# Federal Credit Union Bylaws > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2019-20826 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** October 4, 2019 - **Citation:** 84 FR 53278 ## Text NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Parts 701 and 746 RIN 3313-AE86 Federal Credit Union Bylaws AGENCY: National Credit Union Administration (NCUA). ACTION: Final rule. SUMMARY: The NCUA Board (Board) is issuing a final rule to update, clarify, and simplify the federal credit union bylaws (FCU Bylaws). The final rule updates and conforms the FCU Bylaws to legal opinions issued by the NCUA's Office of General Counsel and provides greater flexibility to federal credit unions (FCUs). The final rule also makes other changes that are designed to remove outdated or obsolete provisions. DATES: The final rule is effective January 2, 2020. FOR FURTHER INFORMATION CONTACT: Rachel Ackmann, Senior Staff Attorney, Office of General Counsel, 1775 Duke Street, Alexandria, Virginia 22314, or by telephone at (703) 548-2601. SUPPLEMENTARY INFORMATION: I. Background and Legal Authority II. Summary of the Proposed Rule III. Final Rule and Discussion of the Comments IV. Regulatory Procedures I. Background and Legal Authority Background Section 108 of the Federal Credit Union Act (FCU Act) requires the Board to prepare periodically a form of bylaws to be used by FCU incorporators and to provide that form to FCU incorporators upon request. 1 FCU incorporators must submit proposed bylaws to the NCUA as part of the chartering process. Once the NCUA has approved an FCU's proposed bylaws, the FCU must operate according to its approved bylaws or seek agency approval for a bylaw amendment. 2 The FCU Bylaws are set out in Appendix A to part 701 of the NCUA's regulations. 3 The Board incorporated the FCU Bylaws into the NCUA's regulations to address concerns regarding bylaw enforcement. 4 As the Board stated in the final rule incorporating the FCU Bylaws, the FCU Act provides only two mechanisms for correcting bylaw violations: (1) Suspension or revocation of an FCU's charter or (2) placing an FCU into conservatorship. Aside from these extreme remedies, when adopting the final rule, the Board was concerned about identifying what, if any, supervisory action the NCUA could take to protect fundamental member rights. 5 By incorporating the FCU Bylaws into the NCUA's regulations, the Board believed that it could use additional regulatory tools, such as the issuance of a cease-and-desist order, to address material noncompliance with an FCU's bylaws. 1 12 U.S.C. 1758. 2 12 CFR 701.2(a). 3 12 CFR part 701, App. A. 4 72 FR 61495, 61496 (Oct. 31, 2007). 5 Specifically, these rights include the right to: (1) Maintain a share account; (2) maintain FCU membership; (3) have access to credit union facilities; (4) participate in the director election process; (5) attend annual and special meetings; and (6) petition for removal of directors and committee members. See 72 FR 30984, 30986 (June 5, 2007) (proposed rule). FCUs often express concerns that the FCU Bylaws do not provide sufficient operational flexibility to allow an FCU to respond to changing market practices or to address basic corporate governance matters in a prompt and efficient manner. These arguments are well taken. Accordingly, the NCUA has engaged in an ongoing review of the FCU Bylaws to determine what, if any, changes may be necessary to provide additional flexibility to FCUs. In 2013, the NCUA's Office of General Counsel consulted with representatives from the credit union industry regarding the FCU Bylaws. The NCUA received many comments during the 2013 consultation, many of which focused on relatively narrow aspects of the FCU Bylaws. For example, FCUs recommended that the NCUA provide more staff commentary on the meaning and interpretation of specific bylaw provisions. They also encouraged the NCUA to make a concerted effort to modernize the FCU Bylaws by using consistent terms throughout and deleting inapplicable language that is no longer useful. Commenters specifically recommended that the NCUA update the preamble to the FCU Bylaws and ensure that the instructions are current. On March 15, 2018, the Board issued an advance notice of proposed rulemaking (ANPR) soliciting comments on how to update, clarify, and simplify the FCU Bylaws. 6 The Board solicited comment on five specific questions related to: (1) Improving the bylaw amendment process within the NCUA; (2) addressing ambiguities in the FCU Bylaws allowing for an FCU to limit services to a member and expel a member; (3) methods to facilitate recruitment and development of directors; (4) methods to encourage member attendance at annual and special meetings; and (5) eliminating regulatory overlaps between the FCU Bylaws and the NCUA's regulations. The Board also invited general comments on improvements to the FCU Bylaws. 6 83 FR 12283 (Mar. 21, 2018). The Board received a wide variety of comments to the ANPR from FCUs, federally insured, state-chartered credit unions, national credit union trade associations, state credit union trade associations, and law firms. Commenters generally appreciated the Board's efforts to provide an enhanced opportunity to participate in the rulemaking process. Nearly all of the commenters raised issues with specific aspects of the FCU Bylaws and requested that the Board provide the greatest amount of regulatory relief permissible under the FCU Act. Legal Authority The Board is issuing this proposed rule pursuant to its specific authority in the FCU Act to adopt a form of bylaws to be used by FCU incorporators when chartering an FCU, 7 as well as its plenary authority to adopt rules and regulations for the administration of the FCU Act. 8 Given the importance of proper corporate governance procedures to the safe and sound operation of FCUs, the Board believes this proposed rule is a necessary and proper exercise of this statutory rulemaking authority. 7 12 U.S.C. 1753. 8 12 U.S.C. 1766(a). II. Summary of the Proposed Rule Based on the comments the Board has received in response to the ANPR and throughout its ongoing review of the FCU Bylaws, the Board issued a proposed rule on October 18, 2018. 9 The proposed rule incorporated many of the suggestions the Board received in response to the ANPR and throughout the NCUA's ongoing review of the FCU Bylaws. In addition, the proposed rule clarified provisions that have created confusion in the past, as reflected by the numerous inquiries the NCUA has received from FCUs and members. In some instances, a proposed change offered more detail or further elaboration to help FCU officials, employees, and members better understand a provision. 9 83 FR 56640 (Nov. 13, 2018). The proposed rule also made stylistic and grammatical changes throughout the FCU Bylaws, which provided for a much clearer and more readable document. For example, the proposed rule moved the entire body of staff commentary to the end of the FCU Bylaws, with corresponding references to the articles and section numbers that are the subject of the commentary. However, the proposed rule did not permit an FCU to draft its own bylaws. The FCU Act requires the Board to develop a form of bylaws that “shall be used” by FCU incorporators and mandates that FCUs operate according to their NCUA-approved bylaws. 10 While commenters to the ANPR and throughout the NCUA's ongoing review of the FCU Bylaws have advocated greater flexibility to develop their own bylaws, the Board continues to believe that having a uniform set of bylaws drafted by the NCUA is consistent with the FCU Act 11 and is necessary to protect fundamental member rights, to avoid confusion among FCUs, and to prevent the adoption of illegal bylaw provisions. 12 10 12 U.S.C. 1758. 11 See 71 FR 24551 (Apr. 26, 2006) (“NCUA's longstanding position has been that [the FCU Act] expresses a congressional desire for uniformity regarding FCU operations and member rights. Accordingly, NCUA views [the FCU Act] as providing authority to issue form bylaws that apply to all FCUs, not only newly chartered FCUs, and to review proposed bylaw amendments.”). 12 See 72 FR 30984, 30985 (June 5, 2007) (proposed rule) (uniform bylaws necessary to protect fundamental member rights, avoid confusion, and prevent adoption of illegal bylaws). III. Final Rule and Summary of the Comments The Board received 35 comments from FCUs, federally insured, state-chartered credit unions (FISCUs), national credit union trade associations, state credit union trade associations, and one individual who provides legal services to FCUs. The commenters generally appreciated the Board's efforts to modernize the FCU Bylaws and to eliminate regulatory burden where possible. Many commenters focused on two aspects of the proposed rule—the provisions governing limitation of services and expulsion of members. Furthermore, several commenters questioned whether it was necessary to codify the bylaws or requested that the Board allow FCUs to draft their own bylaws. As noted above, the Board does not believe that it is appropriate for FCUs to draft their own bylaws. All of the commenters also expressed concerns about specific aspects of the proposal. In response to the comments received, the Board has made several changes to the final rule. The specific details of the final rule, including changes as a result of the comments received, are discussed below. Introduction The proposed rule modernized the introductory language to the FCU Bylaws. It changed the instructions for bylaw amendments to reflect that the NCUA's Office of Credit Union Resources and Expansion (CURE) now is the primary office handling bylaw amendments and consults with the NCUA's Office of General Counsel, as necessary. The proposed rule also established an explicit 90-calendar-day deadline for CURE to reach a decision on a bylaw amendment. In the ANPR, the Board specifically requested comments on improving the bylaw amendment process. Commenters requested that the Board adopt a deadline for CURE to process bylaw amendments, with a majority favoring 30 calendar days. While the Board agreed in the proposed rule that the NCUA should process bylaw amendments as expeditiously as possible to allow the FCU to address any pressing operational concerns, the Board expressed concerns that 30 calendar days may be an insufficient amount of time. Accordingly, the proposed rule adopted a 90-calendar-day deadline. The Board believed that this time period would provide CURE with sufficient time to consider the bylaw amendment without imposing an undue operational burden on the FCU. The Board requested specific comments on this aspect of the proposed rule, including whether another time period, such as 60 calendar days, would be more appropriate to ensure that CURE processes proposed bylaw amendments in a timely manner. Commenters that responded to this aspect of the proposed rule appreciated the Board's effort to provide a clear timeline for CURE to process bylaw amendment requests. A majority favored a shorter deadline of 30 calendar days for CURE to make a decision. Some of these commenters suggested that the rule allow CURE to extend the deadline for particularly difficult bylaw amendment requests. Others favored 45 or 60 calendar days as a compromise. Only a few of the commenters believed that 90 calendar days was an appropriate timeframe for CURE to consider a bylaw amendment request. The Board is sympathetic to commenters' arguments that 90 calendar days may impose an undue burden on an FCU seeking approval of a bylaw amendment. However, the Board does not believe that a 30-calendar-day deadline for CURE to render a decision is appropriate especially in cases involving complex bylaw amendments. Accordingly, in the final rule, the Board is adopting a 60-calendar-day deadline for CURE to render a decision. The Board is convinced that 60 calendar days is an appropriate compromise between granting CURE sufficient time to render a decision on most bylaw amendment requests and remaining responsive to FCUs that may seek bylaw amendments to address pressing operational concerns. Commenters to the ANPR also requested that the Board automatically approve any bylaw amendment that CURE does not approve within this deadline. In the proposed rule, the Board noted that it does not believe that it is appropriate to approve proposed bylaw amendments automatically, as this could result in an FCU adopting a bylaw that has a material adverse effect on fundamental member rights, poses a safety and soundness risk to the FCU, or is otherwise contrary to law. Instead, the Board adopted an approach that treated the failure to approve a bylaw amendment by the prescribed deadline as a denial, which the FCU may then appeal pursuant to the appeals procedures set out in subpart B to part 746 of the NCUA's regulations. 