft and submit a narrative summarizing the evidence to support its application to expand, would create a new information collection requirement. As required, NCUA is applying to OMB for approval to amend the current information collection to account for the new procedure. Approximately 1,090 FCUs have a community charter. While there is no reasonable way to measure how many FCUs will use this particular option, it would be available to any community FCU, regardless of asset size. NCUA estimates that, on average, it would take an FCU's staff approximately 24 hours to collect the evidence of interaction and common interests and to draft a narrative to support its application to expand. Accordingly, NCUA estimates the aggregate information collection burden on FCUs that seek to add an area adjacent to the perimeter of an existing community consisting of a Single Political Jurisdiction, Core Based Statistical Area, Combined Statistical Area or rural district would be 24 hours times 1,090 FCUs for a total of 26,160 hours. NCUA is proposing to amend the current information collection control number 3133-0015 to account for these additional burden hours. Organizations and individuals wishing to submit comments on this information collection requirement should direct them to the Office of Information and Regulatory Affairs, OMB, Attn: Shagufta Ahmed, Room 10226, New Executive Office Building, Washington, DC 20503, with a copy to the Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. NCUA will consider comments by the public on this proposed collection of information in: Evaluating whether the proposed collection of information is necessary for the proper performance of the functions of the NCUA, including whether the information will have a practical use; Evaluating the accuracy of NCUA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; Enhancing the quality, usefulness, and clarity of the information to be collected; and Minimizing the burden of collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology (e.g., permitting electronic submission of responses). 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. Primarily because this rule applies to FCUs exclusively, it 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. Assessment of Federal Regulations and Policies on Families NCUA has determined that this proposed rule will not affect family well-being within the meaning of Section 654 of the Treasury and General Government Appropriations Act, 1999.\77\ --------------------------------------------------------------------------- \77\ Pub. L. 105-277, 112 Stat. 2681 (1998). --------------------------------------------------------------------------- List of Subjects in 12 CFR Part 701 Credit, Credit unions, Reporting and recordkeeping requirements. By the National Credit Union Administration Board on November 19, 2015. Gerard S. Poliquin, Secretary of the Board. For the reasons stated above, NCUA proposes to amend 12 CFR part 701, appendix B, as follows: PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS 0 1. The authority for part 701 continues to read as follows: Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759, 1761a, 1761b, 1766, 1767, 1782, 1784, 1786, 1787, 1789. Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 3601-3610. Section 701.35 is also authorized by 42 U.S.C. 4311-4312. 0 2. Appendix B to part 701 is revised to read as follows: Appendix B to Part 701--Chartering and Field of Membership Manual Chapter 1--Federal Credit Union Chartering I--Goals of NCUA Chartering Policy The National Credit Union Administration's (NCUA) chartering and field of membership policies are directed toward achieving the following goals: To encourage the formation of credit unions; To uphold the provisions of the Federal Credit Union Act; To promote thrift and credit extension; To promote credit union safety and soundness; and To make quality credit union service available to all eligible persons. NCUA may grant a charter to single occupational/associational groups, multiple groups, or communities if: The occupational, associational, or multiple groups possess an appropriate common bond or the community represents a well-defined local community, neighborhood, or rural district; The subscribers are of good character and are fit to represent the proposed credit union; and The establishment of the credit union is economically advisable. Generally, these are the primary criteria that NCUA will consider. In unusual circumstances, however, NCUA may examine other factors, such as other federal law or public policy, in deciding if a charter should be approved. Unless otherwise noted, the policies outlined in this manual apply only to federal credit unions. II--Types of Charters The Federal Credit Union Act recognizes three types of federal credit union charters--single common bond (occupational and associational), multiple common bond (more than one group each having a common bond of occupation or association), and community. [[Page 76757]] The requirements that must be met to charter a federal credit union are described in Chapter 2 of this manual. Special rules for credit unions serving low-income groups are described in Chapter 3 of this manual. If a federal credit union charter is granted, Section 5 of the charter will describe the credit union's field of membership, which defines those persons and entities eligible for membership. Generally, federal credit unions are only able to grant loans and provide services to persons within the field of membership who have become members of the credit union. III--Subscribers Federal credit unions are generally organized by persons who volunteer their time and resources and are responsible for determining the interest, commitment, and economic advisability of forming a federal credit union. The organization of a successful federal credit union takes considerable planning and dedication. Persons interested in organizing a federal credit union should contact one of the credit union trade associations or the NCUA regional office serving the state in which the credit union will be organized. Lists of NCUA offices and credit union trade associations are shown in the appendices. NCUA will provide information to groups interested in pursuing a federal charter and will assist them in contacting an organizer. While anyone may organize a credit union, a person with training and experience in chartering new federal credit unions is generally the most effective organizer. However, extensive involvement by the group desiring credit union service is essential. The functions of the organizer are to provide direction, guidance, and advice on the chartering process. The organizer also provides the group with information about a credit union's functions and purpose as well as technical assistance in preparing and submitting the charter application. Close communication and cooperation between the organizer and the proposed members are critical to the chartering process. The Federal Credit Union Act requires that seven or more natural persons--the ``subscribers''--present to NCUA for approval a sworn organization certificate stating at a minimum: The name of the proposed federal credit union; The location of the proposed federal credit union and the territory in which it will operate; The names and addresses of the subscribers to the certificate and the number of shares subscribed by each; The initial par value of the shares; The detailed proposed field of membership; and The fact that the certificate is made to enable such persons to avail themselves of the advantages of the Federal Credit Union Act. False statements on any of the required documentation filed in obtaining a federal credit union charter may be grounds for federal criminal prosecution. IV--Economic Advisability IV.A--General Before chartering a federal credit union, NCUA must be satisfied that the institution will be viable and that it will provide needed services to its members. Economic advisability, which is a determination that a potential charter will have a reasonable opportunity to succeed, is essential in order to qualify for a credit union charter. NCUA will conduct an independent on-site investigation of each charter application to ensure that the proposed credit union can be successful. In general, the success of any credit union depends on: (a) The character and fitness of management; (b) the depth of the members' support; and (c) present and projected market conditions. IV.B--Proposed Management's Character and Fitness The Federal Credit Union Act requires NCUA to ensure that the subscribers are of good ``general character and fitness.'' Prospective officials and employees will be the subject of credit and background investigations. The investigation report must demonstrate each applicant's ability to effectively handle financial matters. Employees and officials should also be competent, experienced, honest and of good character. Factors that may lead to disapproval of a prospective official or employee include criminal convictions, indictments, and acts of fraud and dishonesty. Further, factors such as serious or unresolved past due credit obligations and bankruptcies disclosed during credit checks may disqualify an individual. NCUA also needs reasonable assurance that the management team will have the requisite skills--particularly in leadership and accounting--and the commitment to dedicate the time and effort needed to make the proposed federal credit union a success. Section 701.14 of NCUA's Rules and Regulations sets forth the procedures for NCUA approval of officials of newly chartered credit unions. If the application of a prospective official or employee to serve is not acceptable to the Office of Consumer Protection Director, the group can propose an alternate to act in that individual's place. If the charter applicant feels it is essential that the disqualified individual be retained, the individual may appeal the Office of Consumer Protection Director's decision to the NCUA Board. If an appeal is pursued, action on the application may be delayed. If the appeal is denied by the NCUA Board, an acceptable new applicant must be provided before the charter can be approved. IV.C--Member Support Economic advisability is a major factor in determining whether the credit union will be chartered. An important consideration is the degree of support from the field of membership. The charter applicant must be able to demonstrate that membership support is sufficient to ensure viability. NCUA has not set a minimum field of membership size for chartering a federal credit union. Consequently, groups of any size may apply for a credit union charter and be approved if they demonstrate economic advisability. However, it is important to note that often the size of the group is indicative of the potential for success. For that reason, a charter application with fewer than 3,000 primary potential members (e.g., employees of a corporation or members of an association) may not be economically advisable. Therefore, a charter applicant with a proposed field of membership of fewer than 3,000 primary potential members may have to provide more support than an applicant with a larger field of membership. For example, a small occupational or associational group may be required to demonstrate a commitment for long-term support from the sponsor. IV.D--Present and Future Market Conditions--Business Plan The ability to provide effective service to members, compete in the marketplace, and to adapt to changing market conditions are key to the survival of any enterprise. Before NCUA will charter a credit union, a business plan based on realistic and supportable projections and assumptions must be submitted. The business plan should contain, at a minimum, the following elements: Mission statement; Analysis of market conditions, including if applicable, geographic, demographic, employment, income, housing, and other economic data; Evidence of member support; Goals for shares, loans, and for number of members; Financial services needed/desired; Financial services to be provided to members of all segments within the field of membership; How/when services are to be implemented; Organizational/management plan addressing qualification and planned training of officials/employees; Continuity plan for directors, committee members and management staff; Operating facilities, to include office space/equipment and supplies, safeguarding of assets, insurance coverage, etc.; Type of record-keeping and data processing system; Detailed semiannual pro forma financial statements (balance sheet, income and expense projections) for 1st and 2nd year, including assumptions--e.g., loan and dividend rates; Plans for operating independently; Written policies (shares, lending, investments, funds management, capital accumulation, dividends, collections, etc.); Source of funds to pay expenses during initial months of operation, including any subsidies, assistance, etc., and terms or conditions of such resources; and Evidence of sponsor commitment (or other source of support) if subsidies are critical to success of the federal credit union. Evidence may be in the form of letters, contracts, financial statements from the sponsor, and any other such document on which the proposed federal credit union can substantiate its projections. While the business plan may be prepared with outside assistance, the subscribers and [[Page 76758]] proposed officials must understand and support the submitted business plan. V--Steps in Organizing a Federal Credit Union V.A--Getting Started Following the guidance contained throughout this policy, the organizers should submit wording for the proposed field of membership (the persons, organizations and other legal entities the credit union will serve) to NCUA early in the application process for written preliminary approval. The proposed field of membership must meet all common bond or community requirements. Once the field of membership has been given preliminary approval, and the organizer is satisfied the application has merit, the organizer should conduct an organizational meeting to elect seven to ten persons to serve as subscribers. The subscribers should locate willing individuals capable of serving on the board of directors, credit committee, supervisory committee, and as chief operating officer/manager of the proposed credit union. Subsequent organizational meetings may be held to discuss the progress of the charter investigation, to announce the proposed slate of officials, and to respond to any questions posed at these meetings. If NCUA approves the charter application, the subscribers, as their final duty, will elect the board of directors of the proposed federal credit union. The new board of directors will then appoint the supervisory committee. V.B--Charter Application Documentation V.B.1--General As discussed previously in this chapter, the organizer of a federal credit union charter must, at a minimum, provide evidence that: The group(s) possess an appropriate common bond or the geographical area to be served is a well-defined local community, neighborhood, or rural district; The subscribers, prospective officials, and employees are of good character and fitness; and The establishment of the credit union is economically advisable. As part of the application process, the organizer must submit the following forms, which are available in appendix 4 of this manual: Federal Credit Union Investigation Report, NCUA 4001; Organization Certificate, NCUA 4008; Report of Official and Agreement To Serve, NCUA 4012; Application and Agreements for Insurance of Accounts, NCUA 9500; and Certification of Resolutions, NCUA 9501. Each of these forms is described in more detail in the following sections. V.B.2--Federal Credit Union Investigation Report, NCUA 4001 The application for a new federal credit union will be submitted on NCUA 4001. State-chartered credit unions applying for conversion to a federal charter will use NCUA 4000. (See Chapter 4 for a full discussion.) The organizer is required to certify the information and recommend approval or disapproval, based on the investigation of the request. V.B.3--Organization Certificate, NCUA 4008 This document, which must be completed by the subscribers, includes the seven criteria established by the Federal Credit Union Act. NCUA staff assigned to the case will assist in the proper completion of this document. V.B.4--Report of Official and Agreement To Serve, NCUA 4012 This form documents general background information of each official and employee of the proposed federal credit union. Each official and employee must complete and sign this form. The organizer must review each of the NCUA 4012s for elements that would prevent the prospective official or employee