Compliance Blog

Oct 12, 2018
Categories: Board and Governance

Communication is Key: NCUA Implements Voluntary Merger Amendment

Written by André B. Cotten, Regulatory Compliance Counsel, NAFCU

Hello, Compliance Friends! We are wrapping up another awesome Regulatory Compliance School here in San Antonio. A special congrats to our new cohort of NCCOs!

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Recently, NCUA released a letter to federally insured credit unions (18-CU-03) explaining the various key provisions of the recently amended voluntary merger rule. To refresh your memory, in June 2018, NCUA published a final rule amending Parts 701 and 708b of its regulations governing voluntary mergers to provide greater transparency to credit union members and ease compliance for merging credit unions.

The recent letter to federally insured credit unions (18-CU-03) primarily focuses on the online portal for members of the merging credit union to communicate. To facilitate this amendment, NCUA’s Office of Credit Union Resources and Expansion (CURE) has established a member-to-member (MTM) process. Today’s post will provide highlights from NCUA’s recent letter.


A merging credit union is required to include a statement in its member notice about the availability of a website where its members can share comments or questions with each other about the proposed mergers. Members are allowed to jointly or individually submit comments.

Prior to posting, CURE will review each submitted comment. Pursuant to 708b, NCUA has the right not to post a communication it reasonably believes: is false or misleading; omits a material fact; relates to a personal claim or personal grievance, or solicits personal gain or business advantage; addresses any matter that is not related to the proposed merger; or directly or indirectly and without express factual foundation impugns a person’s character, makes charges concerning improper conduct; and makes statements impugning the safety and soundness of the credit union.

MTM Communication Process

To begin the merging process, a federally insured credit union is required to submit their proposed merger application to NCUA for review and approval. After NCUA gives a merging credit union permission to proceed with its membership vote, the credit union must then email a copy of its member notice to at least 15 days before it is mailed to members with a link that shows a credit-union specific MTM web address. 

Note, if the merging credit union is state chartered, it must comply with the requirements of its regulator, in addition to the applicable requirements of NCUA’s merger rule.

Unless a membership vote is waived pursuant to state law, NCUA must receive a copy of the member notice at least 15 days before any mailing of the member notice.

Whether federal or state chartered, the member notice must include the link mentioned above and members must receive the notice at least 45 but no more than 90 days before the meeting date by the members of the credit union proposing to merge.

Bylaw Amendment

Pursuant to the amended voluntary merger rule, merging credit unions are also required to update their Bylaws prior to submitting its application to NCUA. Part 708b now requires more time between when the notice of meeting is sent to the membership and the date of the meeting to vote on a merger. As I previously mentioned, members must receive the notice at least 45, but no more than 90 days, prior to the meeting. The board of directors must document the bylaw change in its board minutes. Please see the new bylaw wording for Article IV, Section 2 below:

“Section 2. Notice of meetings required. The secretary must give written notice to each member: at least 30 but no more than 75 days before the date of the annual meeting; at least 6 days before the date of any special meeting; 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.”

Note, federally insured state-chartered credit unions may need to consult with its respective State Supervisory Authority to determine if a bylaw change is needed.

Other Provisions

The letter also provides summaries of other approved revisions and clarifications, which include: 1) requiring the merging credit union to disclose merger-related financial arrangement increases above $10,000 or 15 percent of existing compensation or benefits, whichever is greater for covered persons; and having the revised model forms replaced the merger manual now centrally located in the Subpart C to Part 708b.

For additional details, refer to NCUA Regulations, Part 708b and NAFCU’s Final Rule Summary.


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