13 13 12 CFR part 746, subpart B. The final rule makes a conforming amendment to subpart B of part 746. Nearly all commenters that responded to this aspect of the proposed rule expressed concerns about the proposed automatic denial. Most commenters requested that the NCUA approve bylaw amendment requests if CURE fails to meet this deadline. These commenters expressed concerns with automatic denial because FCUs would not know, and therefore not be able to correct, any potential defects in their bylaw amendment requests prior to an appeal. Commenters also noted that there are other areas of NCUA regulations that permit automatic approval. For example, net worth restoration plans for undercapitalized credit unions are automatically approved if the NCUA Board, or the delegated official, does not reach a decision within 45 days. 14 Commenters also argued that any delay on CURE's part should inure to the benefit of FCUs and not the NCUA. Finally, several commenters expressed concern about the lack of communication between CURE and FCUs. One commenter noted that FCUs could be left wondering whether an approval was in fact sent that the FCU somehow missed or did not receive, the proposed amendment was denied because of a substantive defect, or there was no substantive issue, but CURE could not review the amendment within 90 days. 14 12 CFR 702.206(f)(2). The Board does not believe that it is appropriate for the NCUA to approve proposed bylaw amendments automatically, as this could result in the adoption of illegal or unsafe and unsound bylaw provisions. Instead, the Board believes that the most appropriate approach is to treat CURE's failure to approve a bylaw amendment request as a denial, which the FCU may then appeal to the Board. The Board recognizes that some credit unions may wish to continue to work with CURE on bylaw amendments even if they have the right to appeal. Accordingly, the final rule permits CURE to request additional time from the FCU to process a bylaw amendment request. If CURE fails to render a decision, even after an extension of time, the FCU may appeal to the Board. To address commenters' concerns regarding appeals to the Board in the event that CURE fails to render a timely decision, the final rule requires CURE to provide the FCU with a list of any concerns that CURE has that the FCU may use as part of its appeal. The list must be provided to the FCU within 30 days of the denial. A few commenters also disagreed with the Board's statement that it may take action against minor or technical violations of an FCU's Bylaws. These commenters requested that the Board remove the word “generally” from the statement that it would not take action against minor or technical violations. The Board believes that the word “generally” provides sufficient flexibility to act in rare cases in which a minor or technical violation might warrant agency action while still expressing the Board's position that codification of the FCU Bylaws was not intended as a tool for the agency to pursue minor and technical violations. Article I. Name—Purposes Article I states the FCU's name and mission. The proposed rule amended section 2, which outlines the FCU's purposes, by changing the reference in the second sentence from “consumers” to “members.” The Board proposed to change this term because FCUs are not limited in their mission to serving consumers. There may be small businesses and other organizations within the field of membership that can benefit from the FCU's services, and this change is designed to reflect this benefit. Commenters that responded to this aspect of the proposed rule favored this change. As a result, the Board is adopting this aspect of the proposed rule without amendment. Article II. Qualifications for Membership Article II outlines the requirements for obtaining and continuing FCU membership. The proposed rule included an expanded discussion in the associated staff commentary of measures that an FCU may take to address abusive and disruptive members. In addition, to facilitate an FCU's implementation of any limitation of services policy, the proposed rule added a new section 5 to this Article, describing the concept of a “member in good standing.” So long as a member remains in good standing, that member retains all of the rights and privileges associated with FCU membership. A member not in good standing, however, may be subject to an FCU's limitation of services policy, but even a member deemed not in good standing retains fundamental rights as a credit union member, including the right to attend, participate, and vote at the annual and special meetings of the members, and maintain a share account. In the ANPR, the Board specifically requested suggestions on ways to clarify an FCU's right to limit services or restrict access to credit union facilities to disruptive or abusive members. Some commenters recommended that the Board incorporate into the FCU Bylaws prior legal opinions by the NCUA's Office of General Counsel addressing this matter. Those legal opinions state that an FCU may limit services or access to credit union facilities to violent, belligerent, disruptive, or abusive members, provided there is a logical relationship between the objectionable conduct and the services to be suspended. The member must also receive adequate notice of the FCU's limitation of services policy. 15 15 See OGC Op. No. 08-0431 (Aug. 12, 2008). The Board agreed in the proposed rule that incorporating these legal opinions into the FCU Bylaws was appropriate to provide additional clarity on an FCU's right to limit services or access to credit union facilities. Thus, the proposed rule included staff commentary to Article II, based on these prior legal opinions, that details how an FCU may handle an abusive or disruptive member. The staff commentary noted that there is a reasonably wide range within which an FCU may fashion a limitation of services policy that is tailored to the needs of the individual FCU. An FCU has broad discretion to deny, as it deems appropriate, all or most credit union services, such as ATM services, credit cards, loans, share draft privileges, preauthorized transfers, and access to credit union facilities to a member that has engaged in conduct that has caused a loss to the FCU or that threatens the safety of credit union staff, facilities, or other members in the FCU or its surrounding property. Accordingly, an FCU may take immediate action to address situations in which a member is violent, belligerent, disruptive, or poses a threat to the credit union, or other members, or its employees even if the FCU Act prohibits the FCU from immediately expelling the member. The staff commentary also noted that the policy need not be identical or applied uniformly in all cases, provided that the FCU has a legitimate purpose for any disparate treatment of members. For additional clarity, the staff commentary contained cross-references to procedures that FCUs must use to expel a member, and it refers to Article XVI, § 1 of the FCU Bylaws, which contains language reiterating that no member may access or utilize an FCU's services in furtherance of an illegal objective. A vast majority of the commenters that addressed this aspect of the proposed rule appreciated staff commentary explaining the measures that an FCU may take to address abusive and disruptive members through a limitation of services policy. These commenters noted that this change is useful to FCUs because it consolidates all prior NCUA Office of General Counsel Legal Opinion Letters in one place within the regulation. However, a small number of commenters opposed this change. They argued that codifying the NCUA's prior opinions into the Code of Federal Regulations eliminated any flexibility for FCUs to exercise business judgment regarding limitation of services policies. The Board continues to believe that incorporating prior NCUA Office of General Counsel Legal Opinion Letters into the staff commentary of the FCU Bylaws will be a useful compliance tool for FCUs that may have questions regarding the scope of an FCU's authority to impose a limitation of services policy on a member. The Board does not agree that codification of these legal opinions in the NCUA's regulations will eliminate any flexibility for FCUs to exercise business judgment regarding limitation of services policies, as the agency expects FCUs to implement their bylaws consistently with its legal opinions, regardless of whether they are incorporated into the Appendix. The sole purpose of codification is to provide FCUs with easy access to authoritative opinions issued by Office of General Counsel staff regarding the meaning of the FCU Bylaws. Accordingly, the Board is adopting this aspect of the staff commentary with no material changes. 16 16 One technical change was made to the staff commentary. The proposed rule stated that FCUs must disclose any limitation of services policy to new members when they join and notify existing members of the policy at least 30 days before it becomes effective. The final rule, instead, states FCUs must provide notice of this policy, but characterizes the timeframe for providing the notice as an expectation rather than a requirement. The cited statutory provision, which relates to expulsion based on nonparticipation, has been removed to avoid conflating these subjects. To facilitate an FCU's implementation of its limitation of services policy, the proposed rule amended Article II to distinguish between a member that retains all the rights and privileges associated with FCU membership and a member that is subject to a limitation on services or a restriction on access to credit union facilities. As noted, the proposed rule added a new section 5, describing the concept of a “member in good standing.” A member in good standing retains all the rights of FCU membership. To remain in good standing, a member must maintain the minimum share established by the FCU's bylaws, not be delinquent on credit union loans, not have had any account closed due to abuse or negligent behavior, avoid engaging in any violent, belligerent, disruptive, or abusive behavior towards credit union staff or other credit union members in the FCU or its surrounding property, and not cause a financial loss to the FCU. A member that fails to observe any of these basic requirements may be subject to reasonable limitations of services or access to credit union facilities pursuant to the FCU's limitation of services policy. A vast majority of the commenters that addressed this aspect of the proposed rule approved of the new section creating a “member in good standing” policy. These commenters argued that the “member in good standing” policy would make it easier for FCUs to enforce limitation of services policies. One commenter proposed additional clarifying language to Article II, § 4 and asked the Board to create a new section that addressed the duties of members. In contrast, a small number of commenters opposed this change. They argued that a “member in good standing” policy would be unduly restrictive and prohibit FCUs from tailoring limitation of services policies to the unique needs of the individual FCUs. The Board disagrees that new section 5 restricts the ability of FCUs to tailor limitation of services policies to the unique needs of individual FCUs. In fact, it grants an FCU broad discretion on how to handle a member not in good standing through its limitation of services policy. This provision neither dictates the content of an FCU's limitation of services policy nor defines its scope. Rather, new section 5 merely provides FCUs with a convenient tool to inform members that they may be subject to limitation of services by virtue of their status as a member not in good standing, depending on the specific policy adopted by the FCU's board. It also clarifies that even if that member is not in good standing, the member still enjoys certain fundamental rights of credit union membership. Because the Board believes the benefits of this new provision outweigh any theoretical costs, it is adopting this aspect of the proposed rule. One commenter requested that the definition of member in good standing be limited to members who are not significantly delinquent, instead of any delinquency. The Board agrees. A member should not be subject to a limitation of service for any delinquency, such as a single missed payment. An FCU should reserve limitation of services to substantial and material delinquencies. Therefore, the final rule provides that a member may be subject to a restriction of services only if the delinquency is significant. In the proposed rule, the Board recognized that terms such as “violent,” “belligerent,” “disruptive,” and “abusive” are subjective and, therefore, may not provide FCUs with absolute clarity regarding the circumstances under which a limitation of services or access to credit union facilities may be appropriate. Accordingly, the Board requested comments on ways to clarify these terms, including whether specific examples of offending conduct would be beneficial. Depending on the persuasiveness of the comments, the Board noted that it might incorporate such examples in the staff commentary. In response to comments, the Board is adopting clarifying language to section 5. These amendments further clarify the circumstances under which an FCU may impose a limitation of services policy consistent with existing NCUA Office of General Counsel legal opinion letters and outline the obligations of members. Commenters were split on whether the Board should provide examples of conduct that may be considered “violent,” “belligerent,” “disruptive,” or “abusive.” The Board believes that examples of conduct would be beneficial and notes that such a list is merely for illustrative purposes and it is not intended to be all-inclusive. Accordingly, the final rule incorporates staff commentary that provides examples of such conduct. As the Board noted in the proposed rule, it believes that, without question, certain actions warrant immediate limitation of services or access to credit union facilities, such as violence against other credit union members or credit union staff in the credit union facility or the surrounding property. Other actions, such as rude behavior or potential threats of violence, may warrant limitation of services or restrictions on access to credit union facilities based on the specific facts and circumstances. The Board notes that, in addition to the rights granted under Article II, an FCU may immediately take actions such as contacting local law enforcement, seeking a restraining order, or pursuing other lawful means, to protect the credit union, credit union members, and staff. Nothing in the FCU Act or the FCU Bylaws prevents an FCU from using whatever lawful means it deems necessary to address circumstances in which a member poses a risk of harm to the FCU, its members, or its staff. Article III. Shares of Members Article III provides basic information about issues related to members' share accounts, including the par value of the membership share, trust accounts, and membership status of joint account holders. The proposed rule added new language under Section 1 to provide representative examples for FCUs to choose in establishing varying par values for different classes of membership (such as students, minors, or non-natural persons), provided that such differences conform to applicable legal requirements established by federal, state, or municipal anti-discrimination laws. The new language also clarified that FCUs have options regarding whether to require all members to maintain a regular share account or to permit members to base their qualification for membership on some other type of account. Additional staff commentary elaborated more fully on this option. The proposed rule revised the text of Article III to incorporate plain English writing principles and deleted unnecessary provisions. Commenters to the ANPR requested that the Board provide additional guidance on trust accounts. New staff commentary in the proposed rule addressed some of the considerations that apply in the context of trust accounts, including a discussion of the pertinent differences between revocable and irrevocable trusts. It also clarified that, in the case of a revocable trust, the individual who establishes the trust (also known as the settlor) maintains ownership and control of the funds during that person's lifetime. Thus, the staff commentary clarified that the NCUA requires the settlor to join the FCU in order to establish a revocable trust account for that individual, thus requiring the settlor to be within the FCU's field of membership. The staff commentary noted that there is no requirement that the settlor first