from serving. Further, such factors as serious, unresolved past due credit obligations and bankruptcies disclosed during credit checks may disqualify an individual. V.B.5--Application and Agreements for Insurance of Accounts, NCUA 9500 This document contains the agreements with which federal credit unions must comply in order to obtain National Credit Union Share Insurance Fund (NCUSIF) coverage of member accounts. The document must be completed and signed by both the chief executive officer and chief financial officer. A federal credit union must qualify for federal share insurance. V.B.6--Certification of Resolutions, NCUA 9501 This document certifies that the board of directors of the proposed federal credit union has resolved to apply for NCUSIF insurance of member accounts and has authorized the chief executive officer and recording officer to execute the Application and Agreements for Insurance of Accounts. Both the chief executive officer and recording officer of the proposed federal credit union must sign this form. VI--Name Selection It is the responsibility of the federal credit union organizers or officials of an existing credit union to ensure that the proposed federal credit union name or federal credit union name change does not constitute an infringement on the name of any corporation in its trade area. This responsibility also includes researching any service marks or trademarks used by any other corporation (including credit unions) in its trade area. NCUA will ensure, to the extent possible, that the credit union's name: Is not already being officially used by another federal credit union; Will not be confused with NCUA or another federal or state agency, or with another credit union; and Does not include misleading or inappropriate language. The last three words in the name of every credit union chartered by NCUA must be ``Federal Credit Union.'' The word ``community,'' while not required, can only be included in the name of federal credit unions that have been granted a community charter. VII--NCUA Review VII.A--General Once NCUA receives a complete charter application package, an acknowledgment of receipt will be sent to the organizer. At some point during the review process, a staff member will be assigned to perform an on-site contact with the proposed officials and others having an interest in the proposed federal credit union. NCUA staff will review the application package and verify its accuracy and reasonableness. A staff member will inquire into the financial management experience and the suitability and commitment of the proposed officials and employees, and will make an assessment of economic advisability. The staff member will also provide guidance to the subscribers in the proper completion of the Organization Certificate, NCUA 4008. Credit and background investigations may be conducted concurrently by NCUA with other work being performed by the organizer and subscribers to reduce the likelihood of delays in the chartering process. The staff member will analyze the prospective credit union's business plan for realistic projections, attainable goals, adequate service to all segments of the field of membership, sufficient start-up capital, and time commitment by the proposed officials and employees. Any concerns will be reviewed with the organizer and discussed with the prospective credit union's officials. Additional on-site contacts by NCUA staff may be necessary. The organizer and subscribers will be expected to take the steps necessary to resolve any issues or concerns. Such resolution efforts may delay processing the application. NCUA staff will then make a recommendation to the Office of Consumer Protection Director regarding the charter application. The recommendation may include specific provisions to be included in a Letter of Understanding and Agreement. In most cases, NCUA will require the prospective officials to adhere to certain operational guidelines. Generally, the agreement is for a limited term of two to four years. A sample Letter of Understanding and Agreement is found in appendix 2 of this manual. VII.B--Office of Consumer Protection Director Approval Once approved, the board of directors of the newly formed federal credit union will receive a signed charter and standard bylaws from the Office of Consumer Protection Director. Additionally, the officials will be advised of the name of the examiner assigned responsibility for supervising and examining the credit union. VII.C--Office of Consumer Protection Director Disapproval When the Office of Consumer Protection Director disapproves any charter application, in whole or in part, the organizer will be informed in writing of the specific reasons for the disapproval. Where applicable, the Office of Consumer Protection Director will provide information concerning options or suggestions that the applicant could consider [[Page 76759]] for gaining approval or otherwise acquiring credit union service. The letter of denial will include the procedures for appealing the decision. VII.D--Appeal of Office of Consumer Protection Director Decision If the Office of Consumer Protection Director denies a charter application, in whole or in part, that decision may be appealed to the NCUA Board. An appeal must be sent to the NCUA Board Secretary within 60 days of the date of denial and must address the specific reasons for denial. The appeal must be clearly identified as such and address the specific reason(s) the prospective group disagrees with the denial. A copy of the appeal must be sent to the Office of Consumer Protection Director. NCUA central office staff will make an independent review of the facts and present the appeal with a recommendation to the NCUA Board. Before appealing, the prospective group may, within 30 days of the denial, provide supplemental information to the Office of Consumer Protection Director for reconsideration. A reconsideration will contain new and material evidence addressing the reasons for the initial denial. The Office of Consumer Protection Director will have 30 days from the date of the receipt of the request for reconsideration to make a final decision. If the request is again denied, the applicant may proceed with the appeal process within 60 days of the date of the last denial. A second request for reconsideration will be treated as an appeal to the NCUA Board. VII.E--Commencement of Operations Assistance in commencing operations is generally available through the various credit union trade organizations listed in appendix 5 of this manual. All new federal credit unions are also encouraged to establish a mentor relationship with a knowledgeable, experienced credit union individual or an existing, well-operated credit union. The mentor should provide guidance and assistance to the new credit union through attendance at meetings and general oversight. Upon request, NCUA will provide assistance in finding a qualified mentor. VIII--Future Supervision Each federal credit union will be examined regularly by NCUA to determine that it remains in compliance with applicable laws and regulations and to determine that it does not pose undue risk to the NCUSIF. The examiner will contact the credit union officials shortly after approval of the charter in order to arrange for the initial examination (usually within the first six months of operation). The examiner will be responsible for monitoring the progress of the credit union and providing the necessary advice and guidance to ensure it is in compliance with applicable laws and regulations. The examiner will also monitor compliance with the terms of any required Letter of Understanding and Agreement. Typically, the examiner will require the credit union to submit copies of monthly board minutes and financial statements. The Federal Credit Union Act requires all newly chartered credit unions, up to two years after the charter anniversary date, to obtain NCUA approval prior to appointment of any new board member, credit or supervisory committee member, or senior executive officer. Section 701.14 of the NCUA Rules and Regulations sets forth the notice and application requirements. If NCUA issues a Notice of Disapproval, the newly chartered credit union is prohibited from making the change. NCUA may disapprove an individual serving as a director, committee member or senior executive officer if it finds that the competence, experience, character, or integrity of the individual indicates it would not be in the best interests of the members of the credit union or of the public to permit the individual to be employed by or associated with the credit union. If a Notice of Disapproval is issued, the credit union may appeal the decision to the NCUA Board. IX--Corporate Federal Credit Unions A corporate federal credit union is one that is operated primarily for the purpose of serving other credit unions. Corporate federal credit unions operate under and are administered by the NCUA Office of National Examinations and Supervision. X--Groups Seeking Credit Union Service NCUA will attempt to assist any group in chartering a credit union or joining an existing credit union. If the group is not eligible for federal credit union service, NCUA will refer the group to the appropriate state supervisory authority where different requirements may apply. XI--Field of Membership Designations NCUA will designate a credit union based on the following criteria: Single Occupational: If a credit union serves a single occupational sponsor, such as ABC Corporation, it will be designated as an occupational credit union. A single occupational common bond credit union may also serve a trade, industry, or profession (TIP), such as all teachers. Single Associational: If a credit union serves a single associational sponsor, such as the Knights of Columbus, it will be designated as an associational credit union. Multiple Common Bond: If a credit union serves more than one group, each of which has a common bond of occupation and/or association, it will be designated as a multiple common bond credit union. Community: All community credit unions will be designated as such, followed by a description of their geographic boundaries, including but not limited to city or county boundaries, roadways, rivers, transportation lines. Credit unions desiring to confirm or submit an application to change their designations should contact the Office of Consumer Protection. XII--Foreign Branching Federal credit unions are permitted to serve foreign nationals within their fields of membership wherever they reside provided they have the ability, resources, and management expertise to serve such persons. Before a credit union opens a branch outside the United States, it must submit an application to do so and have prior written approval of the regional director. A federal credit union may establish a service facility on a United States military installation or United States embassy without prior NCUA approval. Chapter 2--Field of Membership Requirements for Federal Credit Unions I--Introduction I.A.1--General As set forth in Chapter 1, the Federal Credit Union Act provides for three types of federal credit union charters--single common bond (occupational or associational), multiple common bond (multiple groups), and community. Section 109 (12 U.S.C. 1759) of the Federal Credit Union Act sets forth the membership criteria for each of these three types of credit unions. The field of membership, which is specified in Section 5 of the charter, defines those persons and entities eligible for membership. A single common bond federal credit union consists of one group having a common bond of occupation or association. A multiple common bond federal credit union consists of more than one group, each of which has a common bond of occupation or association. A community federal credit union consists of persons or organizations within a well-defined local community, neighborhood, or rural district. Once chartered, a federal credit union can amend its field of membership; however, the same common bond or community requirements for chartering the credit union must be satisfied. Since there are differences in the three types of charters, special rules, which are fully discussed in the following sections of this chapter, may apply to each. I.A.2--Special Low-Income Rules Generally, federal credit unions can only grant loans and provide services to persons who have joined the credit union. The Federal Credit Union Act states that one of the purposes of federal credit unions is ``to serve the productive and provident credit needs of individuals of modest means.'' Although field of membership requirements are applicable, special rules set forth in Chapter 3 of this manual may apply to low-income designated credit unions and those credit unions assisting low-income groups or to a federal credit union that adds an underserved community to its field of membership. II--Occupational Common Bond II.A.1--General A single occupational common bond federal credit union may include in its field of membership all persons and entities who share that common bond. NCUA permits a person's membership eligibility in a single occupational common bond group to be established in five ways: Employment (or a long-term contractual relationship equivalent to employment) in a single corporation or other legal entity makes that person part of a single occupational common bond; [[Page 76760]] Employment in a corporation or other legal entity with a controlling ownership interest (which shall not be less than 10 percent) in or by another legal entity makes that person part of a single occupational common bond; Employment in a corporation or other legal entity which is related to another legal entity (such as a company under contract and possessing a strong dependency relationship with another company) makes that person part of a single occupational common bond; Employment or attendance at a school makes that person part of a single occupational common bond (see Chapter 2, Section III.A.1 of this manual); or Employment in the same Trade, Industry, or Profession (TIP) (see Chapter 2, Section II.A.2 of this manual). A geographic limitation is not a requirement for a single occupational common bond. However, for purposes of describing the field of membership, the geographic areas being served may be included in the charter. For example: Employees, officials, and persons who work regularly under contract in Miami, Florida for ABC Corporation and subsidiaries; Employees of ABC Corporation who are paid from * * *; Employees of ABC Corporation who are supervised from * * *; Employees of ABC Corporation who are headquartered in * * *; and/or Employees of ABC Corporation who work in the United States. The corporation or other legal entity (i.e., the employer) may also be included in the common bond--e.g., ``ABC Corporation.'' The corporation or legal entity will be defined in the last clause in Section 5 of the credit union's charter. A charter applicant must provide documentation to establish that the single occupational common bond requirement has been met. Some examples of valid single occupational common bonds are: Employees of the Hunt Manufacturing Company who work in West Chester, Pennsylvania. (common bond--same employer with geographic definition); Employees of the Buffalo Manufacturing Company who work in the United States. (common bond--same employer with geographic definition); Employees, elected and appointed officials of municipal government in Parma, Ohio. (common bond--same employer with geographic definition); Employees of Johnson Soap Company and its majority owned subsidiary, Johnson Toothpaste Company, who work in, are paid from, are supervised from, or are headquartered in Augusta and Portland, Maine. (common bond--parent and subsidiary company with geographic definition); Employees of MMLLJS contractor who work regularly at the U.S. Naval Shipyard in Bremerton, Washington. (common bond-- employees of contractors with geographic definition); Employees, doctors, medical staff, technicians, medical and nursing students who work in or are paid from the Newport Beach Medical Center, Newport Beach, California. (single corporation with geographic definition); Employees of JLS, Incorporated and MJM, Incorporated working for the LKM Joint Venture Company in Catalina Island, California. (common bond--same employer--ongoing dependent relationship); Employees of and students attending Georgetown University. (common bond--same occupation); Employees of all the schools supervised by the Timbrook Board of Education in Timbrook, Georgia. (common bond--same employer); or All licensed nurses in Fairfax County, Virginia. (occupational common bond TIP). In contrast, some examples of insufficiently defined single occupational common bonds