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An NCUA Letter to Credit Unions (15-FCU-03) includes information and supervisory guidance on the agency's new associational common bond rule, which took effect July 6 as part of the Chartering and Field of Membership Manual.

NCUA will now provide automatic approval of 12 categories of associations, including alumni associations, religious organizations, labor unions and fraternal organizations (see the letter for the complete list).

NCUA has updated its Internet application system to accommodate the 12 categories and will send immediate electronic confirmation of approved applications, the letter notes. For associations that do not qualify as pre-approved association groups, NCUA said it is streamlining the approval process.

The new rule includes a threshold-determination requirement to determine if an association was created primarily for the purpose of expanding a credit union's membership; if that is the case, the group would not be approved for a FOM.

NCUA has also added "corporate separateness" as an eighth criterion in its "totality of the circumstances" test. 15-FCU-03 explains that associations which satisfy this new criterion and the first four of the other seven criteria will pass the totality of the circumstances test.

A separate July 6 NCUA Supervisory Letter (SL No. 15-02) notes the red flags field staff should look for that "may indicate weak controls over an FCU's FOM":

• advertising in local media or on the Internet that "anyone can join";
• unusual patterns regarding how borrowers became members;
• establishing a new organization for the primary purpose of attracting new members;
• reliance on fee income from a new program where the majority of new members have joined; and
• compelling allegations that the credit union is engaged in questionable membership and advertising practices.