establish a regular share account to become a member. Rather, the settlor may satisfy the membership through the opening of the revocable trust account itself. One commenter asked for the FCU Bylaws to define the term settlor. The Board believes the term is well defined by its customary usage. In contrast, the staff commentary clarified that membership requirements for an irrevocable trust account may be met through the settlor, who is the original owner of the funds, or the beneficiary, who obtains an equitable, beneficial interest in the funds once the trust is established. So long as one or the other is eligible for membership, then the FCU may accept the account. As with revocable trusts, the membership obligation can be satisfied through the opening of the trust account itself, so it is not necessary for the beneficiary or the settlor, as applicable, to establish a regular share account as a condition precedent to membership. Furthermore, the trustee need not actually be a member of the FCU. Many irrevocable trusts have a trustee, and the NCUA received a comment on whether membership requirements for an irrevocable trust may be met through the trustee. While the trustee has administrative responsibility for the account, the trustee has no ownership interest in the account and is, therefore, irrelevant for purposes of establishing membership. The staff commentary also noted that a trust itself, whether revocable or irrevocable, may be a member of an FCU in its own right if all parties to the trust, including the settlors, beneficiaries, and trustees, are within the field of membership. Some commenters asked clarifying questions on whether a trust must be a member in its own right and whether an FCU must view the trust as a separate legal entity. In addition, several other commenters included specific questions on trusts. These questions generally required more information or knowledge of state trust laws to answer and generally went beyond the scope of the rule. Commenters that responded to this aspect of the proposed rule appreciated the representative examples that an FCU may choose from in establishing the par values of different classes of membership and the additional flexibility for establishing membership through one or more of these accounts. Commenters also appreciated the clarifications regarding trust accounts in the staff commentary. As a result, the Board is adopting this aspect of the proposed rule without amendment. Article IV. Meetings of Members Article IV addresses procedures related to annual and special meetings of an FCU's membership. In the ANPR, the Board specifically requested comments on methods to encourage member attendance at annual and special meetings. The proposed rule made several changes to Article IV to encourage greater member participation, including enhanced notice requirements and adjustments to quorum requirements. To ensure that members receive adequate notice of an annual or special meeting, the proposed rule required that the notice for the annual meeting be posted in a conspicuous place in the FCU's physical office, such as at teller windows or on the front door of the FCU's office, at least 30 calendar days before the meeting. The notice must also be prominently displayed on the FCU's website if the FCU then maintains a website. An FCU is not required to establish and maintain a website solely for this purpose, however. Most commenters stated that an FCU should be required either to post the notice in a conspicuous place or on its website, but not both. The Board disagrees. The Board believes that these changes are appropriate because members are more likely to participate in annual and special meetings if the notice is widely announced. One commenter also asked if posting a meeting notice on its online calendar was considered conspicuous. The Board is clarifying that adding it as a date on a credit union calendar is considered conspicuous, so long as the calendar is easily accessible from the FCU's main web page. The proposed rule also deleted the option to waive prior notice if all members entitled to vote waived the notice requirement. The Board did not receive any comment on this section and is finalizing it as proposed. A few other commenters also recommended removing the provision setting the maximum amount of notice that may be provided to members of an annual meeting. The Board is declining to remove the maximum amount of notice because notice that is reasonably close to the meeting is important to encourage member engagement. The Board notes, however, that nothing precludes an FCU from providing additional notice. In the staff commentary, the proposed rule encouraged FCUs to provide a live webcast of annual and special meetings for interested members, as well as post a video of the annual meeting on the FCU's website. The NCUA encouraged this policy only for FCUs with a website at the time of any such meeting; nothing requires FCUs to establish or maintain a website solely for this purpose. This policy encourages members to participate in the annual meeting, while also providing access to members who cannot attend meetings in person. A few commenters objected to encouraging FCUs to provide a live webcast of annual and special meetings. One commenter believed this would be confusing, as members could not vote or participate in the meeting, but could only passively view the webcast. The Board believes members would benefit from having a webcast of the meeting because it supports member engagement. If an FCU is concerned about member confusion, it may include a disclaimer that viewing the webcast does not permit the member to vote. The Board is finalizing this provision as proposed. The proposed rule also adjusted the quorum requirement for meetings. It required twelve members, excluding the board, credit union staff, and officials, for a quorum. Commenters were generally opposed to this provision and did not believe it would achieve the Board's goal of additional member engagement, although a minority of commenters supported the proposed policy. Several commenters stated that the quorum changes treat board members and staff as inferior members because their presence at the meeting would be insufficient to establish quorum. One commenter believed that forcing attendance would lead to added expense, such as for food, entertainment, and prizes. Another commenter stated that happy members usually do not attend meetings. Other commenters were concerned this change would cause most annual meetings to be adjourned for a lack of quorum, followed by decisions reached by a less than optimal sub-quorum at a subsequent meeting. Finally, one commenter recommended that the NCUA allow a quorum to consist of a proportionate number of members who are directors and employees so long as a certain number of members who are not directors and employees are also present. The Board has reconsidered its policy and is not adopting this proposed change. The Board proposed this change in a desire to encourage FCUs to have wider participation from members, rather than allowing staff and board members to control all corporate decision making within the FCU. The Board continues to believe that wide member engagement is important and that FCUs should be creative in ways to expand member involvement in FCU decision-making. The Board, however, has reconsidered whether this provision would effectively achieve its objective to increase member engagement. Therefore, under the final rule, any 15 members of the FCU establish a quorum at an annual or special meeting. The proposed rule did not change the total number of member signatures required to call a special meeting. During the 2013 consultation process with members of the credit union industry, commenters favored increasing the total number of member signatures required to call a special meeting. They stated that special meetings are expensive and time-consuming to conduct and, thus, should be reserved for matters of interest to a broad group of members. One commenter specifically requested requiring a percentage based on the number of members instead of providing a fixed number of maximum signatures. These comments are well taken and the Board believes that in some instances a percentage based on the number of members may be appropriate as long as it does not disenfranchise members. The Board does not generally favor adopting a blanket percentage in all circumstances, however, given its potential to disenfranchise members of smaller FCUs. The Board believes that a preferable approach is to continue the NCUA's current practice of considering requests from individual FCUs on a case-by-case basis. Finally, the proposed rule did not generally allow an FCU to conduct a virtual or hybrid (combined virtual and in-person) annual or special meeting. Commenters were almost universally against this policy and noted that at least 22 states currently permit corporations to host virtual or hybrid meetings, with several of those states extending the same flexibility to state-chartered financial institutions. The commenters argued that FCUs with the appropriate size, complexity, and sophistication should be allowed to take advantage of these solutions to provide greater flexibility for their members to attend annual or special meetings. The Board finds commenters' arguments persuasive. The Board continues to believe that the best way to support member engagement with the FCU is to require in-person meetings generally. The Board, however, recognizes that offering a chance to participate virtually, as a complement to an in person meeting, has the potential to increase overall member attendance and governance. Therefore, all FCUs have authority to conduct hybrid meetings. The Board cautions that FCUs should conduct hybrid meetings only if they have the operational capacity to utilize the necessary technology successfully. The Board is concerned that members may choose to forgo in-person attendance and then, due to technological difficulties, be unable to participate virtually. If technological difficulties prevent members from engaging in the meeting as anticipated, the Board expects FCUs to provide another similar opportunity for member engagement. Additionally, any FCU that chooses to conduct hybrid meetings should ensure adequate cybersecurity protections. One commenter suggested offering a registration link whereby a member's identity could be confirmed or using multifactor authentication to ensure a sufficient level of privacy and security protections are in place to prevent instances of identity fraud. The Board believes that only FCUs with the appropriate infrastructure and capabilities should conduct hybrid meetings. At this time, the Board does not favor completely virtual meetings. The Board notes that a movement towards completely virtual meetings in an effort to increase member access to meetings could unintentionally result in member disenfranchisement. The Board is particularly concerned with the rights of members who do not have access to electronic devices or who may live in areas without access to broadband internet. To avoid the possibility of member disenfranchisement, the Board is not allowing a virtual meeting to completely supplant a member meeting. Therefore, as stated above, FCUs holding hybrid meetings must always offer an option for in-person attendance as well as online. The FCU Bylaws already grant an FCU considerable discretion to hold meetings in a location that is convenient for most of its members. Article IV allows an FCU to hold an annual or special meeting in the county in which any office of the FCU is located or within a radius of 100 miles of such an office, provided that the FCU does not pick a location designed to limit member participation or that has such an effect. Accordingly, the Board believes that an FCU has sufficient flexibility to ensure broad participation from members without the need for entirely virtual meetings and would be reluctant to approve any bylaw amendment allowing for entirely electronic voting. The Board encourages FCUs to be mindful when selecting a location for a member meeting to choose a location that maximizes member participation. Article V. Elections Article V addresses procedures for electing FCU Board members, and allows FCUs to select one of four options for conducting nominations and elections. For each of the four options for conducting nominations and elections, the proposed rule amended the procedures for the nominating committee, including adding a requirement that the nominating committee widely publicize the call for nominations to all members and interview every member who volunteers. The Board sought specific comments on this change. Commenters were divided on whether to widely publicize to all FCU members the call for nominations. Most commenters objected to this policy, though a few supported it as encouraging member participation. In addition, the Board sought comments on whether the secretary should post the nominations by petition along with those of the nominating committee on the FCU's website (if the credit union maintains a website). A few commenters stated that posting the nominations in a conspicuous place in each FCU office and on the FCU's website was unduly burdensome. The Board continues to believe that widely publicizing the nomination process and posting the nominations by petition on the FCU's website is only a nominal burden, but will provide more opportunities for member participation. Therefore, the Board is finalizing this provision as proposed. The proposed rule also required the nominating committee to interview each member who volunteers. Commenters unanimously objected to the proposal that the nominating committee interview every applicant, arguing that such a requirement would unduly burden the nomination process. Commenters generally stated that requiring all candidates to be interviewed requires significant time from the nomination committee, and interviews would have to be completed within 30 days of appointment, which would not be feasible in certain circumstances. One commenter noted that it recently received between 50 and 60 applications for one position. The credit union interviewed several people, but it would have been burdensome, according to the credit union, if it were required to interview every person that volunteered. The Board has reconsidered its position, as commenters presented reasonable arguments that such a requirement could unduly burden the nomination process. Under the final rule, the nominating committee is not required to interview every candidate and instead is required to interview only the applicants that meet certain objective qualifications established by the nominating committee. The Board believes this approach provides