are: Employees of manufacturing firms in Seattle, Washington. (no defined occupational sponsor; overly broad TIP); Persons employed or working in Chicago, Illinois. (no occupational common bond). II.A.2--Trade, Industry, or Profession A common bond based on employment in a trade, industry, or profession can include employment at any number of corporations or other legal entities that--while not under common ownership--have a common bond by virtue of producing similar products, providing similar services, or participating in the same type of business. While proposed or existing single common bond credit unions have some latitude in defining a trade, industry, or profession occupational common bond, it cannot be defined so broadly as to include groups in fields which are not closely related. For example, the manufacturing industry, energy industry, communications industry, retail industry, or entertainment industry would not qualify as a TIP because each industry lacks the necessary commonality. However, textile workers, realtors, nurses, teachers, police officers, or U.S. military personnel are closely related and each would qualify as a TIP. The common bond relationship must be one that demonstrates a narrow commonality of interests within a specific trade, industry, or profession. If a credit union wants to serve a physician TIP, it can serve all physicians, but that does not mean it can also serve all clerical staff in the physicians' offices. However, if the TIP is based on the health care industry, then clerical staff would be able to be served by the credit union because they work in the same industry and have the same commonality of interests. If a credit union wants to include the airline services industry, it can serve airline and airport personnel but not passengers. Clients or customers of the TIP are not eligible for credit union membership (e.g., patients in hospitals). Any company that is involved in more than one industry cannot be included in an industry TIP (e.g., a company that makes tobacco products, food products, and electronics). However, employees of these companies may be eligible for membership in a variety of trade/profession occupational common bond TIPs. Although a TIP must be narrowly defined, and cannot include third-party vendors and other suppliers, it may include, on a case by case basis with NCUA approval, employees of types of entities that have a strong dependency relationship and work directly with other types of entities within the industry. As one example, an FCU may serve employees of companies within the Airline Transportation Industry that have a strong dependency relationship with airlines or airports, without the limitation that these employees work at an airport. This is provided they work directly with the following: Air transportation of freight, air courier services; air passenger services; airport baggage handling; airport security; commercial airport janitorial services; maintenance, servicing, and repair services; and on board airline food services. The employees of those entities have a narrow commonality of interests, share the single occupational common bond, and can be included within the Air Transportation Industry field of membership. In general, except for credit unions serving a national field of membership or operating in multiple states, a geographic limitation is required for a TIP credit union. The geographic limitation will be part of the credit union's charter and generally correspond to its current or planned operational area. More than one federal credit union may serve the same trade, industry, or profession, even if both credit unions are in the same geographic location. This type of occupational common bond is only available to single common bond credit unions. A TIP cannot be added to a multiple common bond or community field of membership. To obtain a TIP designation, the proposed or existing credit union must submit a request to the Office of Consumer Protection Director. New charter applicants must follow the documentation requirements in Chapter 1 of this manual. New charter applicants and existing credit unions must submit a business plan on how the credit union will serve the group with the request to serve the TIP. The business plan also must address how the credit union will verify the TIP. Examples of such verification include state licenses, professional licenses, organizational memberships, pay statements, union membership, or employer certification. The Office of Consumer Protection Director must approve this type of field of membership before a credit union can serve a TIP. Credit unions converting to a TIP can retain members of record but cannot add new members from its previous group or groups, unless it is part of the TIP. Section II.B of this manual, on Occupational Common Bond Amendments, does not apply to a TIP common bond. Removing or changing a geographical limitation will be processed as a housekeeping amendment. If safety and soundness concerns are present, the Office of Consumer Protection Director may require additional information before the request can be processed. Section II.H, on Other Persons Eligible for Credit Union Membership, applies to TIP based credit unions except for the corporate [[Page 76761]] account provision which only applies to industry based TIPs. Credit unions with industry based TIPs may include corporations as members because they have the same commonality of interests as all employees in the industry. For example, an airline service TIP (industry) can serve an airline carrier (corporate account); however, a nurses TIP (profession) could not serve a hospital (corporate account) because not everyone working in the hospital shares the same profession. If a TIP designated credit union wishes to convert to a different TIP or employer-based occupational common bond, or different charter type, it only retains members of record after the conversion. The Office of Consumer Protection Director, for safety and soundness reasons, may approve a TIP designated credit union to convert to its original field of membership. II.B--Occupational Common Bond Amendments II.B.1--General Section 5 of every single occupational federal credit union's charter defines the field of membership the credit union can legally serve. Only those persons or legal entities specified in the field of membership can be served. There are a number of instances in which Section 5 must be amended by NCUA. First, a group sharing the credit union's common bond is added to the field of membership. This may occur through various ways including agreement between the group and the credit union directly, or through a merger, corporate acquisition, purchase and assumption (P&A), or spin-off. Second, if the entire field of membership is acquired by another corporation, the credit union can serve the employees of the new corporation and any subsidiaries after receiving NCUA approval. Third, a federal credit union qualifies to change its common bond from: A single occupational common bond to a single associational common bond; A single occupational common bond to a community charter; or A single occupational common bond to a multiple common bond. Fourth, a federal credit union removes a portion of the group from its field of membership through agreement with the group, a spin-off, or because a portion of the group is no longer in existence. An existing single occupational common bond federal credit union that submits a request to amend its charter must provide documentation to establish that the occupational common bond requirement has been met. The Office of Consumer Protection Director must approve all amendments to an occupational common bond credit union's field of membership. II.B.2--Corporate Restructuring If the single common bond group that comprises a federal credit union's field of membership undergoes a substantial restructuring, the result is often that portions of the group are sold or spun off. This requires a change to the credit union's field of membership. NCUA will not permit a single common bond credit union to maintain in its field of membership a sold or spun-off group to which it has been providing service unless the group otherwise qualifies for membership in the credit union or the credit union converts to a multiple common bond credit union. If the group comprising the single common bond of the credit union merges with, or is acquired by, another group, the credit union can serve the new group resulting from the merger or acquisition after receiving a housekeeping amendment. II.B.3--Economic Advisability Prior to granting a common bond expansion, NCUA will examine the amendment's likely effect on the credit union's operations and financial condition. In most cases, the information needed for analyzing the effect of adding a particular group will be available to NCUA through the examination and financial and statistical reports; however, in particular cases, the Office of Consumer Protection Director may require additional information prior to making a decision. II.B.4--Documentation Requirements A federal credit union requesting a common bond expansion must submit an Application for Field of Membership Amendment (NCUA 4015- EZ) to the Office of Consumer Protection Director. An authorized credit union representative must sign the request. II.C--NCUA's Procedures for Amending the Field of Membership II.C.1--General All requests for approval to amend a federal credit union's charter must be submitted to the Office of Consumer Protection Director. II.C.2--Office of Consumer Protection Director Decision NCUA staff will review all amendment requests in order to ensure compliance with NCUA policy. Before acting on a proposed amendment, the Office of Consumer Protection Director may require an on-site review. In addition, the Office of Consumer Protection Director may, after taking into account the significance of the proposed field of membership amendment, require the applicant to submit a business plan addressing specific issues. The financial and operational condition of the requesting credit union will be considered in every instance. NCUA will carefully consider the economic advisability of expanding the field of membership of a credit union with financial or operational problems. In most cases, field of membership amendments will only be approved for credit unions that are operating satisfactorily. Generally, if a federal credit union is having difficulty providing service to its current membership, or is experiencing financial or other operational problems, it may have more difficulty serving an expanded field of membership. Occasionally, however, an expanded field of membership may provide the basis for reversing current financial problems. In such cases, an amendment to expand the field of membership may be granted notwithstanding the credit union's financial or operational problems. The applicant credit union must clearly establish that the expanded field of membership is in the best interest of the members and will not increase the risk to the NCUSIF. II.C.3--Office of Consumer Protection Director Approval If the Office of Consumer Protection Director approves the requested amendment, the credit union will be issued an amendment to Section 5 of its charter. II.C.4--Office of Consumer Protection Director Disapproval When the Office of Consumer Protection Director disapproves any application, in whole or in part, to amend the field of membership under this chapter, the applicant will be informed in writing of the: Specific reasons for the action; Options to consider, if appropriate, for gaining approval; and Appeal procedure. II.C.5--Appeal of Office of Consumer Protection Director Decision If a field of membership expansion request, merger, or spin-off is denied by staff, the federal credit union may appeal the decision to the NCUA Board. An appeal must be sent to the NCUA Board Secretary within 60 days of the date of denial. The appeal must be clearly identified as such and must address the specific reason(s) the federal credit union disagrees with the denial. A copy of the appeal must be sent to the Office of Consumer Protection, or as applicable, the appropriate regional office. NCUA central office staff will make an independent review of the facts and present the appeal to the Board with a recommendation. Before appealing, the credit union may, within 30 days of the denial, provide supplemental information to the office rendering the initial decision for reconsideration. A reconsideration will contain new and material evidence addressing the reasons for the initial denial. The office rendering the initial decision will have 30 days from the date of the receipt of the request for reconsideration to make a final decision. If the request is again denied, the applicant may proceed with the appeal process within 60 days of the date of the last denial. A second request for reconsideration will be treated as an appeal to the NCUA Board. II.D--Mergers, Purchase and Assumptions, and Spin-Offs In general, other than the addition of common bond groups, there are three additional ways a federal credit union with a single occupational common bond can expand its field of membership: By taking in the field of membership of another credit union through a common bond or emergency merger; By taking in the field of membership of another credit union through a common bond or emergency purchase and assumption (P&A); or [[Page 76762]] By taking a portion of another credit union's field of membership through a common bond spin-off. II.D.1--Mergers Generally, the requirements applicable to field of membership expansions found in this chapter apply to mergers where the continuing credit union has a federal charter. That is, the two credit unions must share a common bond. Where the merging credit union is state-chartered, the common bond rules applicable to a federal credit union apply. Mergers must be approved by the NCUA regional director where the continuing credit union is headquartered, with the concurrence of the regional director of the merging credit union, and, as applicable, the state regulators. If a single occupational credit union wants to merge into a multiple common bond or community credit union, Section IV.D or Section V.D of this chapter, respectively, should be reviewed. II.D.2--Emergency Mergers An emergency merger may be approved by NCUA without regard to common bond or other legal constraints. An emergency merger involves NCUA's direct intervention and approval. The credit union to be merged must either be insolvent or in danger of insolvency, as defined in the Glossary, and NCUA must determine that: An emergency requiring expeditious action exists; Other alternatives are not reasonably available; and The public interest would best be served by approving the merger. If not corrected, conditions that could lead to insolvency include, but are not limited to: Abandonment by management; Loss of sponsor; Serious and persistent recordkeeping problems; or Serious and persistent operational concerns. In an emergency merger situation, NCUA will take an active role in finding a suitable merger partner (continuing credit union). NCUA is primarily concerned that the continuing credit union has the financial strength and management expertise to absorb the troubled credit union without adversely affecting its own financial condition and stability. As a stipulated condition to an emergency merger, the field of membership of the merging credit union may be transferred intact to the continuing federal credit union without regard to any common bond restrictions. Under this authority, therefore, a single occupational common bond federal credit union may take into its field of membership any dissimilar charter type. The common bond characteristic of the continuing credit union in an emergency merger does not change. That is, even though the merging credit union is a multiple common bond or community, the continuing credit union will remain a single common bond credit union. Similarly, if the merging credit union is also an unlike single common bond, the continuing credit union will remain a single common bond credit union. Future common bond expansions will be based on the continuing credit union's original single common bond. Emergency mergers involving federally insured credit unions in different NCUA regions must be approved by the regional director where the continuing credit union is headquartered, with the concurrence of the regional director of the merging credit union and, as applicable, the state regulators. II.D.3--Purchase and Assumption (P&A) Another alternative for acquiring the field of membership of a failing credit union is through a consolidation known as a P&A. A P&A has limited application