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National Credit Union Administration Allows Expanded Field of Membership for Federal Credit Unions

The National Credit Union Administration released new field of membership rules for federal credit unions. The new rules expand what constitutes an occupational common bond and a community. Under the new regulations, for single common bond credit unions, an occupational common bond can include designations based on employment in a trade, industry, or profession (TIP). Therefore, a single common bond credit union can have a field of membership beyond a single employer if the members share the same profession or trade, or participate in the same industry.

The NCUA board stated that a TIP must be narrowly defined and, in most cases, will include a geographic limitation. However, if the credit union has a national field of membership or is operating in multiple states, it can request a TIP without a geographic limitation. The NCUA board also stressed that there must be a close nexus within the TIP; therefore, a company operating in one main industry and some other small industries will not be included in a single industrial common bond, but would still qualify for a single employer common bond.

In addition, the NCUA regulations expand what constitutes a local community for the purpose of granting community charters. Under the new rules, the NCUA board established three definitions of what constitutes a local community. First, any city, county, or smaller political jurisdiction, regardless of population size, is a local community and no documentation demonstrating that the political jurisdiction is a community is required. Second, any Metropolitan Statistical Area (MSA) or its equivalent, or a portion thereof, where the population of the MSA does not exceed one million, may be a local community. In order to be classified as a local community under the MSA standard, the credit union must submit a letter describing how the area meets the standards for community interaction and/or common interests. Third, the new rules increase the presumption of a local community from 200,000 residents to 500,000 residents for multiple jurisdictions that are not part of a single MSA. If the credit union meets the population criteria, it must also submit a letter describing how the area meets the standards for community interaction and/or common interests.

The NCUA board also clarified some issues regarding community charters. First, the NCUA board stated that a credit union with a community charter can apply to convert to serve a different community area. In addition, the new rule clarifies that persons or organizations who regularly do business in a community can be included in a community credit union's charter.

Some other highlights of the new NCUA regulations include:

  • Elimination of the mandatory factors for determining whether an associational common bond exists and instead adopting a totality of the circumstances test, with the former requirements included in the list of factors.

  • Elimination of overlap protection for single common bond credit unions, allowing more credit unions to compete and increasing consumer choice.

  • Expansion of the definition of a service facility for purposes of determining if a credit union is within reasonable proximity to the location of a group.

  • Elimination of the three-year prohibition on common bond credit unions converting to another type of charter, except a community charter. Common bond credit unions now can convert to any other type of charter without a time restriction.

  • Allowing a state chartered credit union converting to a federal charter to retain its field of membership in some cases even if it does not meet the federal field of membership requirements. However, any future expansions must comply with the federal requirements.

For more information regarding federal credit union field of membership requirements, contact Ryan Van Den Elzen at (414) 277-5455 / or your Quarles & Brady attorney.

The new NCUA regulations were published in the federal register on April 15, 2003 and will become effective May 15, 2003. A copy of the new NCUA regulations is available at

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