flexibility to FCUs while also encouraging greater member participation. For example, under the final rule, if a nominating committee receives a large number of applications, it has the flexibility to adopt selective criteria to determine which applicants to interview. The Board encourages each nominating committee to consider establishing criteria to promote diversity on the FCU's board in a manner consistent with applicable law. The proposed rule also provided staff commentary clarifying electronic voting. The staff commentary stated that an FCU may use as many forms of electronic voting ( e.g., mobile phone or internet) as it wishes for those members who choose to vote electronically. However, the proposed rule did not allow an FCU to adopt an entirely electronic voting process. Commenters overwhelmingly requested electronic-only voting as a standard option. While modern technological innovations have changed the way that corporations and other businesses conduct meetings and hold elections, the Board remains concerned that allowing electronic-only voting could disenfranchise those members who do not have access to electronic devices or who may live in areas without access to reliable internet service. Specifically, electronic-only voting presents substantial concerns regarding member disenfranchisement, particularly in rural areas with lack of access to reliable internet. The Board also believes that the differences in operational capacities among FCUs are too great to allow electronic-only voting as a standard option. The NCUA will, however, consider bylaw amendment requests allowing for electronic-only voting on a case-by-case basis. The Board also specifically sought comment on whether the FCU Bylaws should include an additional option for conducting elections that would allow FCUs to use a combination of voting methods without needing to make individual requests to do so. Commenters expressed support for including such flexibility in the FCU Bylaws. One credit union stated that permitting members to vote online, in person at a branch, or by requesting a ballot, increased the percentage of its membership participating in elections by an average of 250 percent compared to the five years prior. The Board has declined to expand the FCU Bylaws to include this option. The Board believes that not all FCUs have the operational capacity to use a combination of voting methods successfully. Therefore, the final rule will continue to require FCUs that want to combine voting methods to make individual requests to the NCUA. The proposed rule included a recommendation that FCUs use an age not greater than 21 years as the minimum age for holding elective or appointive office. One commenter stated that encouraging a minimum age higher than 21 years could have the unintended consequence of rendering fewer members—who would otherwise be qualified and eager candidates—able to participate in the governance of the credit union. Further, to assist with the development and recruitment of board members, a credit union may be looking to cultivate young and talented members. In order to facilitate greater flexibility, the commenter recommended that the NCUA remove the instructions specifically encouraging the adoption of a resolution regarding the minimum age. The Board has not amended the recommendation, but is clarifying that it has no objections if an FCU uses an age younger than 21 years. The proposed rule also provided staff commentary clarifying procedures for uncontested elections. The staff commentary noted that three of the options for conducting nominations and elections provide for elections by acclamation or consensus when the number of nominees for board positions equals the number of positions to be filled. These options do not permit nominations from the floor at the meeting because members must be provided a ballot in advance of the member vote. Therefore, a petition is the only way to nominate a candidate not on the nominating committee's slate. The staff commentary also highlighted that section (1)(c) in each of these options requires the notice to members to include the fact that there are no nominations from the floor at the meeting, as well as a notice that the FCU will not conduct a vote by ballot if the number of nominees equals the number of positions to be filled. The Board is finalizing this provision as proposed. Article VI. Board of Directors This Article provides the requirements related to the board of directors, such as the number of members, the composition of the board, the terms of office, and the responsibilities of the board. It also describes the regular and special meetings of the board. In addition, this Article provides the requirements for quorums, attendance and removal of board or credit committee members, and the suspension of supervisory committee members. As part of the 2013 consultation process with members of the credit union industry, the NCUA received comments suggesting that the FCU Bylaws be revised to provide specific guidance to FCUs interested in establishing director emeritus and associate director positions. Commenters suggested that greater flexibility in regard to these types of arrangements will enable an FCU to better plan for vacancies in board positions and retirements among current directors. They also recommended enhanced flexibility regarding the composition of the board and reorganization of board duties. Moreover, commenters requested greater flexibility with regard to options concerning attendance by directors at meetings, and criteria and procedures by which incumbent directors may be removed. Commenters to the ANPR reiterated the need for additional guidance on associate director positions. In the proposed rule, the Board noted its agreement that an FCU should have the ability to establish, as a matter of FCU board policy, the position of director emeritus for former directors who faithfully fulfilled their responsibilities as members of the board for at least a specified minimum number of years. Accordingly, the proposed rule included a new section 10 that an FCU may adopt to create such positions. It also included specific staff commentary to this section that stated that the decision to establish a director emeritus position, as well as any selection of individuals to become directors emeriti, is solely within the discretion of the FCU's board. The staff commentary clarified that a director emeritus may attend and participate in board meetings, but may not vote on any matter before the board or exercise any official duties of a director. To provide additional guidance to FCUs on associate director positions, the proposed rule clarified, through staff commentary, that an FCU may establish associate director positions through board policy. The staff commentary noted that the purpose of these positions is to provide qualified individuals with an opportunity to gain exposure to board meetings and discussions, but without formal director responsibility or the right to vote. As with the director emeritus position, the decision to establish an associate director position, as well as the selection of the individual(s) to become associate directors, is solely within the discretion of the FCU's board. Commenters to this aspect of the proposed rule overwhelmingly favored these changes to Article VI of the FCU Bylaws. As a result, the Board is adopting these aspects of the proposed rule without amendment. The Board notes that one commenter suggested that the NCUA offer free training and volunteer education sessions for board members and associate directors. The Board notes that it has published resources for volunteer board members, including a description of the duties of directors. 17 17 See Letter to Credit Unions 11-FCU-02, Duties of Federal Credit Union Boards of Directors (Feb. 2011). To provide FCUs with greater flexibility to address concerns regarding director and credit committee member attendance at monthly meetings, the proposed rule amended the option for FCUs to remove a director or a credit committee member for failure to attend regular meetings. The current FCU Bylaws language allows FCUs to remove a director or credit committee member who has missed meetings for 3 consecutive months or 4 meetings in a calendar year. Under the proposed rule, an FCU could remove a director or credit committee member for missing meetings for 3 consecutive months or for missing 4 meetings within any 12 consecutive months. The Board believed this change would provide FCUs with greater flexibility to address situations in which a director or credit committee member misses a substantial number of meetings but would otherwise not qualify for removal because the missed meetings do not all occur within the same calendar year. In addition, the proposed rule added language to allow FCUs to choose whether directors or credit committee members may be paid employees after such positions end. Commenters to this aspect of the proposed rule also favored these changes to Article VI of the FCU Bylaws. As a result, the Board is adopting this aspect of the proposed rule without amendment. The proposed rule also added language that clarifies the existing restriction on the number of employees and family members of employees who may simultaneously serve on the board. The NCUA has received numerous questions regarding this issue since the FCU Bylaws were first incorporated into the NCUA's regulations in 2007. The current bylaw language prohibits FCU employees, their family members, or a combination of FCU employees and their family members from constituting a majority of the board. The purpose of this restriction is to prevent conflicts of interest that may arise when a majority of the board has a personal or pecuniary interest in a matter currently being reviewed by the board. The Board has historically interpreted this provision of the FCU Bylaws to prohibit any combination of FCU employees, their family members, or FCU employees and their family members from constituting a majority of the board. To provide FCUs with additional clarity, the proposed rule stated that the total number of current voting directors serving who fall into the following categories must not constitute a majority of the board: (1) Management officials plus assistant management officials plus other employees; (2) immediate family members or persons in the same household as the management officials, assistant management officials, and other employees; or (3) management officials plus assistant management officials plus other employees, plus immediate family members or persons in the same household as management officials, assistant management officials, and other employees. The Board believed that this clarification would provide additional guidance to FCUs on this restriction. Commenters to this aspect of the proposed rule favored these changes as providing additional clarity regarding the existing restriction on the number of employees and family members of employees who may simultaneously serve on the board. As a result, the Board is adopting this aspect of the proposed rule substantively as proposed. 18 18 There is a minor wording change for clarification that does not change the substance of this provision. For FCUs that elect not to have a specifically appointed credit committee, the proposed rule added two new options to provide additional flexibility in addressing an applicant's request for review of a denied loan application. The FCU Act requires a board, at the request of the applicant, to review any application that has been denied by a loan officer. 19 The FCU Bylaws allow the board, in its discretion, to establish subcommittees for the purpose of reviewing, at the request of an applicant, loan applications that have been rejected. These subcommittees are comprised of three members that serve a regular term of two years and function as mid-level appeal committees for the review of denials. The board itself must, at the request of an applicant, continue to review all applications denied by any such subcommittee. These two new options allowed for FCUs to choose different ways to form the committee and select terms for the committee members. 19 See 12 U.S.C. 1761c(b) (“If there is not a credit committee, a member shall have the right upon written request of review by the board of directors of a loan application which has been denied.”). Under the first new option, the board may elect to establish a subcommittee of three members and two alternates. The term of office of the subcommittee members may be for up to 3 years. Any number of lending professionals within the FCU may serve on the subcommittee, provided that no loan officer reviews any loan that the loan officer denied. At least 3 members of the subcommittee must review loan denials, none of whom have been a party to denying the loan. Under the second new option, the board may, by resolution, change the number of committee members to an odd number no less than 3 and no more than 7. The board must set the length of each subcommittee member's term upon appointment and stagger terms to prevent a complete turnover of subcommittee members. This option requires the board to file a copy of the resolution covering any increase or decrease in the number of subcommittee members with the official copy of the FCU's bylaws. A few commenters favored the inclusion of these two options to provide FCUs with additional flexibility in addressing an applicant's request for review of a denied loan application. As a result, the Board is adopting these options in the final rule without amendment. One commenter suggested that the language permitting a board to take action and vote on resolutions without a meeting should occur outside of special meeting parameters. The Board is clarifying that this provision is not limited to special meetings and is for any action that has unanimous consent. The proposed rule also added staff commentary that encouraged FCUs to form a board of directors that reflects the FCU's field of membership. Commenters to this aspect of the proposed rule objected that the Board should not mandate diversity on FCU boards. The Board notes that the staff commentary does not create any requirements for an FCU's board of directors. This policy encourages FCUs to consider all members in its leadership. The Board believes that credit unions should strive to have a board that reflects their membership to the greatest extent possible. Finally, the proposed rule added staff commentary that encourages FCUs to notify members, through a website posting (if the credit union then maintains a website), whenever the FCU's board adopts a resolution that changes the size of the FCU's board of directors. An FCU that does not then maintain a website can post such a notice in a conspicuous