because, in most cases, the failing credit union must be placed into involuntary liquidation. In the few instances where a P&A may be appropriate, the assuming federal credit union, as with emergency mergers, may acquire the entire field of membership if the emergency merger criteria are satisfied. However, if the P&A does not meet the emergency merger criteria, it must be processed under the common bond requirements. In a P&A processed under the emergency criteria, specified loans, shares, and certain other designated assets and liabilities, without regard to common bond restrictions, may also be acquired without changing the character of the continuing federal credit union for purposes of future field of membership amendments. If the purchased and/or assumed credit union's field of membership does not share a common bond with the purchasing and/or assuming credit union, then the continuing credit union's original common bond will be controlling for future common bond expansions. P&As involving federally insured credit unions in different NCUA regions must be approved by the regional director where the continuing credit union is headquartered, with the concurrence of the regional director of the purchased and/or assumed credit union and, as applicable, the state regulators. II.D.4--Spin-Offs A spin-off occurs when, by agreement of the parties, a portion of the field of membership, assets, liabilities, shares, and capital of a credit union are transferred to a new or existing credit union. A spin-off is unique in that usually one credit union has a field of membership expansion and the other loses a portion of its field of membership. All common bond requirements apply regardless of whether the spun-off group becomes a new credit union or goes to an existing federal charter. The request for approval of a spin-off must be supported with a plan that addresses, at a minimum: Why the spin-off is being requested; What part of the field of membership is to be spun off; Whether the affected credit unions have a common bond (applies only to single occupational credit unions); Which assets, liabilities, shares, and capital are to be transferred; The financial impact the spin-off will have on the affected credit unions; The ability of the acquiring credit union to effectively serve the new members; The proposed spin-off date; and Disclosure to the members of the requirements set forth above. The spin-off request must also include current financial statements from the affected credit unions and the proposed voting ballot. For federal credit unions spinning off a group, membership notice and voting requirements and procedures are the same as for mergers (see part 708 of the NCUA Rules and Regulations), except that only the members directly affected by the spin-off--those whose shares are to be transferred--are permitted to vote. Members whose shares are not being transferred will not be afforded the opportunity to vote. All members of the group to be spun off (whether they voted in favor, against, or not at all) will be transferred if the spin-off is approved by the voting membership. Voting requirements for federally insured state credit unions are governed by state law. Spin-offs involving federally insured credit unions in different NCUA regions must be approved by all regional directors where the credit unions are headquartered and the state regulators, as applicable. Spin-offs in the same region also require approval by the state regulator, as applicable. Spin-offs involving the creation of a new federally insured credit union require the approval of the Office of Consumer Protection Director. The Office of Consumer Protection also provides advice regarding field of membership compatibility when appropriate. II.E--Overlaps II.E.1--General An overlap exists when a group of persons is eligible for membership in two or more credit unions. NCUA will permit single occupational federal credit unions to overlap any other charter without performing an overlap analysis. II.E.2--Organizational Restructuring A federal credit union's field of membership will always be governed by the common bond descriptions contained in Section 5 of its charter. Where a sponsor organization expands its operations internally, by acquisition or otherwise, the credit union may serve these new entrants to its field of membership if they are part of the common bond described in Section 5. NCUA will permit a complete overlap of the credit unions' fields of membership. If a sponsor organization sells off a group, new members can no longer be served unless they otherwise qualify for membership in the credit union or it converts to a multiple common bond charter. Credit unions must submit documentation explaining the restructuring and providing information regarding the new organizational structure. II.E.3--Exclusionary Clauses An exclusionary clause is a limitation precluding the credit union from serving the primary members of a portion of a group otherwise included in its field of membership. NCUA no longer grants exclusionary clauses. Those granted prior to [[Page 76763]] the adoption of this new Chartering and Field of Membership Manual will remain in effect unless the credit unions agree to remove them or one of the affected credit unions submits a housekeeping amendment to have it removed. II.F--Charter Conversion A single occupational common bond federal credit union may apply to convert to a community charter provided the field of membership requirements of the community charter are met. Groups within the existing charter which cannot qualify in the new charter cannot be served except for members of record, or groups or communities obtained in an emergency merger or P&A. A credit union must notify all groups that will be removed from the field of membership as a result of conversion. Members of record can continue to be served. Also, in order to support a case for a conversion, the applicant federal credit union may be required to develop a detailed business plan as specified in Chapter 2, Section V.A.3 of this manual. A single occupational common bond federal credit union may apply to convert to a multiple common bond charter by adding a non-common bond group that is within a reasonable proximity of a service facility. Groups within the existing charter may be retained and continue to be served. However, future amendments, including any expansions of the original single common bond group, must be done in accordance with multiple common bond policy. II.G--Removal of Groups From the Field of Membership A credit union may request removal of a portion of the common bond group from its field of membership for various reasons. The most common reasons for this type of amendment are: The group is within the field of membership of two credit unions and one wishes to discontinue service; The federal credit union cannot continue to provide adequate service to the group; The group has ceased to exist; The group does not respond to repeated requests to contact the credit union or refuses to provide needed support; or The group initiates action to be removed from the field of membership. When a federal credit union requests an amendment to remove a group from its field of membership, the Office of Consumer Protection Director will determine why the credit union desires to remove the group. If the Office of Consumer Protection Director concurs with the request, membership will continue for those who are already members under the ``once a member, always a member'' provision of the Federal Credit Union Act. II.H--Other Persons Eligible for Credit Union Membership A number of persons, by virtue of their close relationship to a common bond group, may be included, at the charter applicant's option, in the field of membership. These include the following: Spouses of persons who died while within the field of membership of this credit union; Employees of this credit union; Persons retired as pensioners or annuitants from the above employment; Volunteers; Members of the immediate family or household; Honorably discharged veterans who served in any of the Armed Services of the United States listed in this charter; Organizations of such persons; and Corporate or other legal entities in this charter. Immediate family is defined as spouse, child, sibling, parent, grandparent, or grandchild. This includes stepparents, stepchildren, stepsiblings, and adoptive relationships. Household is defined as persons living in the same residence maintaining a single economic unit. Membership eligibility is extended only to individuals who are members of an ``immediate family or household'' of a credit union member. It is not necessary for the primary member to join the credit union in order for the immediate family or household member of the primary member to join, provided the immediate family or household clause is included in the field of membership. However, it is necessary for the immediate family member or household member to first join in order for that person's immediate family member or household member to join the credit union. A credit union can adopt a more restrictive definition of immediate family or household. Volunteers, by virtue of their close relationship with a sponsor group, may be included. Examples include volunteers working at a hospital or school. Under the Federal Credit Union Act, once a person becomes a member of the credit union, such person may remain a member of the credit union until the person chooses to withdraw or is expelled from the membership of the credit union. This is commonly referred to as ``once a member, always a member.'' The ``once a member, always a member'' provision does not prevent a credit union from restricting services to members who are no longer within the field of membership. III--Associational Common Bond 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 [[Page 76764]] 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 of this section. 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.c--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. III.A.2--Subsequent Changes to Association's Bylaws If the association's membership or geographical definitions in its charter and bylaws are changed subsequent to the effective date stated in the field of membership, the credit union must submit the revised charter or bylaws for NCUA's consideration and approval prior to serving members of the association added as a result of the change. III.A.3--Sample Single Associational Common Bonds Some examples of associational common bonds are: Regular members of Locals 10 and 13, IBEW, in Florida, who qualify for membership in accordance with their charter and bylaws in effect on May 20, 2001; Members of the Hoosier Farm Bureau in Grant, Logan, or Lee Counties of Indiana, who qualify for membership in accordance with its charter and bylaws in effect on March 7, 1997; Members of the Shalom Congregation in Chevy Chase, Maryland; Regular members of the Corporate Executives Association, located in Westchester, New York, who qualify for membership in accordance with its charter and bylaws in effect on December 1, 1997; Members of the University of Wisconsin Alumni Association, located in Green Bay, Wisconsin; Members of the Marine Corps Reserve Officers Association; or Members of St. John's Methodist Church and St. Luke's Methodist Church, located in Toledo, Ohio. Some examples of insufficiently defined single associational common bonds are: All Lutherans in the United States (too broadly defined); or Veterans of U.S. military service (group is too broadly defined; no formal association of all members of the group). Some examples of unacceptable single associational common bonds are: Alumni of Amos University (no formal association); Customers of Fleetwood Insurance Company (policyholders or primarily customer/client relationships do not meet associational standards); Employees of members of the Reston, Virginia, Chamber of Commerce (not a sufficiently close tie to the associational common bond); or Members of St. John's Lutheran Church and St. Mary's Catholic Church located in Anniston, Alabama (churches are not of the same denomination). III.B--Associational Common Bond Amendments III.B.1--General Section 5 of every associational federal credit union's charter defines the field of membership the credit union can legally serve. Only those persons who, or legal entities that, join the credit union and are specified in the field of membership can be served. There are three instances in which Section 5 must be amended by NCUA. First, a group that shares the credit union's common bond is added to the field of membership. This may occur through various ways including agreement between the group and the credit union directly, or through a merger, purchase and assumption (P&A), or spin-off. Second, a federal credit union qualifies to change its common bond from: A single associational common bond to a single occupational common bond; A single associational common bond to a community charter; or A single associational common bond to a multiple common bond. Third, a federal credit union removes a portion of the group from its field of membership through agreement with the group, a spin-off, or a portion of the group that is no longer in existence. An existing single associational federal credit union that submits a request to amend its charter must provide documentation to establish that the associational common bond requirement has been met. The Office of Consumer Protection Director must approve all amendments to an associational common bond credit union's field of membership. III.B.2--Organizational Restructuring If the single common bond group that comprises a federal credit union's field of membership undergoes a substantial restructuring, the result is often that portions of the group are sold or spun off. This is an event requiring a change to the credit union's field of membership. NCUA may not permit a single associational credit union to maintain in its field of membership a sold or spun-off group to which it has been providing service unless the group otherwise qualifies for membership in the credit union or the credit union converts to a multiple common bond credit union. If the group comprising the single common bond of the credit union merges with, or is acquired by, another group, the credit union can serve the new group resulting from the merger or acquisition after receiving a housekeeping amendment. III.B.3--Economic Advisability Prior to granting a common bond expansion, NCUA will examine the amendment's likely impact on the credit union's operations and financial condition. In most cases, the information needed for analyzing the effect of adding a particular group will be available to NCUA through the examination and financial and statistical reports; however, in particular cases, the Office of Consumer Protection Director may [[Page 76765]] require additional information prior to making a decision. III.B.4--Documentation Requirements A federal credit union requesting a common bond expansion must submit an Application for Field of Membership Amendment (NCUA 4015- EZ) to the Office of Consumer Protection Director. An authorized credit union representative must sign the request. III.C--NCUA Procedures for Amending the Field of Membership III.C.1--General All requests for approval to amend a federal credit union's charter must be submitted to the Office of Consumer Protection Director. III.C.2--Office of Consumer Protection Director Decision NCUA staff will review all amendment requests in order to ensure conformance to NCUA policy. Before acting on a proposed amendment, the Office of Consumer Protection Director may require an on-site review. In addition, the Office of Consumer Protection Director may, after taking into account the significance of the proposed field of membership amendment, require the applicant to submit a business plan addressing specific issues. The financial and operational condition of the requesting credit union will be considered in every instance. The economic advisability of expanding the field of membership of a credit union with financial or operational problems must be carefully considered. In most cases, field of membership amendments will only be approved for credit unions that are operating satisfactorily. Generally, if a federal credit union is having difficulty providing service to its current membership, or is experiencing financial or other operational problems, it may have more difficulty serving an expanded field of membership. Occasionally, however, an expanded field of membership may provide the basis for reversing current financial problems. In such cases, an amendment to expand the field of membership may be granted notwithstanding the credit union's financial or