Organization and Operations of Federal Credit Unions

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701

Organization and Operations of Federal Credit Unions

AGENCY: National Credit Union Administration.

ACTION: Interim final rule with request for comments and Interpretive

Ruling and Policy Statement 96-2 (IRPS 96-2).

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SUMMARY: The purpose of this interim Interpretive Ruling and Policy

Statement is to permit federal credit unions to restructure their

fields of membership consistent with the recent Court of Appeals

decision (``the Decision'') and District Court order (``the Order'')

limiting federal credit unions' ability to serve eligible credit union

members and new select groups. NCUA recognizes that this interim policy

will not provide complete relief to all multiple group federal credit

unions, since any interim policy must meet the requirements set forth

in the Decision and the Order. Similarly, this interim policy does not

assist

[[Page 59306]]

individuals who wish to obtain, but do not currently have, access to

federal credit unions as a result of the Decision. This interim policy

is intended to provide limited and temporary relief until the legal

issues with respect to the Decision are finally resolved. NCUA is also

issuing a final amendment to update its rules entitled ``Organization

and Operations of Federal Credit Unions.''

DATES: The interim rule is effective November 14, 1996. Comments must

be received on or before February 1, 1997.

ADDRESSES: Comments should be directed to Becky Baker, Secretary of the

Board. Mail or hand deliver comments to: National Credit Union

Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. Fax

comments to (703) 518-6319. Post comments on NCUA's electronic bulletin

board by dialing (703) 518-6480. Please send comments by one method

only.

FOR FURTHER INFORMATION CONTACT: J. Leonard Skiles, President, Asset

Management and Assistance Center, 4807 Spicewood Springs Road, Suite

5100, Austin, Texas 78759, or telephone (512) 795-0999; Stephen E.

Austin, Director of Supervision, Office of Examination and Insurance,

1775 Duke Street, Alexandria, Virginia, or telephone (703) 518-6360,

Lynn K. McLaughlin, Program Officer, at the above address and telephone

number, Michael J. McKenna, Acting Associate General Counsel, Office of

General Counsel, at the above address or telephone (703) 518-6540.

SUPPLEMENTARY INFORMATION: In 1982, safety and soundness concerns

prompted the NCUA Board to revise chartering policy consistent with the

Federal Credit Union Act to permit the combination of multiple groups

with unlike common bonds. Such combinations could be accomplished

through the chartering process, amendment of the charter, or by way of

merger to form a single credit union. Another primary reason for the

policy change was to provide small groups of people who did not have

the resources to charter their own credit unions access to credit union

service.

In First National Bank and Trust Co., et al. v. NCUA, the U.S.

Court of Appeals for the District of Columbia Circuit invalidated

certain select group additions to the field of membership of a North

Carolina credit union (``the Decision''). In the context of that case,

the Court ruled that groups with unlike common bonds could not be

joined to form a single credit union. Furthermore, in the consolidated

cases of First National Bank and Trust Co., et al. v. NCUA and the

American Bankers Association v. NCUA, et al., the District Judge issued

a nationwide injunction ordering that federal credit unions are

immediately barred from adding select groups without the same common

bond to their fields of membership (``the Order''). The District Court

further ordered that federal credit unions are prohibited from adding

any new members to select groups which were added pursuant to the

multiple group policy. The Order adversely impacts approximately

158,000 select groups in 3,586 multiple group federal credit unions.

NCUA has analyzed the impact of the Order and has determined that it

has created and will continue to create disruption in the operations of

credit unions. Equally important, a significant number of persons in

small groups will be denied access to credit union services. This is

particularly burdensome and harmful to persons in low to moderate

income communities.