place in the FCU's offices, such as at teller windows or on the FCU's front doors. Commenters to this aspect of the proposed rule argued that such a requirement would be unduly burdensome on credit unions. The Board does not believe that notifying members through existing online channels presents an undue burden on credit unions and is adopting this aspect of the proposed rule. Article VII. Board Officers, Management Officials and Executive Committee Article VII provides the requirements related to board officers, such as their election and their terms of office. It lists the duties of the chair, vice chair, financial officer, management officials, and secretary of the board. Article VII also explains the board powers regarding employees and the provisions for an executive committee and an investment committee. The proposed rule made certain clarifications and improvements to the readability of the language in this Article. For example, this Article utilizes the term “financial officer,” and the NCUA has received comments that this term is confusing. The proposed rule, therefore, modified the definition of “financial officer” in Article XVIII to mean “treasurer.” The proposed rule also updated the language in section 8 to allow different options for addressing when directors or committee members may serve as paid employees of the credit union after their terms as directors and/or committee members have ended. The proposed rule added more staff commentary under this Article, addressing procedural questions that arise in connection with specified board officer positions that may be held by directors, such as the president, vice president, and secretary of the board. The staff commentary clarified that officers hold their respective board officer positions for a term of one year, until the first board meeting following the next annual meeting of the members. At that board meeting, board officer positions are again filled. Each board officer holds his or her position until the election and qualification of his or her successors. Thus, a board officer who is re-elected to the position the officer is currently holding serves for another year. Where another director is chosen to fill the position, the director takes office effective as of the date of the election, assuming the director is qualified. The proposed rule also added staff commentary to address questions relating to temporary appointments of board officers, succession, replacement of director positions that may have become vacant between election cycles, and notifying members about membership on FCU committees. The staff commentary noted that, in the absence of both the chair and vice chair, those directors who are present at a meeting may select from among themselves an individual director to act as temporary chair for that particular meeting. Actions taken by the board under the direction of the temporary chair have the same validity and effect as if taken under the direction of the chair or the vice chair, provided a quorum of the board, including the temporary chair, is present. There is no requirement for the board to ratify actions taken under the temporary chair at a subsequent meeting of the board where either the chair or vice chair are present. One commenter requested additional clarity on the interaction between the FCU's board of directors and its supervisory committee. The commenter recommended clarifying that the supervisory committee is a committee of the board and that it must submit its audits to the FCU's board and the NCUA. The Board believes the FCU Act is clear that the supervisory committee must submit a report of its audit to the board of directors and that additional clarity in the FCU Bylaws is unnecessary. 20 20 12 U.S.C. 1761d. The Board did not receive many comments on this section, but the ones received were generally favorable. Accordingly, the Board is adopting these changes as proposed in the final rule. Article VIII. Credit Committee or Loan Officers This Article provides the requirements for the credit committee, if an FCU elects to have one. This Article also lists the requirements for loan officers if an FCU does not have a credit committee. The proposed rule modernized the language of this Article and incorporated plain English writing principles. In addition, the proposed rule incorporated into the FCU Bylaws several NCUA Office of General Counsel opinion letters permitting FCUs to use automated systems to process, underwrite, and fund loans under certain conditions. Commenters to this aspect of the proposed rule favored this approach. One commenter, however, objected to the requirement that if an FCU uses an automated lending system, a credit committee or loan officer must review a sample of the loans for fraud. The Board believes this is an important safety and soundness function. In addition, the Board notes that this requirement will present only a minimal amount of burden, as it requires reviewing only a sample of approved loans. As a result, the Board is adopting these changes in the final rule without amendment. The Board also notes that in addition to ensuring the automated system is functioning within the lending policies the board has established, the credit committee or loan officer should ensure the automated system is compliant with all applicable laws. Article IX. Supervisory Committee Article IX provides the requirements for the supervisory committee, such as the appointment and membership of the committee, its duties, and the required officers. This Article also lists the powers of the supervisory committee. The FCU Act requires each FCU to have a supervisory committee. The supervisory committee must conduct or arrange for annual audits and verify members' deposits at least once every two years. 21 The NCUA has assigned additional duties to FCUs' supervisory committees, including having them serve as an initial forum for hearing FCU members' complaints. 22 21 12 U.S.C. 1761d. 22 See 12 CFR 715.3. The proposed rule modernized the language of this Article. In addition, the proposed rule deleted paragraph (c) of section 3, as it is duplicative of paragraph (b). During the 2013 consultation process, commenters requested a number of changes to this Article to allow for greater flexibility. For example, one commenter requested that the Board amend section 3 to allow an FCU to call a special meeting 30 calendar days after all director positions become vacant, rather than the 7 to 14 calendar days currently set out in the FCU Bylaws. Another commenter requested that the Board amend section 6 to limit the actions members could take at a special meeting called to consider allegations of unsafe or illegal activity by an FCU director or credit committee member. These requested changes require statutory amendments to the FCU Act, so the proposed rule did not include any other substantive changes to this Article. One commenter asked that FCUs be permitted to add alternative supervisory committee members. The Board is unaware of an existing problem with supervisory committee members requiring alternatives and does not believe alternative members are necessary at this time. The Board did not receive any other comments regarding these specific changes. 23 As a result, the Board is adopting these changes as proposed. 23 The Board received a number of helpful recommendations from one commenter that primarily represents credit unions. Unfortunately, those recommendations are outside the scope of the proposed rule. However, the Board will keep these recommendations on file and may consider them in a future rulemaking. Article X. Organization Meeting Some commenters have noted that the provisions in Article X, which govern the initial organizational meeting by which the FCU is established, effectively become obsolete and irrelevant after that initial organizational meeting. Although the Board acknowledges that this Article serves a limited purpose, it does not agree that the Article is necessarily irrelevant after the FCU has been established. Nevertheless, the proposed rule included an option whereby FCUs may eliminate the Article after five years of operation. For FCUs electing this option, Article X will become “reserved” and its language inoperative. One commenter suggested eliminating this article for all established FCUs. The Board does not believe retaining the article for five years presents any burden to FCUs. Therefore, the Board is adopting this change as proposed. Article XI. Loans and Lines of Credit to Members Article XI lists loan purposes for members and addresses member delinquencies on loans. The proposed rule slightly edited the language of this Article for readability, but did not make other substantive changes. The Board received no comments on this Article and is adopting this change as proposed. Article XII. Dividends Article XII establishes the power of the board to declare dividends. The proposed rule slightly edited the language of this Article for readability. There were no other substantive changes. The Board received no comments on this Article is adopting this change as proposed. Article XIII. Reserved The proposed rule did not make changes to this Article. The Board did not receive any comments regarding this Article and will not make any changes in the final rule. Article XIV. Expulsion and Withdrawal Article XIV addresses the expulsion and withdrawal procedures for members. The Board notes that expulsion from membership is a very serious remedy that may be accomplished only in accordance with the procedures set forth in the FCU Act. An FCU may expel a member only upon a two-thirds majority vote of the membership at a special meeting called for that purpose or by operation of a board-approved nonparticipation policy. 24 The FCU Act allows an FCU's board to adopt, by majority vote of a quorum of directors, and enforce a nonparticipation policy. If the FCU's board adopts such a policy, the FCU must provide written notice of the policy and its effective date to each member at least 30 calendar days prior to the policy's effective date. Each new member also must be provided a written notice of the policy prior to, or upon applying for, membership. 24 12 U.S.C. 1764. The proposed rule incorporated new staff commentary to this Article reiterating that the FCU Act provides only two methods for an FCU to expel a member and clarifies that only in-person voting is permitted in conjunction with a special meeting held for that purpose. This procedure gives the affected member an opportunity to present his or her case against expulsion and an opportunity to respond to the FCU's concerns. The staff commentary clarified that, short of expulsion, an FCU has a wide range of measures available to address abusive or disruptive members, and it specifically referenced Article XVI, Section 1 of the FCU Bylaws, which addresses situations when members use their accounts for unlawful purposes. Many commenters recommended that the Board make the expulsion of a disruptive member easier to accomplish. Many commenters requested that the Board either amend the FCU Bylaws or include staff commentary interpreting the FCU Act to allow an FCU to expel a member for actions such as filing for bankruptcy, habitual default, or misconduct under the FCU's board-approved nonparticipation policy. Commenters responding to this aspect of the proposed rule almost unanimously objected to the Board's reading of the term “nonparticipation” in the proposed rule, which the commenters perceived as unreasonably restrictive and narrow. These commenters argued that the Board has broad discretion to interpret the term “nonparticipation” to include certain violent, disruptive, abusive, or belligerent conduct. The Board disagrees. The Board believes the most reasonable interpretation of the term “nonparticipation” is a person not being involved with or participating in something. The Board believes interpreting the term to include other disruptive conduct goes beyond the plain meaning of the term. Accordingly, the Board will not adopt a more expansive definition of “nonparticipation” in the final rule. The Board is adopting Article XIV and related staff commentary as proposed. One commenter asked what information the FCU must provide in the special meeting to expel a member. The Board notes that the FCU Bylaws do not require any specific information to be provided. It provides only that the member be afforded an opportunity to be heard, in addition to a two-thirds vote, at a special meeting. As the Board notes in the discussion of changes to Article II above, FCUs have the option to address violent, belligerent, disruptive, and abusive members by limiting their access to products and services, provided that there is a logical relationship between the objectionable conduct and the services to be suspended, and that the member has received adequate notice of the FCU's limitation of services policy. 25 Neither the FCU Act nor the NCUA's regulations prohibit an FCU, as it deems appropriate, from denying most credit union services, such as ATM services, credit cards, loans, share draft privileges, preauthorized transfers, or access to credit union facilities to a member that has engaged in some objectionable conduct that has caused a loss to the FCU or that threatens the safety of credit union staff, facilities, or members. In fact, the Board believes that, without question, certain actions warrant immediate limitations of service or access to credit union facilities, such as violence against other credit union members or credit union staff in the credit union facility or the surrounding property. Consequently, even though the FCU Act does not permit an FCU to expel a member immediately under these circumstances, an FCU may still take immediate action to address situations in which a member is disruptive or poses a threat to the credit union, its employees, or other members in the FCU or its surrounding property. 