operational problems. The applicant credit union must clearly establish that the expanded field of membership is in the best interest of the members and will not increase the risk to the NCUSIF. III.C.3--Office of Consumer Protection Director Approval If the Office of Consumer Protection Director approves the requested amendment, the credit union will be issued an amendment to Section 5 of its charter. III.C.4--Office of Consumer Protection Director Disapproval When the Office of Consumer Protection Director disapproves any application, in whole or in part, to amend the field of membership under this chapter, the applicant will be informed in writing of the: Specific reasons for the action; Options to consider, if appropriate, for gaining approval; and Appeal procedures. III.C.5--Appeal of Office of Consumer Protection Director Decision If a field of membership expansion request, merger, or spin-off is denied by staff, the federal credit union may appeal the decision to the NCUA Board. An appeal must be sent to the NCUA Board Secretary within 60 days of the date of denial and must be clearly identified as such and address the reason(s) the federal credit union disagrees with the denial. A copy of the appeal must be sent to the Office of Consumer Protection, or as applicable, the appropriate regional office. NCUA central office staff will make an independent review of the facts and present the appeal to the NCUA Board with a recommendation. Before appealing, the credit union may, within 30 days of the denial, provide supplemental information to the office rendering the initial decision for reconsideration. A reconsideration will contain new and material evidence addressing the reasons for the initial denial. The office rendering the initial decision will have 30 days from the date of the receipt of the request for reconsideration to make a final decision. If the request is again denied, the applicant may proceed with the appeal process within 60 days of the date of the last denial. A second request for reconsideration will be treated as an appeal to the NCUA Board. III.D--Mergers, Purchase and Assumptions, and Spin-Offs In general, other than the addition of common bond groups, there are three additional ways a federal credit union with a single associational common bond can expand its field of membership: By taking in the field of membership of another credit union through a common bond or emergency merger; By taking in the field of membership of another credit union through a common bond or emergency purchase and assumption (P&A); or By taking a portion of another credit union's field of membership through a common bond spin-off. III.D.1--Mergers Generally, the requirements applicable to field of membership expansions found in this section apply to mergers where the continuing credit union is a federal charter. That is, the two credit unions must share a common bond. Where the merging credit union is state-chartered, the common bond rules applicable to a federal credit union apply. Mergers must be approved by the NCUA regional director where the continuing credit union is headquartered, with the concurrence of the regional director of the merging credit union, and, as applicable, the state regulators. If a single associational credit union wants to merge into a multiple common bond or community credit union, Section IV.D or Section V.D of this chapter, respectively, should be reviewed. III.D.2--Emergency Mergers An emergency merger may be approved by NCUA without regard to common bond or other legal constraints. An emergency merger involves NCUA's direct intervention and approval. The credit union to be merged must either be insolvent or in danger of insolvency, as defined in the Glossary, and NCUA must determine that: An emergency requiring expeditious action exists; Other alternatives are not reasonably available; and The public interest would best be served by approving the merger. If not corrected, conditions that could lead to insolvency include, but are not limited to: Abandonment by management; Loss of sponsor; Serious and persistent record-keeping problems; or Serious and persistent operational concerns. In an emergency merger situation, NCUA will take an active role in finding a suitable merger partner (continuing credit union). NCUA is primarily concerned that the continuing credit union has the financial strength and management expertise to absorb the troubled credit union without adversely affecting its own financial condition and stability. As a stipulated condition to an emergency merger, the field of membership of the merging credit union may be transferred intact to the continuing federal credit union without regard to any common bond restrictions. Under this authority, therefore, a single associational common bond federal credit union may take into its field of membership any dissimilar charter type. The common bond characteristic of the continuing credit union in an emergency merger does not change. That is, even though the merging credit union is a multiple common bond or community, the continuing credit union will remain a single common bond credit union. Similarly, if the merging credit union is an unlike single common bond, the continuing credit union will remain a single common bond credit union. Future common bond expansions will be based on the continuing credit union's single common bond. Emergency mergers involving federally insured credit unions in different NCUA regions must be approved by the regional director where the continuing credit union is headquartered, with the concurrence of the regional director of the merging credit union and, as applicable, the state regulators. III.D.3--Purchase and Assumption (P&A) Another alternative for acquiring the field of membership of a failing credit union is through a consolidation known as a P&A. A P&A has limited application because, in most cases, the failing credit union must be placed into involuntary liquidation. In the few instances where a P&A may be appropriate, the assuming federal credit union, as with emergency mergers, may acquire the entire field of membership if the emergency merger [[Page 76766]] criteria are satisfied. However, if the P&A does not meet the emergency merger criteria, it must be processed under the common bond requirements. In a P&A processed under the emergency criteria, specified loans, shares, and certain other designated assets and liabilities, without regard to common bond restrictions, may also be acquired without changing the character of the continuing federal credit union for purposes of future field of membership amendments. If the purchased and/or assumed credit union's field of membership does not share a common bond with the purchasing and/or assuming credit union, then the continuing credit union's original common bond will be controlling for future common bond expansions. P&As involving federally insured credit unions in different NCUA regions must be approved by the regional director where the continuing credit union is headquartered, with the concurrence of the regional director of the purchased and/or assumed credit union and, as applicable, the state regulators. III.D.4--Spin-Offs A spin-off occurs when, by agreement of the parties, a portion of the field of membership, assets, liabilities, shares, and capital of a credit union are transferred to a new or existing credit union. A spin-off is unique in that usually one credit union has a field of membership expansion and the other loses a portion of its field of membership. All common bond requirements apply regardless of whether the spun-off group becomes a new credit union or goes to an existing federal charter. The request for approval of a spin-off must be supported with a plan that addresses, at a minimum: Why the spin-off is being requested; What part of the field of membership is to be spun off; Whether the affected credit unions have the same common bond (applies only to single associational credit unions); Which assets, liabilities, shares, and capital are to be transferred; The financial impact the spin-off will have on the affected credit unions; The ability of the acquiring credit union to effectively serve the new members; The proposed spin-off date; and Disclosure to the members of the requirements set forth above. The spin-off request must also include current financial statements from the affected credit unions and the proposed voting ballot. For federal credit unions spinning off a group, membership notice and voting requirements and procedures are the same as for mergers (see part 708 of the NCUA Rules and Regulations), except that only the members directly affected by the spin-off--those whose shares are to be transferred--are permitted to vote. Members whose shares are not being transferred will not be afforded the opportunity to vote. All members of the group to be spun off (whether they voted in favor, against, or not at all) will be transferred if the spin-off is approved by the voting membership. Voting requirements for federally insured state credit unions are governed by state law. Spin-offs involving federally insured credit unions in different NCUA regions must be approved by all regional directors where the credit unions are headquartered and the state regulators, as applicable. Spin-offs in the same region also require approval by the state regulator, as applicable. Spin-offs involving the creation of a new federally insured credit union require the approval of the Office of Consumer Protection Director. The Office of Consumer Protection also provides advice regarding field of membership compatibility when appropriate. III.E--Overlaps III.E.1--General An overlap exists when a group of persons is eligible for membership in two or more credit unions. NCUA will permit single associational federal credit unions to overlap any other charters without performing an overlap analysis. III.E.2--Organizational Restructuring A federal credit union's field of membership will always be governed by the common bond descriptions contained in Section 5 of its charter. Where a sponsor organization expands its operations internally, by acquisition or otherwise, the credit union may serve these new entrants to its field of membership if they are part of the common bond described in Section 5. NCUA will permit a complete overlap of the credit unions' fields of membership. If a sponsor organization sells off a group, new members can no longer be served unless they otherwise qualify for membership in the credit union or it converts to a multiple common bond. Credit unions must submit documentation explaining the restructuring and providing information regarding the new organizational structure. III.E.3--Exclusionary Clauses An exclusionary clause is a limitation precluding the credit union from serving the primary members of a portion of a group otherwise included in its field of membership. NCUA no longer grants exclusionary clauses. Those granted prior to the adoption of this new Chartering and Field of Membership Manual will remain in effect unless the credit unions agree to remove them or one of the affected credit unions submits a housekeeping amendment to have it removed. III.F--Charter Conversions A single associational common bond federal credit union may apply to convert to a community charter provided the field of membership requirements of the community charter are met. Groups within the existing charter which cannot qualify in the new charter cannot be served except for members of record, or groups or communities obtained in an emergency merger or P&A. A credit union must notify all groups that will be removed from the field of membership as a result of conversion. Members of record can continue to be served. Also, in order to support a case for a conversion, the applicant federal credit union may be required to develop a detailed business plan as specified in Chapter 2, Section V.A.3 of this manual. A single associational common bond federal credit union may apply to convert to a multiple common bond charter by adding a non- common bond group that is within a reasonable proximity of a service facility. Groups within the existing charter may be retained and continue to be served. However, future amendments, including any expansions of the original single common bond group, must be done in accordance with multiple common bond policy. III.G--Removal of Groups From the Field of Membership A credit union may request removal of a portion of the common bond group from its field of membership for various reasons. The most common reasons for this type of amendment are: The group is within the field of membership of two credit unions and one wishes to discontinue service; The federal credit union cannot continue to provide adequate service to the group; The group has ceased to exist; The group does not respond to repeated requests to contact the credit union or refuses to provide needed support; or The group initiates action to be removed from the field of membership. When a federal credit union requests an amendment to remove a group from its field of membership, the Office of Consumer Protection Director will determine why the credit union desires to remove the group. If the Office of Consumer Protection Director concurs with the request, membership will continue for those who are already members under the ``once a member, always a member'' provision of the Federal Credit Union Act. III.H--Other Persons Eligible for Credit Union Membership A number of persons by virtue of their close relationship to a common bond group may be included, at the charter applicant's option, in the field of membership. These include the following: Spouses of persons who died while within the field of membership of this credit union; Employees of this credit union; Volunteers; Members of the immediate family or household; Honorably discharged veterans who served in any of the Armed Services of the United States in this charter; Organizations of such persons; and Corporate or other legal entities in this charter. Immediate family is defined as spouse, child, sibling, parent, grandparent, or grandchild. This includes stepparents, stepchildren, stepsiblings, and adoptive relationships. Household is defined as persons living in the same residence maintaining a single economic unit. Membership eligibility is extended only to individuals who are members of an ``immediate family or household'' of a credit [[Page 76767]] union member. It is not necessary for the primary member to join the credit union in order for the immediate family or household member of the primary member to join, provided the immediate family or household clause is included in the field of membership. However, it is necessary for the immediate family member or household member to first join in order for that person's immediate family member or household member to join the credit union. A credit union can adopt a more restrictive definition of immediate family or household. Volunteers, by virtue of their close relationship with a sponsor group, may be included. One example is volunteers working at a church. Under the Federal Credit Union Act, once a person becomes a member of the credit union, such person may remain a member of the credit union until the person chooses to withdraw or is expelled from the membership of the credit union. This is commonly referred to as ``once a member, always a member.'' The ``once a member, always a member'' provision does not prevent a credit union from restricting services to members who are no longer within the field of membership. IV--Multiple Occupational/Associational Common Bonds IV.A.1--General A federal credit union may be chartered to serve a combination of distinct, definable single occupational and/or associational common bonds. This type of credit union is called a multiple common bond credit union. Each group in the field of membership must have its own occupational or associational common bond. For example, a multiple common bond credit union may include two unrelated employers, or two unrelated associations, or a combination of two or more employers or associations. Additionally, these groups must be within reasonable geographic proximity of the credit union. That is, the groups must be within the service area of one of the credit union's service facilities. These groups are referred to as select groups. A multiple common bond credit union cannot include a TIP or expand using single common bond criteria. Employment in a corporation or other legal entity which is related to another legal entity (such as a company under contract and possessing a strong dependency relationship with another company) makes that person part of the occupational common bond of a select employee group within a multiple common bond. A multiple