The Court of Appeals, in its Decision, recognized that NCUA may

identify and approve interpretations that provide broader common bonds

than NCUA's current ``single employer'' policy. This interim policy,

therefore, affords some relief to the federal credit unions affected by

the Order by allowing them to restructure their existing fields of

membership within the limits of the Federal Credit Union Act as

construed in the Decision. NCUA will continue to pursue all available

legal means to seek reversal of the Decision and Order. The interim

policy is not intended to exhaust NCUA's authority to interpret the

common bond provisions. NCUA will continue to review possible

chartering and field of membership policy changes in an effort to

permit federal credit unions to exercise to the fullest extent possible

their ability to serve those who want or need credit union service.

This interim policy takes effect immediately upon adoption by the

NCUA Board and is effective until further notice. To the degree this

policy is inconsistent with IRPS 94-1, as amended by IRPS 96-1, those

policies are superseded and this policy statement is controlling. More

specifically, the select group policies and those procedures related to

the select group polices, such as the Streamlined Expansion Procedure,

are superseded. To the extent any action taken pursuant to this interim

policy is more restrictive than any future revision of this interim

rule requires, then the more restrictive provisions adopted by the

credit unions can be modified. To the extent any action taken pursuant

to this interim rule is less restrictive than any future revision of

this interim rule requires, then the less restrictive provisions

adopted by credit unions will not be unilaterally revoked by NCUA.

The NCUA Board has adopted three basic substantive changes to

current chartering and field of membership policy as set forth in IRPS

94-1 as amended by IRPS 96-1. These changes include adding a fourth

definition of occupational common bond, streamlining the documentation

requirements for a community charter, and adding a subset to the

community charter option.

Occupational Common Bond

IRPS 94-1, and previous policy statements by NCUA since 1982,

allowed the combination of unlike common bond groups. Federal credit

unions that utilized the multiple group policy and now have select

groups within their fields of membership must now designate a core

common bond. This designation of a core common bond is extremely

important and must be completed by March 1, 1997. New field of

membership expansions will not be permitted unless a core common bond

has been designated. Those groups that are not within the core common

bond cannot be served, except that members of record as of October 25,

1996, can still receive service from the credit union. New members can

only be added from the core common bond.

Consistent with the Decision in First National Bank and Trust

Company, et al. v. NCUA, the NCUA Board is adding a fourth definition

of occupational common bond. Under previous policy, an occupational

common bond was based on:

Employment (or a long-term contractural relationship

equivalent to employment) in a single corporation or other legal

entity;

Employment in a corporation or other legal entity with an

ownership interest in or by another legal entity; and

Employment in a corporation or other legal entity which is

related to another legal entity (such as a company under contract and

possessing a strong dependency relationship with another company).

Pursuant to this interim policy, an occupational common bond

incorporates any charter based on employment in a trade, industry, or

profession. This type of common bond can include employment at any

number of corporations or other legal entities, that while not under

common ownership, share a common bond by

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virtue of producing similar products or providing similar services.

While there is some latitude in defining trade, industry, or

profession, the groups must have a close nexus. NCUA will evaluate such

factors as the nature, size and diversity of the trade, industry, or

profession and the geographic limits associated with the proposed

charter. For example, all manufacturing enterprises in Seattle,

Washington, would not qualify since manufacturing, in and of itself, is

overly broad and would include manufacturing of all types of products.

However, all computer software manufacturers in Seattle would qualify,

since it relates to a specific type of manufactured product. This type

of common bond charter can be similar to, but distinguishable from, a

common bond based on a single corporation. For example, all Navy

personnel would qualify as a single corporation (employer), but all

teachers would not. The latter would be a profession and subject to

certain limitations as discussed below. NCUA will interpret the

industry standard in a manner consistent with the Act and Congressional

purpose.

Further examples of this type of occupational common bond include

all textile workers, all coal miners, or the medical profession.

Federal credit unions with this type of occupational common bond can

only provide credit union service to those qualifying groups within the

credit union's operational area. For example, a credit union located in

California may serve the oil industry, but such groups must be within

the operational area of the credit union's service facilities.