25 See OGC Op. No. 08-0431 (Aug. 12, 2008). Furthermore, as noted in the discussion of changes to Article II above, neither the FCU Act nor the NCUA's regulations prohibit an FCU from using lawful means to immediately protect the credit union, credit union members, and staff, such as contacting local law enforcement, seeking a restraining order, or pursuing other forms of legal redress. The Board fully expects that an FCU would use these lawful means in addition to its limitation of services policy to proactively limit security threats or financial harm caused by violent, belligerent, disruptive, or abusive credit union members. Article XV. Minors This Article provides that minors are permitted to own shares and that the rights of minors to transact business with the FCU are governed by state law. The proposed rule slightly edited the language of this Article for readability, but there are no other substantive changes. Commenters did not raise issues with this aspect of the proposed rule. Consequently, the Board is adopting this aspect of the FCU Bylaws as proposed. Article XVI. General Article XVI addresses other general requirements, such as complying with other laws and regulations, confidentiality, and conflicts of interest. It also provides requirements related to records, indemnification, and the removal of directors and committee members. During the 2013 consultation process with representatives of the credit union industry, the NCUA received comments regarding section 3, requesting a simplified procedure for confirmation by the membership of the suspension of a director or committee member by the supervisory committee. Commenters suggested that the confirmation of suspension be accomplished through balloting rather than a special meeting at which members must vote in person to accomplish the removal. The Board notes, in this respect, that these procedures are mandated by statute. The FCU Act requires that membership confirmation of supervisory committee suspension be accomplished only by majority vote of the members at a special meeting called for that purpose. 26 The proposed rule added staff commentary explaining these requirements. 26 12 U.S.C. 1761d. The staff commentary also added new language regarding section 1 of this Article, which specifies that the FCU, its powers and duties, as well as the functions of its members, officers, and directors, are all strictly circumscribed by law and regulation. It notes that, insofar as section 1 is included in the FCU Bylaws, an FCU need not adopt a specific policy or requirement that members use credit union products or services for lawful purposes. Furthermore, it confirms that this bylaw provision supports an FCU's decision to impose limits on products and services available to any individual who is found to be using the FCU in furtherance of unlawful purposes. The Board is adopting these aspects of the proposed rule without amendment. The proposed rule also amended section 6 to require FCUs with websites to post their bylaws on the website. The Board believed that adding this new requirement would ensure that members without access to an FCU's physical location where they can request a copy of the bylaws can still have access to the FCU's corporate governance documents. Some FCUs operate over a wide geographic area, employing shared branch networks and/or online banking as a way to provide fast and reliable services to their members. It may be difficult for members of these FCUs, particularly in rural areas, to travel to the nearest branch office to request a copy of the FCU's bylaws. Accordingly, the Board believes that, to the extent an FCU maintains a website, an FCU should post its current bylaws on that website to provide these members with immediate access. Commenters overwhelmingly disapproved of this proposed change. One commenter went so far as to suggest that such a requirement would open up FCUs to unnecessary lawsuits. One commenter raised concerns with privacy and cybersecurity. This commenter suggested requiring that the FCU post a disclosure of the right to inspect all books of account and records, including a copy of the bylaws. One commenter stated that posting bylaws online may present a burden for smaller FCUs, even if those FCUs maintain an online presence. The Board disagrees. Allowing members to access the FCU's bylaws on its website provides a significant benefit to members and assists them in fulfilling their oversight role as member-owners of the FCU. The Board also believes that the compliance burden for FCUs will be minimal. On balance, commenters have not presented persuasive arguments why the NCUA should not require an FCU to post its bylaws on its website (if it maintains a website). Accordingly, the Board is adopting this aspect of the proposed rule without amendment. One commenter requested clarification on whether the FCU could post a copy of the bylaws within a password-protected, members-only access area of the website. The Board is clarifying that the bylaws can be posted in a password-protected, members-only access area of a FCU's website. Finally, the proposed rule added a new section 9 which clarified the use of singular and plural terms and pronouns in the FCU Bylaws. The NCUA has received questions in the past in this regard. New section 9 clarified that, unless the context requires otherwise, words denoting the singular may be construed as denoting the plural, words of the plural may be construed as denoting the singular, and words of one gender may be construed as denoting another gender, as appropriate. The Board received no comments on this Article is adopting this aspect of the proposed rule without amendment. Article XVII. Amendments of Bylaws and Charter Article XVII provides the requirements for amending an FCU's bylaws or charter. The proposed rule modernized the language of this Article and incorporated plain English writing principles. In addition, in conjunction with the proposed rule's requirement for an FCU to post its current bylaws on its website (if the FCU maintains a website), the proposed rule required an FCU to update the posting if it amends its bylaws. One commenter requested a technical change to clarify that it is the board of directors that vote on bylaw amendments and not members. The Board has made this technical edit and is adopting the remainder of this provision as proposed in the final rule. Article XVIII. Definitions Article XVIII lists the definitions applicable to all of the FCU Bylaws. The proposed rule made a few technical changes to this Article and added several new definitions, which the Board believed were useful for purposes of clarification. These included new definitions for “Agency,” “Charter,” “Field of Membership,” “Loans,” and “Membership Officer.” In addition, the definitions include a listing of approved board officers. This article also included the term “Member,” the definition of which identifies the characteristics and actions an individual must take to become a qualified member. Finally, the definitions included the term “Management,” which is defined to include the Board, Financial Officer, and Management Official. One commenter suggested several additional definitions, including electronic mail, mail, settlor, board associates, natural person, and alternate members to the supervisory committee. The Board does not believe these terms are sufficiently ambiguous to warrant definitions at this time. The Board is adopting this provision without amendment in the final rule. V. Regulatory Procedures A. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) generally requires that, in connection with a final rulemaking, an agency prepare a final regulatory flexibility analysis that describes the impact of a final rule on small entities. 27 A regulatory flexibility analysis is not required, however, if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities (defined for purposes of the RFA to include credit unions with assets less than $100 million) and publishes its certification and a short, explanatory statement in the Federal Register together with the rule. The new bylaw amendments are simply a resource that is available to all FCUs, regardless of size. Except for newly chartered FCUs, there is nothing prescriptive or mandatory about this final rule. All FCUs are free to adopt the new bylaws, retain their current bylaws, or adopt some combination of the bylaws and their current bylaws. If an FCU elects to adopt the new version, that FCU only needs to adopt a board resolution to that effect. Accordingly, the NCUA hereby certifies this final rule will not have a significant economic impact on a substantial number of small credit unions. B. Paperwork Reduction Act The Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq. ) requires that the Office of Management and Budget (OMB) approve all collections of information by a Federal agency from the public before they can be implemented. Respondents are not required to respond to any collection of information unless it displays a current, valid OMB control number. In accordance with the PRA, the information collection requirements included in this final rule has been submitted to OMB for approval under control number 3133-0052. C. Executive Order 13132 Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. The NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order to adhere to fundamental federalism principles. This rule will not have a direct effect on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. This final rule will apply to FCUs only. Accordingly, the NCUA has determined this proposed rule does not constitute a policy that has federalism implications for purposes of the executive order. D. Assessment of Federal Regulations and Policies on Families The NCUA has determined that this final rule will not affect family well-being within the meaning of Section 654 of the Treasury and General Government Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681 (1998). E. Small Business Regulatory Enforcement Fairness Act The Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121) (SBREFA) generally provides for congressional review of agency rules. 28 A reporting requirement is triggered in instances where the NCUA issues a final rule as defined by Section 551 of the Administrative Procedure Act (APA). 29 An agency rule, in addition to being subject to congressional oversight, may also be subject to a delayed effective date if the rule is a “major rule.” 30 The NCUA does not believe this rule is a “major rule” within the meaning of the relevant sections of SBREFA. As required by SBREFA, the NCUA submitted this final rule to the Office of Management and Budget (OMB) for it to determine if the final rule is a “major rule” for purposes of SBREFA. OMB determined the final rule was not a major rule. The NCUA also will file appropriate reports with Congress and the Government Accountability Office so this rule may be reviewed. 28 5 U.S.C. 801-804. 29 5 U.S.C. 551. 30 5 U.S.C. 804(2). List of Subjects 12 CFR Part 701 Credit, Credit Unions, Federal Credit Union Bylaws 12 CFR Part 746 Administrative practice and procedure, Claims, Credit Unions, Investigations. By the National Credit Union Administration Board on September 19, 2019. Gerard S. Poliquin, Secretary of the Board. For the reasons stated above, the NCUA is amending 12 CFR parts 701 and 746 as follows: PART 701—ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS 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. 2. Appendix A to part 701 is revised to read as follows: Appendix A to Part 701—Federal Credit Union Bylaws Introduction Effective Date The National Credit Union Administration (NCUA) Board first incorporated the Federal Credit Union (FCU) Bylaws as Appendix A to Part 701 of the NCUA's regulations on November 30, 2007. FCUs may retain previously adopted versions of the FCU Bylaws including the November 30, 2007 version. Unless an FCU has adopted bylaws before January 2, 2020, it must adopt these revised bylaws. Adoption of All or Part of These Bylaws Although FCUs may retain any previously approved version of the FCU Bylaws, the NCUA Board encourages FCUs to adopt the revised bylaws because it believes they provide greater clarity and flexibility for credit unions and their officials and members. FCUs may also adopt portions of the revised bylaws and retain the remainder of previously approved bylaws, but the NCUA Board cautions FCUs to be extremely careful in making the decision. FCUs must be careful because they run the risk of having inconsistent or conflicting provisions because of the various options the revised bylaws provide, as well as other revisions in the text. Bylaw Amendments 1. The FCU Bylaws contain provisions allowing FCU boards to select from an option or range of options or to fill in a blank. The “fill-in-the-blank” provisions are changes to the FCU's bylaws. Thus, they require a two-thirds vote of the FCU's board of directors. As long as the board selects from the permissible options, the FCU does not need to submit the change to the NCUA for its approval. 2. FCUs continue to have the flexibility to request bylaw amendments. The NCUA must approve all bylaw amendments except for the provisions noted above. In the past, the NCUA has published a “Standard Bylaw Amendments” booklet containing a list of “standard” preapproved and optional amendments not included in the FCU Bylaws. That document remains on the NCUA's website for historical purposes. However, FCUs may not adopt amendments from the “Standard Bylaw Amendments” booklet, as the FCU Bylaws include sufficient flexibility to make a separate list of standard bylaw amendments unnecessary. Thus, the NCUA no longer makes a distinction between “standard” and “nonstandard” bylaw amendments. Consequently, the NCUA considers any change to the FCU Bylaws that is not a “fill-in-the-blank” provision or part of a range of options to be a bylaw amendment that requires the NCUA approval. 3. The procedure for approval of a bylaw amendment is as follows: a. The FCU must submit its request to the Office of Credit Union Resources and Expansion (CURE). b. The request must include: 1. The section of the FCU Bylaws to be amended; 2. The reason for, or purpose of, the amendment; 3. An explanation of why the amendment is desirable and what it will accomplish for the federal credit union; and 4. The specific wording of the proposed amendment. c. CURE will advise the credit union within 60 days if it approved the proposed amendment after its review and, if necessary, consultation with the NCUA's Office of General Counsel. If CURE does not reach a decision within 60 days, the proposed amendment is considered to be denied unless CURE requests an extension of time from the federal credit union and the credit union agrees to such a request. If CURE reaches an adverse decision or CURE fails to render a decision within the agreed timeframe, the credit union may appeal that decision in accordance with the procedures set out in subpart B to part 746 of this chapter. If CURE fails to render a timely decision, within thirty days it must provide the FCU with a written notice of its failure to render a timely decision and a statement of any concerns that CURE has with the bylaw amendment request. 4. Federal credit unions considering an amendment may find it useful to review the bylaws section of the agency website, which includes the NCUA's Office of General Counsel opinions on proposed bylaw amendments. 1 Opinions issued after April 2006 include the language of the approved amendment. 