common bond credit union is also able to serve the employees of tenants who work in an industrial park, such as a shopping mall or office park, without listing each occupational group, provided that each tenant employee group has fewer than 3,000 employees at the location. In addition, only employees who work at the facility during the tenancy are eligible for membership. New tenants would be eligible for membership subject to the above requirements. A federal credit union's service area is the area that can reasonably be served by the service facilities accessible to the groups within the field of membership. The service area will most often coincide with that geographic area primarily served by the service facility. Additionally, the groups served by the credit union must have access to the service facility. The non-availability of other credit union service is a factor to be considered in determining whether the group is within reasonable proximity of a credit union wishing to add the group to its field of membership. A service facility includes the means for a multiple common bond credit union to accept shares for members' accounts, accept loan applications from them or disburse loans to them. This definition includes a credit union owned branch, a mobile branch, an office operated on a regularly scheduled weekly basis, a credit union owned ATM, a credit union owned electronic facility, or a credit union's transactional Web site that meets the above listed transactional requirements (a ``transactional Web site''). A credit union's transactional Web site that meets these requirements may be accessed by a computer, smart phone, tablet, or similar technological device. This definition of service facility does not meet the requirement that a credit union establish and maintain an office or facility in an underserved area. The select group as a whole will be considered to be within a credit union's service area when: A majority of the persons in a select group live, work, or gather regularly within the service area; The group's headquarters is located within the service area; or The group's ``paid from'' or ``supervised from'' location is within the service area. IV.A.2--Sample Multiple Common Bond Field of Membership An example of a multiple common bond field of membership is: ``The field of membership of this federal credit union shall be limited to the following: 1. Employees of Teltex Corporation who work in Wilmington, Delaware; 2. Partners and employees of Smith & Jones, Attorneys at Law, who work in Wilmington, Delaware; 3. Members of the M&L Association in Wilmington, Delaware, who qualify for membership in accordance with its charter and bylaws in effect on December 31, 1997; 4. Employees of tenants with fewer than 3,000 employees of MJB Office Park who work in MJB Office Park's Wilmington, Delaware location.'' IV.B--Multiple Common Bond Amendments IV.B.1--General Section 5 of every multiple common bond federal credit union's charter defines the field of membership and select groups the credit union can legally serve. Only those persons or legal entities specified in the field of membership can be served. There are a number of instances in which Section 5 must be amended by NCUA. First, a new select group is added to the field of membership. This may occur through agreement between the group and the credit union directly, or through a merger, corporate acquisition, purchase and assumption (P&A), or spin-off. Second, a federal credit union qualifies to change its charter from: A single occupational or associational charter to a multiple common bond charter; A multiple common bond to a single occupational or associational charter; A multiple common bond to a community charter; or A community to a multiple common bond charter. Third, a federal credit union removes a group from its field of membership through agreement with the group, a spin-off, or because the group no longer exists. IV.B.2--Numerical Limitation of Select Groups An existing multiple common bond federal credit union that submits a request to amend its charter must provide documentation to establish that the multiple common bond requirements have been met. The Office of Consumer Protection Director 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 Office of Consumer Protection Director, with input from the appropriate regional director, which is material during the one year period preceding the filing to add the group; The credit union is ``adequately capitalized'' pursuant to part 702 of NCUA's Rules and Regulations. For low-income credit unions or credit unions chartered less than ten years, the Office of Consumer Protection Director, with input from the appropriate regional director, may determine that a less than ``adequately capitalized'' credit union can qualify for an expansion if it is making reasonable progress toward becoming ``adequately capitalized.'' For any other credit union, the Office of Consumer Protection Director, with input from the appropriate regional director, may determine that a less than ``adequately capitalized'' credit union can qualify for an expansion if it is making reasonable progress toward becoming ``adequately capitalized,'' and the addition of the group would not adversely affect the credit union's capitalization level; The credit union has the administrative capability to serve the proposed group and the financial resources to meet the need for additional staff and assets to serve the new group; Any potential harm the expansion may have on any other credit union and its members is clearly outweighed by the probable beneficial effect of the expansion. With respect to a proposed expansion's effect on other credit unions, the requirements on overlapping fields of membership set forth in Section IV.E of this chapter are also applicable; and If the formation of a separate credit union by such group is not practical and consistent with reasonable standards for the safe and sound operation of a credit union. Additional information is required for groups of 3,000 or more primary potential [[Page 76768]] members requesting to be added to a multiple common bond credit union. For groups between 3,000 and 4,999 potential members, NCUA requires documentation indicating the group has a lack of available subsidies, interest among the group's members, and sufficient resources. For such cases the NCUA will accept a written statement indicating these conditions exist as sufficient documentation the group cannot form its own credit union. Groups with 5,000 or more members will be subject to the standard application process as discussed later in this chapter, requiring a group to fully describe its inability to establish a new single common bond credit union. IV.B.3--Documentation Requirements A multiple common bond credit union requesting a select group expansion must submit a formal written request, using the Application for Field of Membership Amendment (NCUA 4015 or NCUA 4015-EZ) to the Office of Consumer Protection Director. An authorized credit union representative must sign the request. The NCUA 4015-EZ (for groups less than 3,000 potential members) must be accompanied by the following: A letter, or equivalent documentation, from the group requesting credit union service. This letter must indicate: That the group wants to be added to the applicant federal credit union's field of membership; The number of persons currently included within the group to be added and their locations; and The group's proximity to credit union's nearest service facility. The most recent copy of the group's charter and bylaws or equivalent documentation (for associational groups). The NCUA 4015 (for groups between 3,000 and 4,999 primary potential members) must be accompanied by the following: A letter, or equivalent documentation, from the group requesting credit union service. This letter must indicate: That the group wants to be added to the federal credit union's field of membership; Whether the group presently has other credit union service available; The number of persons currently included within the group to be added and their locations; The group's proximity to credit union's nearest service facility, and Why the formation of a separate credit union for the group is not practical or consistent with safety and soundness standards because of a lack of available subsidies, interest among the group's members, and sufficient resources. The NCUA 4015 (for groups of 5,000 or more primary potential members) must be accompanied by the following: A letter, or equivalent documentation, from the group requesting credit union service. This letter must indicate: That the group wants to be added to the federal credit union's field of membership; Whether the group presently has other credit union service available; The number of persons currently included within the group to be added and their locations; The group's proximity to credit union's nearest service facility, and Why the formation of a separate credit union for the group is not practical or consistent with safety and soundness standards. A credit union need not address every item on the list, simply those issues that are relevant to its particular request: Member location--whether the membership is widely dispersed or concentrated in a central location. Demographics--the employee turnover rate, economic status of the group's members, and whether the group is more apt to consist of savers and/or borrowers. Market competition--the availability of other financial services. Desired services and products--the type of services the group desires in comparison to the type of services a new credit union could offer. Sponsor subsidies--the availability of operating subsidies. The desire of the sponsor--the extent of the sponsor's interest in supporting a credit union charter. Employee interest--the extent of the employees' interest in obtaining a credit union charter. Evidence of past failure--whether the group previously had its own credit union or previously filed for a credit union charter. Administrative capacity to provide services--will the group have the management expertise to provide the services requested. If the group is eligible for membership in any other credit union, documentation must be provided to support inclusion of the group under the overlap standards set forth in Section IV.E of this chapter; and The most recent copy of the group's charter and bylaws or equivalent documentation (for associational groups). IV.B.4--Corporate Restructuring If a select group within a federal credit union's field of membership undergoes a substantial restructuring, a change to the credit union's field of membership may be required if the credit union is to continue to provide service to the select group. NCUA permits a multiple common bond credit union to maintain in its field of membership a sold, spun-off, or merged select group to which it has been providing service. This type of amendment to the credit union's charter is not considered an expansion; therefore, the criteria relating to adding new groups are not applicable. When two groups merge and each is in the field of membership of a credit union, then both (or all affected) credit unions can serve the resulting merged group, subject to any existing geographic limitation and without regard to any overlap provisions. However, the credit unions cannot serve the other multiple groups that may be in the field of membership of the other credit union. IV.C--NCUA's Procedures for Amending the Field of Membership IV.C.1--General All requests for approval to amend a federal credit union's charter must be submitted to the Office of Consumer Protection Director. IV.C.2--Office of Consumer Protection Director Decision NCUA staff will review all amendment requests in order to ensure conformance to NCUA policy. Before acting on a proposed amendment, the Office of Consumer Protection Director may require an on-site review. In addition, the Office of Consumer Protection Director may, after taking into account the significance of the proposed field of membership amendment, require the applicant to submit a business plan addressing specific issues. The financial and operational condition of the requesting credit union will be considered in every instance. An expanded field of membership may provide the basis for reversing adverse trends. In such cases, an amendment to expand the field of membership may be granted notwithstanding the credit union's adverse trends. The applicant credit union must clearly establish that the approval of the expanded field of membership meets the requirements of Section IV.B.2 of this chapter and will not increase the risk to the NCUSIF. IV.C.3--Office of Consumer Protection Director Approval If the Office of Consumer Protection Director approves the requested amendment, the credit union will be issued an amendment to Section 5 of its charter. IV.C.4--Office of Consumer Protection Director Disapproval When the Office of Consumer Protection Director disapproves any application, in whole or in part, to amend the field of membership under this chapter, the applicant will be informed in writing of the: Specific reasons for the action; Options to consider, if appropriate, for gaining approval; and Appeal procedure. IV.C.5--Appeal of Office of Consumer Protection Director Decision If a field of membership expansion request, merger, or spin-off is denied by staff, the federal credit union may appeal the decision to the NCUA Board. An appeal must be sent to the NCUA Board Secretary within 60 days of the date of denial and must be clearly identified as such and address the reason(s) the federal credit union disagrees with the denial. A copy of the appeal must be sent to the Office of Consumer Protection or, as applicable, the appropriate regional office. NCUA central office staff will make an independent review of the facts and present the appeal to the NCUA Board with a recommendation. Before appealing, the credit union may, within 30 days of the denial, provide supplemental information to the office rendering the initial decision for reconsideration. A reconsideration will contain new and material evidence addressing the reasons for the initial denial. The office rendering the initial decision will have 30 days from the date of the receipt of the request for reconsideration to make a final decision. If the request is again denied, the applicant may proceed with the appeal [[Page 76769]] process within 60 days of the date of the last denial. A second request for reconsideration will be treated as an appeal to the NCUA Board. IV.D--Mergers, Purchase and Assumptions, and Spin-Offs In general, other than the addition of select groups, there are three additional ways a multiple common bond federal credit union can expand its field of membership: By taking in the field of membership of another credit union through a merger; By taking in the field of membership of another credit union through a purchase and assumption (P&A); or By taking a portion of another credit union's field of membership through a spin-off. IV.D.1--Voluntary Mergers a. All Select Groups in the Merging Credit Union's Field of Membership Have Less Than 3,000 Primary Potential Members A voluntary merger of two or more federal credit unions is permissible as long as each select group in the merging credit union's field of membership has less than 3,000 primary potential members. While the merger requirements outlined in Section 205 of the Federal Credit Union Act must still be met, the requirements of Chapter 2, Section IV.B.2 of this manual are not applicable. b. One or More Select Groups in the Merging Credit Union's Field of Membership Has 3,000 or More Primary Potential Members If the merging credit unions serve the same group, and the group consists of 3,000 or more primary potential members, then the ability to form a separate credit union analysis is not required for that group. If the merging credit union has any other groups consisting of 3,000 or more primary potential members, special requirements apply. NCUA will analyze each group of 3,000 or more primary potential members, except as noted above, to determine whether the formation of a separate credit union by such a group is practical. If the formation of a separate credit union by such a group is not practical because the group lacks sufficient volunteer and other resources to support the efficient and effective operations of a credit union or does not meet the economic advisable criteria outlined in Chapter 1 of this manual, the group may be merged into a multiple common bond credit union. If the formation of a separate credit union is practical, the group must be spun-off before the merger can be approved. c. Merger of a Single Common Bond Credit Union Into a Multiple Common Bond