As defined in IRPS 94-1, operational area is that area which, as

determined by NCUA, in its sole discretion, may reasonably be served by

the service facilities that will be accessible to the groups in the

field of membership. The operational area will vary depending on the

location of the credit union. For example, the operational area for a

credit union in an urban area may be smaller than the operational area

for a credit union in a sparsely populated rural district.

An existing credit union that wishes to serve a trade, industry, or

profession must first designate its occupational common bond. This

requirement does not apply to a new charter. This could be the original

core common bond group or another group within its field of membership.

For example, a credit union that serves primarily teachers, but whose

original core common bond was municipal employees, could designate

teachers or ``education'' as it occupational common bond. It would then

be able to add new members from that occupational group. However, the

designation must come from an existing group within its current field

of membership. For example, a credit union that serves primarily

teachers, could not be redesignated as a credit union serving the auto

industry if the auto industry is not already included in the field of

membership.

To designate its common bond, the credit union must submit a

request to the appropriate regional director. If the request is

approved, the credit union may immediately begin serving all groups

within its previously existing field of membership meeting this

occupational common bond definition. Credit unions that have groups

within their fields of membership that do not meet this new definition,

cannot add new members from those groups. For these groups, credit

unions can only serve members of record as of October 25, 1996.

To add new groups from within the new occupational common bond, the

credit union must apply and obtain written approval of the regional

director. The application letter must demonstrate that the group is

within the common bond, the group has provided a written request for

service, the group presently does not have service available, and the

group is within the operational area of one of the credit union's

service facilities. If the group to be added was previously served by

another credit union but has lost service as a result of the court

decisions, the credit union wishing to add the group must consult with

the other credit union prior to submitting its application to NCUA.

Community Chartering Policy

NCUA's community chartering policy is not affected by the ongoing

litigation. However, the NCUA Board is making two changes to the

community chartering policy that are consistent with the Federal Credit

Union Act in order to provide all federal credit unions with further

options in restructuring their fields of membership.

First, the documentation requirements for a community charter have

been streamlined. A credit union that wants to serve anyone who lives,

works, worships, or goes to school in a community area must still meet

the long-standing community criteria. For example, the community must

have clearly defined geographic boundaries that are recognized as a

distinct neighborhood, community, or rural district. However, the

documentation required to demonstrate that the proposed service area is

a well-defined community has been streamlined. This will greatly

facilitate the expeditious processing of community charters.

The ``well defined neighborhood, community or rural district''

requirement will automatically be met if the area to be served is in a

single political jurisdiction or portion thereof, and if the population

of the requested political jurisdiction does not exceed 1,000,000. If

the area to be served is not contained within a single political

jurisdiction or if the population of the area exceeds 1,000,000, then

more detailed documentation is necessary to support that the proposed

area is a well-defined community. Generally, the political subdivision

will most often coincide with a ``county'', or its political

equivalent, and any portion thereof.

Except as noted below, a credit union seeking a community charter

must contact all the credit unions with a service facility in the

proposed service area. The applicant credit union should provide the

comments of any overlapped credit unions in the area, and the regional

director will conduct a standard overlap analysis. An overlap analysis

may result in denial of the charter, change in the community

boundaries, or use of exclusionary clauses. Documentation reflecting

support for the charter application is still required, except as noted

below.

Second, while NCUA traditionally has interpreted the field of

membership authority for ``groups within a well-defined neighborhood,

community, or rural district'' to encompass all groups within that

community, a subset of a community charter credit union (called ``group

community'') is now authorized. This type of community charter is

available to those wishing to serve specific occupational,

associational, and community groups within a well-defined neighborhood,

community, or rural district. The requirements for a group community

parallel those required of a community charter. However, if a multiple

group credit union is converting to a group community, then a business

plan, overlap analysis, and evidence of community support is not

required.