1 http://www.ncua.gov/Legal/Pages/BylawByYear.aspx. Because each decision by CURE is made on a case-by-case basis that depends on the unique facts and circumstances applicable to each FCU, the credit union must submit a proposed amendment to the NCUA for review under the procedure listed above, even if the NCUA previously approved an identical or similar amendment for another credit union. The Nature of the FCU Bylaws 1. The Federal Credit Union Act requires the NCUA Board to prepare bylaws for federal credit unions. 2 The FCU Bylaws address a broad range of matters concerning a credit union's organization and governance, the relationship of the credit union to its members, and the procedures and rules a credit union follows. 2 12 U.S.C. 1758. The FCU Bylaws supplement the broad provisions of: • A federal credit union's charter, which establishes the existence of a federal credit union; • The Federal Credit Union Act, which establishes the powers of federal credit unions; and • The NCUA's regulations, which implement the Federal Credit Union Act. As a legal matter, a federal credit union's bylaws must conform to, and cannot be inconsistent with, any provision of its charter, the Federal Credit Union Act, the NCUA's regulations, or other laws or regulations applicable to the credit union's operations. 2. The NCUA expects federal credit unions and their members will make every effort to resolve bylaw disputes using the credit union's internal member complaint resolution process. If a bylaw dispute cannot be resolved internally, credit union officials or members should contact the regional office with oversight over the credit union for assistance in resolving the dispute. 3. The NCUA has discretion to take administrative actions when a credit union is not in compliance with its bylaws. If a potential violation is identified, the NCUA will carefully consider all of the facts and circumstances in deciding whether to take enforcement action. The NCUA will not generally take action against minor or technical violations, but emphasizes that it retains discretion to enforce the FCU Bylaws in appropriate cases, such as safety and soundness concerns or threats to fundamental, material credit union member rights. Table of Contents Article I. Name—Purposes Article II. Qualifications for Membership Article III. Shares of Members Article IV. Meetings of Members Article V. Elections Article VI. Board of Directors Article VII. Board Officers, Management Officials and Executive Committee Article VIII. Credit Committee or Loan Officers Article IX. Supervisory Committee Article X. Organization Meeting Article XI. Loans and Lines of Credit to Members Article XII. Dividends Article XIII. Reserved Article XIV. Expulsion and Withdrawal Article XV. Minors Article XVI. General Article XVII. Amendments of Bylaws and Charter Article XVIII. Definitions Bylaws Federal Credit Union, Charter No.____ (A corporation chartered under the laws of the United States) Article I. Name—Purposes Section 1. Name. The name of this credit union is as stated in Section 1 of its charter (approved organization certificate). Section 2. Purposes. This credit union is a member-owned, democratically operated, not-for-profit organization managed by a volunteer board of directors. Its stated mission is to meet the credit and savings needs of members, especially individuals of modest means. The purpose of this credit union is to promote thrift among its members by affording them an opportunity to accumulate their savings and to create a source of credit for provident or productive purposes. The credit union may add business as one of its purposes by placing a comma after “provident” and inserting “business.” Article II. Qualifications for Membership Section 1. Field of membership. The field of membership of this credit union is limited to that stated in Section 5 of its charter. Section 2. Membership application procedures. Persons eligible for membership under Section 5 of the charter must sign a membership application on approved forms. The applicant becomes a member upon approval of the application by a membership officer, after subscription to at least one share, payment of the initial installment, and payment of a uniform entrance fee if required by the board. If the membership officer denies a person's membership application, the credit union must explain the reasons for the denial in writing upon written request. Section 3. Maintenance of membership share required. A member who withdraws all shareholdings or fails to comply with the time requirements for restoring his or her account balance to par value in Article III, Section 3, ceases to be a member. By resolution, the board may require persons readmitted to membership to pay another entrance fee. Section 4. Continuation of membership. (a) Once a member, always a member. Once a member, always a member until the person or organization chooses to withdraw its membership or is expelled under the Act and Article XIV of these bylaws. (b) Limitation of services. Notwithstanding any provision of these bylaws, the board of directors may adopt a policy that limits credit union services to any member not in good standing. Section 5. Member in good standing. A member in good standing retains all their rights and privileges in the credit union. A member in good standing is a member who maintains at least the minimum share set forth in Article III, Section 1 of these bylaws; who is not significantly delinquent on any credit union loan; who has not had any account with this credit union closed due to abuse or negligent behavior; who has not caused a financial loss to this credit union; and who has not engaged in violent, belligerent, disruptive, or abusive activities, such as: (1) Violence, intimidation, threats, harassment, or physical or verbal abuse of duly elected or appointed officials or employees of the credit union, members, or agents of the credit union. This includes actions while on credit union premises and through use of telephone, mail, email or other electronic method. (2) Causes or threatens damage to credit union property. (3) Unauthorized use or access of credit union property. (4) Knowingly disseminating incorrect, misleading, confidential, or proprietary information regarding the credit union. (5) Any actions that may cause material risk or financial harm to the credit union. A credit union may limit services for violent, belligerent, disruptive, or abusive activities only if there is a logical relationship between the objectionable activities and the services to be suspended. In the event of a suspension of service, the member will be notified of what accounts or services have been discontinued. Subject to Article XIV of these bylaws and any applicable limitation of services policy approved by the board, members not in good standing retain their right to attend, participate, and vote at the annual and special meetings of the members and maintain a share account. Article III. Shares of Members Section 1. Par value. The par value of each share is $____. Subscriptions to shares are payable at the time of subscription, or in installments of at least $____ per month. FCUs may establish differing par values for different classes of members or types of accounts (such as students, minors, or non-natural persons), provided this action does not violate any federal, state or local antidiscrimination laws. Below are some options an FCU can choose. The FCU may also establish differing par values for other classes of members not listed below. List all established par values in Section 1. __ Option. Par value for minors. The par value of each share for members ____ years of age or younger is $____. Subscriptions to shares are payable at the time of subscription, or in installments of at least $____ per month. __ Option. Par value for students. The par value of each share for students is $____. Subscriptions to shares are payable at the time of subscription, or in installments of at least $____ per month. A student is defined as anyone enrolled □ full-time or □ part-time in ____. __ Option. Par value for non-natural persons. The par value of each share for non-natural persons is $____. Subscriptions to shares are payable at the time of subscription, or in installments of at least$___ per month. To establish membership, the member must subscribe to one par value of share. The share does not have to be in a regular share account. The board may choose the best account for the characteristics of its membership. __ Option A—Regular Share account required to establish membership To establish membership in the credit union, the member must subscribe to one share in a regular share account. __ Option B—____account required to establish membership. To established members in the credit union, the member must subscribe to one share in the stated account or accounts (note the account(s) in the blank above). Section 2. Cap on shares held by one person. The board may establish, by resolution, the maximum amount of shares that any one member may hold. Section 3. Time periods for payment and maintenance of membership share. The credit union will terminate from membership a member who: • Fails to complete payment of one share within _____ of admission to membership, or • Fails to complete payment of one share within ____ from the increase in the par value of shares, or • Reduces the share balance below the par value of one share and does not increase the balance to at least the par value of one share within ____ of the reduction. Section 4. Transferability. Members may transfer shares to another member in any form approved by the board. Shares that accrue credits for unpaid dividends retain those credits when transferred. Section 5. Withdrawals. Members may withdraw money paid in on shares provided that: (a) The board has the right, at any time, to require members, or a subset of members, to give up to 60 days written notice of intention to withdraw all or part of the amounts they paid in. (b) [Reserved]. (c) A member delinquent on any loan or obligation to the credit union may not withdraw their shares below the delinquent amount without the written approval of the credit committee or loan officer. This withdrawal restriction also applies if the member is a comaker, endorser, or guarantor of a delinquent loan. Coverage of overdrafts under an overdraft protection policy does not constitute delinquency for purposes of this paragraph. Shares issued in an irrevocable trust as provided in Section 6 of this article are not subject to withdrawal restrictions except as stated in the trust agreement. (d) The share account of a deceased member (other than one held in joint tenancy with another member) may be continued until the close of the dividend period in which the administration of the deceased's estate is completed. (e) The board can impose a fee for excessive share withdrawals from regular share accounts. By resolution, the board can set the number of withdrawals not subject to a fee and the amount of the fee subject to regulations relevant to the advertising and disclosure of terms and conditions on member accounts. Section 6. Trusts. Shares may be issued in a revocable or irrevocable trust, subject to the following: Shares issued in a revocable trust—the settlor must be a member of this credit union in his or her own right. Shares issued in an irrevocable trust—either the settlor or the beneficiary must be a member of this credit union. Both a revocable and irrevocable trust must state the name of the beneficiary. A trust may be a member of the credit union as an entity if all parties to the trust, including all settlors, beneficiaries and trustees, are within the credit union's field of membership. Shares issued through a pension plan authorized by the rules and regulations will be treated as an irrevocable trust unless otherwise indicated in the rules and regulations. Section 7. Joint accounts and membership requirements. Select one option and check the box corresponding to that option. __ Option A—Separate account not required to establish membership. Owners of a joint account may both be members of the credit union without opening separate accounts. For joint membership, both owners are required to fulfill all of the membership requirements including each member purchasing and maintaining at least one share in the account and filling out the membership card. __ Option B—Separate account required to establish membership. Each member must purchase and maintain at least one share in a share account that names the member as the sole or primary owner. Being named as a joint owner of a joint account is not sufficient to establish membership. Article IV. Meetings of Members Section 1. Annual meeting. The board must hold the annual meeting of the members [insert time for annual meeting, for example, “during the month of March/on the third Saturday of April/no later than March 31”], in the county in which any office of the credit union is located or within a radius of 100 miles of an office, at the time and place as the board determines and announces in the notice of the annual meeting. This credit union may permit virtual attendance and participation in the annual meeting, provided that an in-person meeting complying with the geographic requirements of this paragraph is also held. Section 2. Notice of meetings required. a. The secretary must give written notice to each member at least 30 but no more than 75 days before the date of any annual meeting. The secretary must give written notice to each member at least 7 days before the date of any special meeting of the members and at least 45 but no more than 90 days before the date of any meeting to vote on a merger with another credit union. The secretary may deliver the notice in person, by mail to the member's address, or, for members who have opted to receive statements and notices electronically, by electronic mail. The secretary must give notice of the annual meeting by posting the notice in a conspicuous place in the office of this credit union where members may read it at least 30 days before the meeting. The secretary must also prominently display the notice on the credit union's website if such credit union maintains a website. b. All special meeting notices must state the purpose of the meeting. The officials and members may only transact business related to the stated purpose at the meeting. Section 3. Special meetings. a. The board chair, the board of directors by majority vote, or the supervisory committee as provided in these bylaws may call a special meeting of the members. The chair must call and hold a special meeting within 30 days of the receipt of a written request from 25 members or 5% of the members as of the date of the request, whichever number is larger. However, a request of no more than 750 members may be required to call a special meeting. b. The