Credit Union A financially healthy single common bond credit union with a primary potential membership of 3,000 or more cannot merge into a multiple common bond credit union, absent supervisory reasons, unless the continuing credit union already serves the same group. d. Merger Approval If the merger is approved, the qualifying groups within the merging credit union's field of membership will be transferred intact to the continuing credit union and can continue to be served. Where the merging credit union is state-chartered, the field of membership rules applicable to a federal credit union apply. Mergers must be approved by the NCUA regional director where the continuing credit union is headquartered, with the concurrence of the regional director of the merging credit union, and, as applicable, the state regulators. IV.D.2--Supervisory Mergers The NCUA may approve the merger of any federally insured credit union when safety and soundness concerns are present without regard to the 3,000 numerical limitation. The credit union need not be insolvent or in danger of insolvency for NCUA to use this statutory authority. Examples constituting appropriate reasons for using this authority are: Abandonment of the management and/or officials and an inability to find replacements, loss of sponsor support, serious and persistent record-keeping problems, sustained material decline in financial condition, or other serious or persistent circumstances. IV.D.3--Emergency Mergers An emergency merger may be approved by NCUA without regard to common bond or other legal constraints. An emergency merger involves NCUA's direct intervention and approval. The credit union to be merged must either be insolvent or in danger of insolvency, as defined in the Glossary, and NCUA must determine that: An emergency requiring expeditious action exists; Other alternatives are not reasonably available; and The public interest would best be served by approving the merger. If not corrected, conditions that could lead to insolvency include, but are not limited to: Abandonment by management; Loss of sponsor; Serious and persistent record-keeping problems; or Serious and persistent operational concerns. In an emergency merger situation, NCUA will take an active role in finding a suitable merger partner (continuing credit union). NCUA is primarily concerned that the continuing credit union has the financial strength and management expertise to absorb the troubled credit union without adversely affecting its own financial condition and stability. As a stipulated condition to an emergency merger, the field of membership of the merging credit union may be transferred intact to the continuing federal credit union without regard to any field of membership restrictions including numerical limitation requirements. Under this authority, any single occupational or associational common bond, multiple common bond, or community charter may merger into a multiple common bond credit union and that credit union can continue to serve the merging credit union's field of membership. Subsequent field of membership expansions of the continuing multiple common bond credit union must be consistent with multiple common bond policies. Emergency mergers involving federally insured credit unions in different NCUA regions must be approved by the regional director where the continuing credit union is headquartered, with the concurrence of the regional director of the merging credit union and, as applicable, the state regulators. IV.D.4--Purchase and Assumption (P&A) Another alternative for acquiring the field of membership of a failing credit union is through a consolidation known as a P&A. Generally, the requirements applicable to field of membership expansions found in this chapter apply to purchase and assumptions where the purchasing credit union is a federal charter. A P&A has limited application because, in most cases, the failing credit union must be placed into involuntary liquidation. However, in the few instances where a P&A may occur, the assuming federal credit union, as with emergency mergers, may acquire the entire field of membership if the emergency criteria are satisfied. Specified loans, shares, and certain other designated assets and liabilities, without regard to field of membership restrictions, may also be acquired without changing the character of the continuing federal credit union for purposes of future field of membership amendments. Subsequent field of membership expansions must be consistent with multiple common bond policies. P&As involving federally insured credit unions in different NCUA regions must be approved by the regional director where the continuing credit union is headquartered, with the concurrence of the regional director of the purchased and/or assumed credit union and, as applicable, the state regulators. IV.D.5--Spin-Offs A spin-off occurs when, by agreement of the parties, a portion of the field of membership, assets, liabilities, shares, and capital of a credit union are transferred to a new or existing credit union. A spin-off is unique in that usually one credit union has a field of membership expansion and the other loses a portion of its field of membership. All common bond requirements apply regardless of whether the spun-off group becomes a new charter or goes to an existing federal charter. The request for approval of a spun-off group must be supported with a plan that addresses, at a minimum: Why the spin-off is being requested; What part of the field of membership is to be spun off; Which assets, liabilities, shares, and capital are to be transferred; The financial impact the spin-off will have on the affected credit unions; The ability of the acquiring credit union to effectively serve the new members; The proposed spin-off date; and Disclosure to the members of the requirements set forth above. The spin-off request must also include current financial statements from the affected credit unions and the proposed voting ballot. [[Page 76770]] For federal credit unions spinning off a group, membership notice and voting requirements and procedures are the same as for mergers (see part 708 of the NCUA Rules and Regulations), except that only the members directly affected by the spin-off--those whose shares are to be transferred--are permitted to vote. Members whose shares are not being transferred will not be afforded the opportunity to vote. All members of the group to be spun off (whether they voted in favor, against, or not at all) will be transferred if the spin-off is approved by the voting membership. Voting requirements for federally insured state credit unions are governed by state law. Spin-offs involving federally insured credit unions in different NCUA regions must be approved by all regional directors where the credit unions are headquartered and the state regulators, as applicable. Spin-offs in the same region also require approval by the state regulator, as applicable. IV.E--Overlaps IV.E.1--General An overlap exists when a group of persons is eligible for membership in two or more credit unions, including state charters. An overlap is permitted when the expansion's beneficial effect in meeting the convenience and needs of the members of the group proposed to be included in the field of membership outweighs any adverse effect on the overlapped credit union. Credit unions must investigate the possibility of an overlap with federally insured credit unions prior to submitting an expansion request if the group has 5,000 or more primary potential members. If cases arise where the assurance given to the Office of Consumer Protection Director concerning the unavailability of credit union service is inaccurate, the misinformation may be grounds for removal of the group from the federal credit union's charter. When an overlap situation requiring analysis does arise, officials of the expanding credit union must ascertain the views of the overlapped credit union. If the overlapped credit union does not object, the applicant must submit a letter or other documentation to that effect. If the overlapped credit union does not respond, the expanding credit union must notify NCUA in writing of its attempt to obtain the overlapped credit union's comments. NCUA will approve an overlap if the expansion's beneficial effect in meeting the convenience and needs of the members of the group outweighs any adverse effect on the overlapped credit union. In reviewing the overlap, the Office of Consumer Protection Director will consider: The view of the overlapped credit union(s); Whether the overlap is incidental in nature--the group of persons in question is so small as to have no material effect on the original credit union; Whether there is limited participation by members or employees of the group in the original credit union after the expiration of a reasonable period of time; Whether the original credit union fails to provide requested service; Financial effect on the overlapped credit union; The desires of the group(s); The desire of the sponsor organization; and The best interests of the affected group and the credit union members involved. Generally, if the overlapped credit union does not object, and NCUA determines that there is no safety and soundness problem, the overlap will be permitted. Potential overlaps of a federally insured state credit union's field of membership by a federal credit union will generally be analyzed in the same way as if two federal credit unions were involved. Where a federally insured state credit union's field of membership is broadly stated, NCUA will exclude its field of membership from any overlap protection. NCUA will permit multiple common bond federal credit unions to overlap community charters without performing an overlap analysis. IV.E.2--Overlap Issues as a Result of Organizational Restructuring A federal credit union's field of membership will always be governed by the field of membership descriptions contained in Section 5 of its charter. Where a sponsor organization expands its operations internally, by acquisition or otherwise, the credit union may serve these new entrants to its field of membership if they are part of any select group listed in Section 5. Where acquisitions are made which add a new subsidiary, the group cannot be served until the subsidiary is included in the field of membership through a housekeeping amendment. A federal credit union's field of membership will always be governed by the field of membership descriptions contained in Section 5 of its charter. Where a sponsor organization expands its operations internally, by acquisition or otherwise, the credit union may serve these new entrants to its field of membership if they are part of any select group listed in Section 5. Where acquisitions are made which add a new subsidiary, the group cannot be served until the subsidiary is included in the field of membership through a housekeeping amendment. Overlaps may occur as a result of restructuring or merger of the parent organization. When such overlaps occur, each credit union must request a field of membership amendment to reflect the new groups each wishes to serve. The credit union can continue to serve any current group in its field of membership that is acquiring a new group or has been acquired by a new group. The new group cannot be served by the credit union until the field of membership amendment is approved by NCUA. Credit unions affected by organizational restructuring or merger should attempt to resolve overlap issues among themselves. Unless an agreement is reached limiting the overlap resulting from the corporate restructuring, NCUA will permit a complete overlap of the credit unions' fields of membership. When two groups merge, or one group is acquired by the other, and each is in the field of membership of a credit union, both (or all affected) credit unions can serve the resulting merged or acquired group, subject to any existing geographic limitation and without regard to any overlap provisions. This is accomplished through a housekeeping amendment. Credit unions must submit to NCUA documentation explaining the restructuring and provide information regarding the new organizational structure. IV.E.3--Exclusionary Clauses An exclusionary clause is a limitation precluding the credit union from serving the primary members of a portion of a group otherwise included in its field of membership. NCUA no longer grants exclusionary clauses. Those granted prior to the adoption of this new Chartering and Field of Membership Manual will remain in effect unless the credit unions agree to remove them or one of the affected credit unions submits a housekeeping amendment to have it removed. IV.F--Charter Conversion A multiple common bond federal credit union may apply to convert to a community charter provided the field of membership requirements of the community charter are met. Groups within the existing charter which cannot qualify in the new charter cannot be served except for members of record, or groups or communities obtained in an emergency merger or P&A. A credit union must notify all groups that will be removed from the field of membership as a result of conversion. Members of record can continue to be served. Also, in order to support a case for a conversion, the applicant federal credit union may be required to develop a detailed business plan as specified in Chapter 2, Section V.A.3 of this manual. A multiple common bond federal credit union may apply to convert to a single occupational or associational common bond charter provided the field of membership requirements of the new charter are met. Groups within the existing charter, which do not qualify in the new charter, cannot be served except for members of record, or groups or communities obtained in an emergency merger or P&A. A credit union must notify all groups that will be removed from the field of membership as a result of conversion. IV.G--Credit Union Requested Removal of Groups From the Field of Membership A credit union may request removal of a group from its field of membership for various reasons. The most common reasons for this type of amendment are: The group is within the field of membership of two credit unions and one wishes to discontinue service; The federal credit union cannot continue to provide adequate service to the group; The group has ceased to exist; The group does not respond to repeated requests to contact the credit union or refuses to provide needed support; The group initiates action to be removed from the field of membership; or [[Page 76771]] The federal credit union wishes to convert to a single common bond. When a federal credit union requests an amendment to remove a group from its field of membership, the Office of Consumer Protection Director will determine why the credit union desires to remove the group. If the Office of Consumer Protection Director concurs with the request, membership will continue for those who are already members under the ``once a member, always a member'' provision of the Federal Credit Union Act. IV.H--NCUA Supervisory Action To Remove Groups From the Field of Membership NCUA has in place quality control processes that protect the integrity of its field of membership requirements. As part of this obligation, NCUA's Office of Consumer Protection will randomly select groups added through NCUA's Field of Membership Internet Application (FOMIA) system for quality assurance reviews even if the expansion application meets all the conditions for approval. Each FCU is responsible for obtaining certain documentation when seeking to add groups to its field of membership through FOMIA. In addition, as indicated in the FOMIA User Instruction Guide, available on NCUA's Web site, an FCU must permanently retain the documentation from the select group requesting service and the Confirmation Certificate generated at the time the FOMIA request is submitted to NCUA. As part of the quality assurance process, OCP reserves the right to request this documentation at any time. If the FCU fails to provide this documentation when OCP requests it, OCP may consider removing the group from the FCU's field of membership and restricting the FCU from using the FOMIA system for future requests. Specifically, as part of the FOMIA quality assurance process, OCP staff will do the following: 1. Within 10 days of receiving an application selected for a quality assurance review, notify the FCU of the documentation OCP requires. The FCU will have 15 days to provide the necessary documentation. OCP staff will respond to the FCU with a determination on the quality assurance review of the association within 15 days of receiving the requested information; 2. After receiving the additional documentation, if any concerns remain outstanding, OCP staff will again