Upon converting to a group community charter, the credit union will

immediately recover the ability to add new members from all groups that

were previously served by the credit union (i.e., at the time of the

Order) and that are located within the community. New members from

existing groups outside the community cannot be served by the group

community. To add new groups from within the community, the credit

union must receive prior approval by submitting an application to the

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regional director documenting that the group is within the community,

the group has provided a written request for service, and whether the

group presently has credit union service available.

If the credit union wishes to add a group that was previously

served by another credit union, but has lost service as a result of the

court decisions concerning common bond, the federal credit union

wishing to add the group must consult with the other credit union and

provide the results of that consultation in its application to NCUA. A

determination as to whether that group can be added will be made based

on a review of any safety and soundness concerns and the needs of the

group.

Associational Common Bonds

No amendments to the associational common bond requirements are

included in this interim policy. After review of the associational

common bond requirements in IRPS 94-1 as amended by IRPS 96-1, the

Board determined that the policy allows for many types of associations

to qualify as eligible groups. However, any associational credit union

with multiple groups must designate a core common bond.

Emergency Mergers

NCUA is issuing clarifying amendments to the provisions concerning

emergency mergers and purchase and assumptions consistent with the

Order and Decision. Further, NCUA is removing the 12 month insolvency

limitation since it is not required by the Federal Credit Union Act.

Regional Action

This policy is not self-executing. Credit Unions must receive the

approval of NCUA before restructuring their fields of membership to

serve either specified groups within a single common bond of ``trade,

industry, or profession'' or specified groups within a ``well-defined

community.'' Once approval is granted by NCUA, a federal credit union

can serve new members from all of its previously approved groups that

fall within the newly defined field of membership.

Effective Date; Interim Rule; Comment Period

Although this amendment is being issued as an interim final rule

and is effective immediately, the NCUA Board encourages interested

parties to submit comments. Comments may be submitted on or before

February 1, 1997.

Federal credit unions are suffering irreparable injury due to the

injunction issued in the consolidated cases of First National Bank and

Trust Co., et al. and the American Bankers Association v. NCUA, et al.

Since 1982, federal credit unions have been permitted to diversify

their membership base through the addition of select groups. This

ability has strengthened federal credit unions and reduced losses to

the NCUSIF and extended credit union service to millions of persons who

would not otherwise be eligible to join a credit union.

The inability to add new members from existing select groups

effectively begins the process of divesting those groups from the

credit union. This has an immediate effect of cutting off service to

millions of potential members and adversely affecting credit unions.

This adverse effect on credit unions poses potential safety and

soundness concerns with respect to the National Credit Union Share

Insurance Fund.

Therefore, the Board finds it is necessary and appropriate to act

expeditiously in this matter in order to allow credit unions to

partially restructure their fields of membership. If this rule is not

effective immediately, credit unions and their members will continue to

be adversely impacted. Accordingly, the Board for good cause finds that

(i) pursuant to 5 U.S.C. 553(b)(3)(B), notice and public procedure are

impracticable, unnecessary, and contrary to the public interest, and

(ii) pursuant to 5 U.S.C. 553(d)(3), the rule shall be effective

immediately and without 30 days advance notice or publication. Further,

NCUA has determined that this is not a major rule under 5 U.S.C.

Chapter 8, and shall be effective immediately.

Regulatory Procedures

Regulatory Flexibility Act

The Regulatory Flexibility Act requires NCUA to prepare an analysis

to describe any significant economic impact a regulation may have on a

substantial number of small credit unions (primarily those under $1

million in assets). This interim rule will not have a significant

economic impact on a substantial number of small credit unions and

therefore a regulatory flexibility analysis is not required.

Paperwork Reduction Act

NCUA has determined that the amendments do not increase paperwork

requirements under the Paperwork Reduction Act of 1995 and regulations

of the Office of Management and Budget (OMB). 60 FR 44978 (August 29,

1995).

Executive Order 12612

Executive Order 12612 requires NCUA to consider the effect of its

actions on state interests. This interim regulation makes no

significant changes with respect to state credit unions and therefore,

will not materially affect state interests.

List of Subjects in 12 CFR Part 701

Credit, Credit unions, Reporting and recordkeeping requirements.

By the National Credit Union Administration Board on November

14, 1996.

Becky Baker,

Secretary of the Board.

Accordingly, NCUA amends 12 CFR part 701 as follows:

PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

1. The authority citation for part 701 continues to read as

follows:

Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a,

1761b, 1766, 1767, 1782, 1784, 1787, 1789. Section 701.6 is also

authorized by 31 U.S.C. 3717. Section 701.31 is also authorized by

12 U.S.C. 1601, et seq., 42 U.S.C. 1981 and 3601-3610. Section

701.35 is also authorized by 12 U.S.C. 4311-4312.

2. Section 701.1 is revised to read as follows:

Sec. 701.1 Federal credit union chartering, field of membership

modifications, and conversions.

National Credit Union Administration practice and procedure

concerning chartering, field of membership modifications, and

conversions are set forth in Interpretive Ruling and Policy Statement

94-1 Chartering and Field of Membership Policy (IRPS 94-1) as amended

by IRPS 96-1 and IRPS 96-2. Copies may be obtained by contacting NCUA

at the address found in Sec. 792.2(g)(1) of this chapter. The combined

IRPS are incorporated into this section.

(Approved by the Office of Management and Budget under control

number 3133-0015.)

Note: The text of the Interpretive Ruling and Policy Statement

(IRPS 94-1) does not and the following amendments will not appear in

the Code of Federal Regulations.

3. In IRPS 94-1, Chapter 1, Section II.A is revised to read as

follows:

II.A.--Occupational Common Bonds

II.A.1--General

A federal credit union may include in a single occupational

common bond, any and all persons who share that common bond. NCUA

permits a person's membership eligibility in an occupational common

bond to be established in four ways:

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Employment (or a long-term contractual relationship

equivalent to employment) in a single corporation or other legal

entity makes that person part of an occupational common bond of

employees of the entity;

Employment in a corporation or other legal entity with

an ownership interest in or by another legal entity makes that

person part of occupational common bond of employees of the two

legal entities;

Employment in a corporation or other legal entity which

is related to another legal entity (such as a company under contract

and possessing a strong dependency relationship with another

company) makes that person part of an occupational common bond of

employees of the two entities; or

Employment based on a trade, industry, or profession.

An occupational common bond based on a trade, industry, or

profession must include a geographic limitation. This limitation

does not apply to any other occupational common bonds. However, a

proposed or existing federal credit union may limit its field of

membership to a specific geographic area.

So that NCUA may monitor any potential field of membership

overlaps, each group to be served (e.g., employees of subsidiaries,

franchisees, and contractors) must be separately listed in Section 5

of the charter.

The corporate or other legal entity (i.e., the employer) may

also be included in the common bond--e.g., ``ABC Corporation and its

subsidiaries.'' The corporation or legal entity will be defined in

the last clause in Section 5 of the credit union's charter.

Some examples of single occupational common bonds are:

Employees of the Scott Manufacturing Company who work

in Chester, Pennsylvania. (common bond--same employer);

Employees of the Scott Manufacturing Company. (common

bond--same employer without geographic limitation);

Employees, elected and appointed officials of municipal

government in Parma, Ohio. (common bond--same employer with

geographic limitation);

Employees of the federal government. (common bond--

single sponsor);

Employees of Johnson Soap Company and its subsidiary,

Johnson Toothpaste Company, who work in Augusta and Portland, Maine.

(common bond--parent and subsidiary company with geographic

limitation);

Employees of the Department of Defense--civilian and

U.S. Army. (common bond--same employer without geographic

limitation);

Employees of those contractors who work regularly at

the U.S. Naval Shipyard in Bremerton, Washington. (common bond--

employees of contractors with geographic limitation);

Employees, doctors, medical staff, technicians, medical

and nursing students who work in or are paid from Boston Medical

Center. (single corporation); or

Employees of JKL, Incorporated and STU, Incorporated

working for the XYZ Joint Venture Company in Los Gatos, California.

(common bond--same employer--ongoing dependent relationship).

Some examples of insufficiently defined single occupational

groups are:

Employees of manufacturing firms in Seattle,

Washington. (no defined sponsor or industry);

Persons employed or working in Chicago, Illinois. (no

occupational common bond); or

Employees of all colleges and universities in the State

of Texas. (not a single occupational common bond; although this may

qualify as an occupational common bond based on trade).

II.A.2--Trade, Industry, or Profession

A common bond based on employment in a trade, industry, or

profession can include employment at any number of corporations or

other legal entities that--while not under common ownership--have a

common bond by virtue of producing similar products or providing

similar services. Because this type of common bond is the most

expansive and has overlap implications, a geographic limitation is

required. In general, a geographic limitation corresponds to the

credit union's operational area. Also, each employee group to be

served must be separately listed in Section 5 of the credit union

charter.

While proposed or existing credit unions have some latitude in

defining a trade, industry, or profession occupational common bond,

it can not be defined so broadly as to include groups in fields

which are not closely related. For example, all textile workers or

all government employees in a limited geographic area (including

federal, state, and local) may qualify under this category. However,

employees of all manufacturing companies would not. The common bond

relationship must be one that demonstrates a commonality of

interests within a specific trade, industry, or profession. More

than one federal credit union may serve the same trade, industry, or

profession.

Some examples of trade, industry, or profession common bonds

are:

Employees and teachers who work for universities and

colleges in Austin, Texas. (same profession; acceptable if within

the credit union's operational area);

All persons working in the educational system in

Atlanta, Georgia. (same trade, acceptable if within the credit

union's operational area);

Employees of the federal, state, and municipal

governments in Fairfax County, Virginia. (same industry; acceptable

with a geographic limitation, i.e., within the credit union's

operational area);

Employees of the coal mining industry in Erie County,

Pennsylvania. (same industry; acceptable if within the credit

union's operational area); or

Persons working as Certified Public Accountants in Los

Angeles, California. (same profession; acceptable if within the

credit union's operational area).

Some examples of insufficiently defined trade, industry, or

profession common bonds are:

Employees and teachers who work for public schools.

(same trade, but no geographic limitation); or

Employed persons in Maryland. (no common bond--no

specified trade).

II.A.3--Common Bond Amendments

II.A.3.a--Designation of Common Bond

The chartering and field of membership policies effective prior

to the implementation of this interim policy statement allowed for

the combination of multiple select groups that did not share the

same common endeavor, purpose or interest to form a single credit

union. These policies have been suspended. Accordingly, It is now

necessary for those federal credit unions that were chartered, or

expanded their field of membership pursuant to the multiple select

group policies, to designate a core field of membership, i.e., a

common bond. Credit unions must designate a core common bond by

March 1, 1997. If a credit union fails to designate its core common

bond, NCUA will designate the original core group as its common

bond.

The core common bond can be defined as the employee group that

constituted the field of membership, i.e., its core group, at the

time of charter. The core common bond can also be defined as any

group in the credit union's field of membership, including a common

bond of trade, industry, or profession. If a group other than the

one that constituted the core common bond at the time of charter is

designated as the core common bond, then the newly designated core

common bond must receive NCUA's concurrence. To change the core

common bond the credit union must submit a written request to NCUA

for approval. The designation of a core common bond does not apply

to community charters.

The designation of a core common bond is critical for the

following reasons:

New members can be accepted only from the designated

core common bond;

Future field of membership expansions will be based on

the designated core common bond;

Only members of record, as of October 25, 1996, of

select groups that do not have the same designated core common bond

can continue to be served; and

Once a core common bond has been designated, it can not

be changed. However, in those cases where there is a valid safety

and soundness concern or a different common bond group is acquired

as a result of an emergency merger, the credit union may request a

new designation.

II.A.3.b--Documentation Requirements

A charter applicant or existing occupational federal credit

union that submits a request to amend its charter to add new groups

must provide documentation to establish that the occupational common

bond requirement has been met.

All amendments to an occupational common bond credit union's

field of membership, except the designation of the original core

common bond, must be approved by the regional director. The regional

director may approve an amendment to expand the field of membership

if:

The common bond requirements of this section are

satisfied;

[[Page 59310]]

The group to be added has provided a written request

for service to the credit union;

The group presently does not have credit union service

available (if credit union service is available, the region must

conduct an overlap analysis), other than through a community credit

union; and

The occupational common bond is based on a trade,

industry, or profession only if the group is within the operational

area of one of the credit union's service facilities.

If the credit union wishes to add a group that was previously

served by another credit union, but has lost service as a result of

the court decisions concerning common bond, the federal credit union

wishing to add the group must consult with the other credit union

and provide the results of that consultation in its application to

NCUA. A determination as to whether that group can be added will be

made based on a review of any safety and soundness concerns and the

needs of the group.

4. In IRPS 94-1, Chapter 1, Section II.C is revised to read as

follows:

II.C--Community Charters

II.C.1--General

A community credit union is permitted to serve persons who live

in, worship in, go to school in, or work in a ``well-defined

neighborhood, community or rural district.'' A subset of a community

charter is a group community, which permits a credit union to serve

specific occupational, associational, and community groups within

that same well defined area. Although there are differences in

documentation requirements for a group community charter, the

definition of a ``well defined neighborhood, community or rural

district'' is the same.

II.C.2--General Community Charter Criteria

NCUA policy is to limit a community to a single, geographically

well-defined area where residents have common interests or interact.

NCUA recognizes four types of affinity on which a community common

bond can be based--persons who live in, worship in, go to school in,

or work in the community. Businesses and other legal entities within

the community boundaries may also qualify for membership. More than

one community credit union may serve the same community area.

Given the diversity of community characteristics throughout the

country and NCUA's goal of making credit union service available to

all eligible groups, NCUA has established the following requirements

for community charters:

The geographic area's boundaries must be clearly

defined; and

The charter applicant must establish that the area is

recognized as a well defined ``neighborhood, community, or rural

district.''

Some examples of community charter definitions are:

Persons who live, work, worship, or go to school in,

and businesses located in the area of XYZ City bounded by Fern

Street on the north, Long Street on the east, Fourth Street on the

south, and Elm Avenue on the west.

Persons who live or work in Green County, Maine.

Persons who live, worship, go to school in, or work in

and businesses and other legal entities located in Independent

School District No. 1, DuPage County, Illinois.

Some examples of insufficiently defined community charter

definitions are:

Persons who live or work within and businesses located

within a ten-mile radius of Washington, D.C. (Not a recognized

neighborhood, community, or rural district).

Persons who live or work in the industrial section of

New York, New York. (No clearly defined boundaries).

II.C.3--Documentation Requirements for a Community Charter

For a community charter, any political jurisdiction or portion

thereof, excluding state boundaries, automatically qualifies as a

well-defined community, if the population of the requested political

jurisdiction does not exceed 1,000,000. If the area to be served is

not contained within a single political jurisdiction, or if the

population of the area to be served exceeds 1,000,000, the credit

union should provide to NCUA for approval, if available, the

following documentation to support that it is a well-defined

community:

The defined political jurisdictions;

Major trade areas (shopping patterns and traffic

flows);

Shared/common facilities (for example, educational,

medical, police and fire protection, school district, water, etc.);

Organizations and clubs within the community area;

Newspapers or other periodicals published for and about

the area;

Maps designating the areas to be served;

Common characteristics and background of residents (for

example, income, religious beliefs, primary ethnic groups,

similarity of occupations, household types, primary age group,

etc.); and

History of area.

Except for a group community, the following information must be

provided to support a need for a community credit union:

A list of credit unions presently in area and evidence

that these credit unions were contacted regarding the community

charter. If available, provide the opinion of the overlapped credit

unions; and

Written documentation reflecting support for the

charter application, field of membership expansion, or conversion to

a community credit union. This may be in the form of letters,

surveys, studies, pledges, or a petition. Other types of evidence

may also be acceptable.

II.C.4--Business Plan

Business plans are required of all credit unions expanding their

community boundaries or converting to a community charter (except

for a credit union converting to a group community). The business

plan for a community federal credit union should comply with the

requirements of Chapter 1, Section IV.A.4.b, except that a summary

of survey results is not required.

II.C.5--Community Service Area

The service area for a community federal credit union is the

area defined in its charter usually with north, south, east, and

west boundaries. If the community is a recognized political

jurisdiction, the service area may be defined by the applicable

political jurisdiction, such as ``DEF Township, Kansas'' or ``GHI

County, Minnesota.''

II.C.6--Group Community

A group community charter is available to those wishing to serve

specific occupational, associational, and community groups within a

well-defined neighborhood, community, or rural district.

An example of a group community common bond definition is:

The following groups within Smithson County,

Pennsylvania: Employees of HAC Corporation and Smith and Wesson

Firearms, who work in Smithson County, Pennsylvania; members of the

Greater Smithson County Ruritan Club who qualify for membership in

accordance with its bylaws in effect on November 9, 1996; members of

the First Amish Church in Smithson County, Pennsylvania; members of

the National Rifle Association in Smithson County, Pennsylvania, who

qualify for membership in accordance with its bylaws in effect on

November 9, 1996; and members of the Greystone Electric Membership

Cooperative in Smithson County, Pennsylvania.

A group community charter must receive regional director

approval to expand its field of membership to include new groups

within that community. The regional director may approve the

amendment if the request supports:

The group is within the defined geographical area;

The group has provided a written request for service to

the credit union; and

Whether the group presently has credit union service

available from an occupational or associational credit union.

If the credit union wishes to add a group that was previously

served by another credit union, but has lost service as a result of

the court decisions concerning common bond, the federal credit union

wishing to add the group must consult with the other credit union

and provide the results of that consultation in its application to

NCUA. A determination as to whether that group can be added will be

made based on a review of any safety and soundness concerns and the

needs of the group.

5. In IRPS 94-1, Chapter 2, Section III.B is amended by removing

the words ``within 12 months'' and adding a new paragraph at the end of

the section to read as follows:

III.B. * * *

If the continuing and merging credit union do not have the same

core common bond, then the continuing credit union's core common

bond will be controlling for future common bond expansions. However,

the continuing credit union may, at the time of the emergency

merger, request a redesignation to the merging credit union's core

common bond. Subsequent field of membership expansions must be based

on a single designated core common bond.

[[Page 59311]]

However, the continuing credit union may serve new members of the

merging credit union's core common bond and members of record as of

October 25, 1996, of the non-core common bond groups.

6. In IRPS 94-1, Chapter 2, Section III.C is amended by adding a

new paragraph at the end of the section to read as follows:

III.C. * * *

If the continuing and the purchased and assumed credit unions do

not have the same common bond, then the continuing credit union's

core common bond will be controlling for future common bond

expansions. However, the continuing credit union may, at the time of

the P&A, request a redesignation to the purchased and assumed credit

union's core common bond if the P&A meets the emergency merger

criteria. Subsequent field of membership expansions must be based on

a single designated common bond. However, the continuing credit

union may serve new members of the purchased and assumed credit

union's core common bond and members of record as of October 25,

1996, of the non-core common bond groups.

[FR Doc. 96-29886 Filed 11-21-96; 8:45 am]

BILLING CODE 7535-01-P