credit union may hold a special meeting at any location permitted for the annual meeting. Section 4. Items of business for annual meeting and rules of order for annual and special meetings. The suggested order of business at annual meetings of members is— (a) Ascertain that a quorum is present. (b) Reading and approval or correction of the minutes of the last meeting. (c) Report of directors, if there is one. For credit unions participating in the Community Development Revolving Loan Program, the directors must report on the credit union's progress on providing needed community services, if required by NCUA Regulations. (d) Report of the financial officer or the chief management official. (e) Report of the credit committee, if there is one. (f) Report of the supervisory committee, as required by Section 115 of the Act. (g) Unfinished business. (h) New business other than elections. (i) Elections, as required by Section 111 of the Act. (j) Adjournment. (k) To the extent consistent with these bylaws, the board will conduct all meetings of the members according to ____. The order of business for the annual meeting may vary from the suggested order, provided it includes all required items and complies with the rules of procedure adopted by the credit union. The credit union must fill in the blank with one of the following authorities, noting the edition to be used: Democratic Rules of Order, The Modern Rules of Order, Robert's Rules of Order, or Sturgis' Standard Code of Parliamentary Procedure. Section 5. Quorum. Except as otherwise provided, 15 members constitute a quorum at annual or special meetings. If a quorum is not present, the board may adjourn to a date at least 7 but not more than 14 days thereafter. The members present at any adjourned meeting will constitute a quorum, regardless of the number of members present. The board must give the same notice for the adjourned meeting as prescribed in Section 2 of this article for the original meeting, except that they must give notice at least 5 days before the date of the meeting fixed in the adjournment. Article V. Elections The Credit Union must select one of the four voting options. The board may print the credit union's bylaws with the option selected or retain this copy and check the box of the option selected. All options continue with Section 3 of this article. Option A1—In-Person Elections; Nominating Committee and Nominations From Floor Section 1. Nomination procedures. At least 30 days before each annual meeting, the chair will appoint a nominating committee of three or more members. The nominating committee will nominate at least one member for each vacancy, including any unexpired term vacancy, for which elections are being held, and determine that the members nominated are agreeable to the placing of their names in nomination and will accept office if elected. The nominating committee must widely publicize the call for nominations to all members by any medium and interview each member that meets any qualifications established by the nominating committee. Section 2. Election procedures. After placing the nominations of the nominating committee before the members, the chair calls for nominations from the floor. When nominations are closed, the chair appoints election tellers. The election tellers distribute the ballots, collect the ballots and tally the votes, and the chair announces the results. Except when there is only one nominee for each open office, all elections are by ballot and determined by the plurality of vote. If there is only one nominee for each open office, the chair may take a voice vote or declare the election of each nominee by general consent or acclamation. Option A2—In-Person Elections; Nominating Committee and Nominations by Petition Section 1. Nomination procedures. a. At least 120 days before each annual meeting the chair will appoint a nominating committee of three or more members. The nominating committee will nominate at least one member for each vacancy, including any unexpired term vacancy, for which elections are being held, and determine that the members nominated are agreeable to the placing of their names in nomination and will accept office if elected. The nominating committee must widely publicize the call for nominations to all members by any medium and interview each member that meets any qualifications established by the nominating committee. b. At least 90 days before the annual meeting, the nominating committee files its nominations with the secretary of the credit union. At least 75 days before the annual meeting, the secretary notifies, in writing, all members eligible to vote that they may make nominations for vacancies by petition signed by 1% of the members with a minimum of 20 and a maximum of 500. The secretary may use electronic mail to notify members who have opted to receive notices or statements electronically. c. The written notice must specify that the credit union will not conduct the election by ballot and there will be no nominations from the floor when the number of nominees equals the number of open positions. d. The notice will include, in a form approved by the board of directors, a brief statement of qualifications and biographical data for each nominee submitted by the nominating committee. Each nominee by petition must submit a similar statement of qualifications and biographical data with the petition. e. The written notice must state the closing date for receiving nominations by petition. At least 40 days before the annual meeting, nominee(s) must file the nomination petition with the secretary of the credit union. To be effective, nominee(s) must include a signed certificate with the nomination petition stating that they are agreeable to nomination and will serve if elected to office. f. At least 35 days before the annual meeting, the secretary will post the nominations by petition along with those of the nominating committee in a conspicuous place in each credit union office and on the credit union's website (if the credit union maintains a website). Section 2. Election procedures. a. The secretary must place all persons nominated by either the nominating committee or by petition before the members. When nominations are closed, the chair appoints the election tellers. The election tellers distribute the ballots, collect the ballots, and tally the votes, and the chair announces the results. Except when there is only one nominee for each open office, all elections are by ballot and determined by the plurality of vote. b. There are no nominations from the floor if there are sufficient nominations by the nominating committee or by petition to provide at least one nominee for each open position. If there are nominations from the floor and they result in more nominees than open positions, the chair will close nominations, and appoint election tellers. The election tellers distribute the ballots, collect the ballots and tally the votes, and the chair announces the results. If there is only one nominee for each open office, the chair may take a voice vote or declare the election of each nominee by general consent or acclamation. Option A3—Election by Ballot Boxes or Voting Machine; Nominating Committee and Nomination by Petition Section 1. Nomination procedures. a. At least 120 days before each annual meeting, the chair will appoint a nominating committee of three or more members. The nominating committee will nominate at least one member for each vacancy, including any unexpired term vacancy, for which elections are being held, and determine that the members nominated are agreeable to the placing of their names in nomination and will accept office if elected. The nominating committee must widely publicize the call for nominations to all members by any medium and interview each member that meets any qualifications established by the nominating committee. b. At least 90 days before the annual meeting, the nominating committee files its nominations with the secretary of the credit union. At least 75 days before the annual meeting, the secretary notifies, in writing, all members eligible to vote that they may make nominations for vacancies by petition signed by 1% of the members with a minimum of 20 and a maximum of 500. The secretary may use electronic mail to notify members who have opted to receive notices or statements electronically. c. The written notice must specify that the credit union will not conduct the election by ballot and there will be no nominations from the floor when the number of nominees equals the number of open positions. d. The notice will include, in a form approved by the board of directors, a brief statement of qualifications and biographical data for each nominee submitted by the nominating committee. Each nominee by petition must submit a similar statement of qualifications and biographical data with the petition. e. The written notice must state the closing date for receiving nominations by petition. At least 40 days before the annual meeting, nominee(s) must file the nomination petition with the secretary of the credit union. To be effective, nominee(s) must include a signed certificate with the nomination petition stating that they are agreeable to nomination and will serve if elected to office. f. At least 35 days before the annual meeting, the secretary will post the nominations by petition along with those of the nominating committee in a conspicuous place in each credit union office and on the credit union's website (if the credit union maintains a website). Section 2. Election procedures. The plurality of the vote determines all elections. The election is conducted by ballot boxes or voting machines, subject to the following conditions: (a) The board of directors will appoint the election tellers; (b) At least 10 days before the annual meeting, the secretary will direct the preparation and placement of ballot boxes, printed ballots, or voting machines if there are sufficient nominations made by the nominating committee or by petition to provide more nominees than open positions. The secretary will place the boxes or voting machines in conspicuous locations as determined by the board of directors. The secretary will post the names of the candidates near the boxes or voting machines. The posting will include a brief statement of the candidates' qualifications and biographical data in a form approved by the board of directors; (c) The members have 24 hours to vote at conspicuous locations as the board determines. After 24 hours, election tellers will open the ballot boxes or voting machines, tally the vote, place the tally in the ballot boxes, and reseal the ballot boxes. The election tellers are responsible at all times for the ballot boxes or voting machines and the integrity of the vote. The election tellers will keep a record of all persons voting and must assure themselves that each person voting is entitled to vote; and (d) The election tellers will take the ballot boxes to the annual meeting and place them in conspicuous locations with the names of the candidates posted near them. At the annual meeting, the election tellers will distribute printed ballots to those in attendance who have not voted. Members will deposit their votes in the ballot boxes placed by the election tellers. After giving the members an opportunity to vote at the annual meeting, the chair will close balloting. The election tellers will open the ballot boxes, tally the vote, and add the vote to the previous count. The chair will then announce the result of the vote. Option A4—Election by Electronic Device (Including But Not Limited to Telephone and Electronic Mail) or Mail Ballot; Nominating Committee and Nominations by Petition Section 1. Nomination procedures. a. At least 120 days before each annual meeting, the chair will appoint a nominating committee of three or more members. The nominating committee will nominate at least one member for each vacancy, including any unexpired term vacancy, for which elections are being held, and determine that the members nominated are agreeable to the placing of their names in nomination and will accept office if elected. The nominating committee must widely publicize the call for nominations to all members by any medium and interview each member that meets any qualifications established by the nominating committee. b. At least 90 days before the annual meeting, the nominating committee files its nominations with the secretary of the credit union. At least 75 days before the annual meeting, the secretary notifies, in writing, all members eligible to vote that they may make nominations for vacancies by petition signed by 1% of the members with a minimum of 20 and a maximum of 500. The secretary may use electronic mail to notify members who have opted to receive notices or statements electronically. c. The written notice must specify that the credit union will not conduct the election by ballot and there will be no nominations from the floor when the number of nominees equals the number of open positions. d. The notice will include, in a form approved by the board of directors, a brief statement of qualifications and biographical data for each nominee submitted by the nominating committee. Each nominee by petition must submit a similar statement of qualifications and biographical data with the petition. e. The written notice must state the closing date for receiving nominations by petition. At least 40 days before the annual meeting, nominee(s) must file the nomination petition with the secretary of the credit union. To be effective, nominee(s) must include a signed certificate with the nomination petition stating that they are agreeable to nomination and will serve if elected to office. f. At least 35 days before the annual meeting, the secretary will post the nominations by petition along with those of the nominating committee in a conspicuous place in each credit union office and on the credit union's website (if the credit union maintains a website). Section 2. Election procedures. The plurality of vote determines all elections. The election is conducted by electronic device or mail ballot, subject to the following conditions: (a) The board of directors will appoint the election tellers; (b) At least 30 days before the annual meeting, the secretary will ensure either a printed ballot or notice of ballot is mailed to all members eligible to vote if there are sufficient nominations made by the nominating committee or by petition to provide more nominees than open positions. The secretary may use electronic mail to provide the notice of ballot to members who have opted to receive notices or statements electronically; (c) If the credit union conducts its elec [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2019-20826. Public record. Not legal advice.