correspond with the FCU and provide a 15-day time frame for correcting the concern. OCP staff will respond to the FCU with a determination on the quality assurance review of the association within 15 days of receiving the requested information; and 3. If the FCU does not provide the requested documentation, or cannot correct the concern, the OCP Director will deny the application and notify the credit union of its appeal rights. IV.I--NCUA Investigation of Potential Field of Membership Violations NCUA's Office of Consumer Protection (OCP) is responsible for investigating field of membership complaints from the public, and matters referred to it from the field. It also pursues corrective action as needed for FCUs with confirmed field of membership violations. Although circumstances can vary with each case, OCP staff will generally adhere to the following process for investigating and addressing potential field of membership violations: 1. Initially correspond with management to outline concerns and request clarifying information within 60 days. OCP staff will also provide context as to the source of OCP's concerns, such as the discovery of new information about a particular group or an examination finding brought to OCP's attention; 2. If OCP does not receive the requested information within 60 days, it will notify the FCU and again request the required information be provided within 30 days; 3. After receiving the additional documentation, if any concerns remain outstanding, OCP staff will again correspond with the FCU to provide a 60-day time frame for addressing the concern; and 4. If the FCU is unable to correct the concern, and after consultation with the Office of General Counsel and the appropriate Regional Office, and in accordance with agency guidelines for administrative actions, OCP will remove the group from the FCU's field of membership pursuant to authority delegated by the NCUA Board. Removal of a group is treated the same as an initial denial under the Chartering Manual. In any adverse final determination on removal under the above delegations, OCP will notify the FCU of its appeal rights. NCUA considers the removal of an association from an FCU's field of membership as an action of last resort. If a group is removed, the FCU can no longer add new members from the group, but can continue serving those who are already members of the FCU under the ``once a member, always a member'' provision of the Federal Credit Union Act. Also, if the group subsequently qualifies due to changes to the group itself, management can submit a new application at that time. IV.J--Other Persons Eligible for Credit Union Membership A number of persons, by virtue of their close relationship to a common bond group, may be included, at the charter applicant's option, in the field of membership. These include the following: Spouses of persons who died while within the field of membership of this credit union; Employees of this credit union; Persons retired as pensioners or annuitants from the above employment; Volunteers; Members of the immediate family or household; Honorably discharged veterans who served in any of the Armed Services of the United States in this charter; Organizations of such persons; and Corporate or other legal entities in this charter. Immediate family is defined as spouse, child, sibling, parent, grandparent, or grandchild. This includes stepparents, stepchildren, stepsiblings, and adoptive relationships. Household is defined as persons living in the same residence maintaining a single economic unit. Membership eligibility is extended only to individuals who are members of an ``immediate family or household'' of a credit union member. It is not necessary for the primary member to join the credit union in order for the immediate family or household member of the primary member to join, provided the immediate family or household clause is included in the field of membership. However, it is necessary for the immediate family member or household member to first join in order for that person's immediate family member or household member to join the credit union. A credit union can adopt a more restrictive definition of immediate family or household. Volunteers, by virtue of their close relationship with a sponsor group, may be included. Examples include volunteers working at a hospital or church. Under the Federal Credit Union Act, once a person becomes a member of the credit union, such person may remain a member of the credit union until the person chooses to withdraw or is expelled from the membership of the credit union. This is commonly referred to as ``once a member, always a member.'' The ``once a member, always a member'' provision does not prevent a credit union from restricting services to members who are no longer within the field of membership. V--Community Charter Requirements V.A.1--General There are two types of community charters. One is based on a single, geographically well-defined local community or neighborhood; the other is a rural district. More than one credit union may serve the same community. NCUA recognizes four types of affinity on which both a community charter and a rural district can be based--persons who live in, worship in, attend school in, or work in the community or rural district. Businesses and other legal entities within the community boundaries or rural district may also qualify for membership. NCUA has established the following requirements for community charters: The geographic area's boundaries must be clearly defined; and The area is a well-defined local community or a rural district. V.A.2--Definition of Well-Defined Local Community and Rural District In addition to the documentation requirements in Chapter 1 of this manual to charter a credit union, a community credit union applicant must provide additional documentation addressing the proposed area to be served and community service policies. An applicant has the burden of demonstrating to NCUA that the proposed community area meets the statutory requirements of being: (1) Well-defined, and (2) a local community or rural district. ``Well-defined'' means the proposed area has specific geographic boundaries. Geographic boundaries may include a city, [[Page 76772]] township, county (single, multiple, or portions of a county) or their political equivalent, an individual Congressional district, school districts, or a clearly identifiable neighborhood. Although state boundaries are well-defined areas, states themselves do not meet the requirement that the proposed area be a local community or rural district. The well-defined local community requirement is met if: Single Political Jurisdiction--The area to be served is in a recognized Single Political Jurisdiction, i.e., a city, county, or their political equivalent, or any contiguous portion thereof. A Congressional district qualifies as Single Political Jurisdiction. If redistricting were to redraw the boundaries of a Congressional district into two or more Congressional districts, an FOM consisting of the original Congressional district would no longer be available to be served by any other credit union. Statistical Area--The area is a designated Core Based Statistical Area or allowing a portion thereof, or in the case of a Core Based Statistical Area with Metropolitan Divisions, the area is a Metropolitan Division or is a portion thereof; or The area is a designated a Combined Statistical Area or a portion thereof; AND The Core Based Statistical Area, Metropolitan Division or Combined Statistical Area, or the portion thereof, must have a population of 2.5 million or less people. Compelling Evidence of Interaction or Common Interests--In lieu of a statistical area as defined above, this option applies when an area is substantially a Core Based Statistical Area or Combined Statistical Area, but also has an additional portion falling outside, and which is immediately adjacent to, the Core Based Statistical Area or Combined Statistical Area, and thus may demonstrate a sufficient level of interaction to qualify as a local community. For these situations, applicants have the option of submitting a narrative to NCUA to discuss how the residents meet the requirements for being a local community. NCUA will base its decision on a consideration of the following factors with respect to the proposed service area in its entirety: Economic Hub: Evidence indicates residents commonly travel to a geographically compact locale within the area for work and major commerce needs. Traffic flows, the presence of common or related industries, or unified economic planning demonstrate how the locales have economic interdependence. Population Center: Area has a dominant county or municipality with a significant portion of the area's population and evidence exists to support the relevance of the population center to all residents within the area. Quasi-Governmental Agencies: A quasi-governmental agency, such as a regional planning commission, covers the proposed service area in its entirety and derives its leadership from the area to advance meaningful objectives advancing the residents' common interests in economic development and/or improving quality of life. Success of agency in meeting its mission depends upon collaboration from throughout the area. Government Designations: A division of a federal or state agency specifically designates the proposed service area as its area of coverage or as a target area for specific programs. Shared Public Services/Facilities: Formal agreements exist that provide for a common need shared by all of the residents, such as common police or fire protection, or public utilities. Colleges and Universities: Evidence exists to demonstrate the common relevance of an institution or institutions to the entire area, such as unique educational initiatives to support economic objectives benefiting all residents and/or partnerships with local businesses or high schools. The rural district requirement is met if: Rural District-- The district has well-defined, contiguous geographic boundaries; The total population of the district does not exceed 1,000,000. Either more than 50% of the district's population resides in census blocks or other geographic areas that are designated as rural by either the Consumer Financial Protection Bureau or the United States Census Bureau, OR the district has a population density of 100 persons or fewer per square mile; and The boundaries of the well-defined rural district do not exceed the outer boundaries of the states that are immediately contiguous to the state in which the credit union maintains its headquarters (i.e., not to exceed the outer perimeter of the layer of states immediately surrounding the headquarters state). The affinities that apply to rural districts are the same as those that apply to well-defined local communities. The OMB definitions of Core Based Statistical Area and Metropolitan Division may be found at https://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. Access to these definitions is available through the main page of the Federal Register Web site at http://www.gpoaccess.gov/fr/index.html and on NCUA's Web site at http://www.ncua.gov. The requirements in Chapter 2, Sections V.A.4 through V.G. of this manual also apply to a credit union that serves a rural district. V.A.3--Previously Approved Communities If prior to July 26, 2010 NCUA has determined that a specific geographic area is a well-defined local community, then a new applicant need not reestablish that fact as part of its application to serve the exact area. The new applicant must, however, note NCUA's previous determination as part of its overall application. An applicant applying for an area after that date that is not exactly the same as the previously approved well defined local community must comply with the current criteria in place for determining a well-defined local community. V.A.4--Business Plan Requirements for a Community Credit Union A community credit union is frequently more susceptible to competition from other local financial institutions and generally does not have substantial support from any single sponsoring company or association. As a result, a community credit union will often encounter financial and operational factors that differ from an occupational or associational charter. Its diverse membership may require special marketing programs targeted to different segments of the community. For example, the lack of payroll deduction creates special challenges in the development and promotion of savings programs and in the collection of loans. Accordingly, to support an application for a community charter, an applicant Federal credit union must develop a business plan incorporating the following data: Pro forma financial statements for a minimum of 24 months after the proposed conversion, including the underlying assumptions and rationale for projected member, share, loan, and asset growth; Anticipated financial impact on the credit union, including the need for additional employees and fixed assets, and the associated costs; A description of the current and proposed office/branch structure, including a general description of the location(s); parking availability, public transportation availability, drive- through service, lobby capacity, or any other service feature illustrating community access; A marketing plan addressing how the community will be served for the 24-month period after the proposed conversion to a community charter, including detailing: how the credit union will implement its business plan; the unique needs of the various demographic groups in the proposed community; how the credit union will market to each group, particularly underserved groups; which community-based organizations the credit union will target in its outreach efforts; the credit union's marketing budget projections dedicating greater resources to reaching new members; and the credit union's timetable for implementation, not just a calendar of events; Details, terms and conditions of the credit union's financial products, programs, and services to be provided to the entire community; and Maps showing the current and proposed service facilities, ATMs, political boundaries, major roads, and other pertinent information. An existing Federal credit union may apply to convert to a community charter. Groups currently in the credit union's field of membership, but outside the new community credit union's boundaries, may not be included in the new community charter. Therefore, the credit union must notify groups that will be removed from the field of membership as a result of the conversion. Members of record can continue to be served. Before approval of an application to convert to a community credit union, NCUA must be satisfied that the credit union will be viable and capable of providing services to its members. Community credit unions will be expected to regularly review and to follow, to the fullest extent economically possible, the marketing and business plans submitted with their applications. Additionally, NCUA will [[Page 76773]] follow-up with an FCU every year for three years after the FCU has been granted a new or expanded community charter, and at any other intervals NCUA believes appropriate, to determine if the FCU is satisfying the terms of its marketing and business plans. An FCU failing to satisfy those terms will be subject to supervisory action. As part of this review process, the regional office will report to the NCUA Board instances where an FCU is failing to satisfy the terms of its marketing and business plan and indicate what supervisory actions the region intends to take. V.A.5--Community Boundaries The geographic boundaries of a community Federal credit union are the areas defined in its charter. The boundaries can usually be defined using political borders, streets, rivers, railroad tracks, or other static geographical feature. A community that is a recognized legal entity may be stated in the field of membership--for example, ``Gus Township, Texas,'' ``Isabella City, Georgia,'' or ``Fairfax County, Virginia.'' A community that is a recognized Core Based Statistical Area must state in the field of membership the political jurisdiction(s) that comprise the Core Based Statistical Area. V.A.6--Special Community Charters A community field of membership may include persons who work or attend school in a particular industrial park, shopping mall, office building or complex, or similar development. The proposed field of membership must have clearly defined geographic boundaries. V.A.7--Sample Community Fields of Membership A community charter does not have to include all four affinities (i.e., live, work, worship, or attend school in a community). Some examples of community fields of membership are: