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March 24, 2017
NAFCU Compliance Blog talks membership and par value
NAFCU Special Counsel for Compliance and Research Pamela Yu offered an overview of the basics of credit union membership and par value – or the face value of a member's share – in today's Compliance Blog.
"The Federal Credit Union (FCU) Act requires that federal credit union members 'shall each subscribe to at least one share of its stock and pay the initial installment thereon and a uniform entrance fee if required by the board of directors,' " Yu wrote. "The par value of the required member share is established by each credit union in its bylaws."
"There is no regulatory minimum or maximum amount for credit union shares, and par values are often nominal – but sometimes not," she continued. "Oftentimes, a credit union wants to increase its membership, but it is concerned that the cost of the par value share may discourage new members."
Yu notes that credit unions are not allowed to advance payment of the par value to potential members, because credit unions are not authorized to extend credit to people who have not yet become members. However, the NCUA has issued legal opinions indicating that a credit union may pay the initial share from its own funds on behalf of potential members to begin their credit union membership.
"The Federal Credit Union (FCU) Act requires that federal credit union members 'shall each subscribe to at least one share of its stock and pay the initial installment thereon and a uniform entrance fee if required by the board of directors,' " Yu wrote. "The par value of the required member share is established by each credit union in its bylaws."
"There is no regulatory minimum or maximum amount for credit union shares, and par values are often nominal – but sometimes not," she continued. "Oftentimes, a credit union wants to increase its membership, but it is concerned that the cost of the par value share may discourage new members."
Yu notes that credit unions are not allowed to advance payment of the par value to potential members, because credit unions are not authorized to extend credit to people who have not yet become members. However, the NCUA has issued legal opinions indicating that a credit union may pay the initial share from its own funds on behalf of potential members to begin their credit union membership.
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