Compliance Blog

Dec 21, 2015
Categories: Board and Governance

FOM-Calling All Credit Unions, pt2

Written by Alicia Nealon, Director of Regulatory Affairs

Happy Monday!! And, welcome back to the second installment of our series of posts where NAFCU's Compliance Blog will break down different portions of NCUA's FOM proposal and highlight the key issues that we are looking for your feedback on. Last week, we discussed Community Charters. Today, we will review Multiple Common Bond Charters. Specifically, a look at the 5 proposed changes to various aspects of multiple common bond chartering.

To start off, below is an aggregated list of ways the proposal would modernize multiple common bond federal charters:

  • Allow Reasonable Proximity through Online Access to Services.
  • Permit the addition of persons who work regularly for an entity that is under contract to the sponsor of the Select Employee Group (SEG) listed in its charter, provided there is a strong dependency relationship with that sponsor.
  • Permit inclusion of employees of an office/industrial park's tenants under certain conditions.
  • Streamline application process for demonstrating Stand-Alone Feasibility so that groups with between 3,000-5,000 members would need to submit a written statement indicating that conditions exist that result in the group being unable to form their own credit union.
  • Allow a credit union's common bond to include honorably discharged veterans of any branch of the United States Armed Forces listed in its charter, thereby continuing their eligibility for credit union membership beyond active duty.

For a comprehensive discussion of each of these amendments, be sure to check out NAFCU's Regulatory Alert 15-EA-20. For today though, lets breakdown the permissibility of reasonable proximity through online services and the inclusion of SEG contractors and office/industrial park tenant employees.

Reasonable Proximity through Online Access to Services

As all the multiple common bond credit unions out there know, reasonable proximity is one factor considered when determining whether a group can be added to a charter. NCUA's rules base reasonable proximity on the location of a service facility of the credit union. A service facility is currently defined as a credit union branch, a shared branch, a mobile branch that visits the same location on a weekly basis, or a credit union-owned electronic facility. In order to qualify as a service facility, a group's members must be able to deposit funds, apply for a loan or obtain funds on approved loans.

Recognizing the advent of technology and its impact on commerce and consumer behavior, the proposal would amend the definition of a service facility to extend it to members of occupational select groups and pre-approved associational groups who have access to the credit union's products and services through an online internet channel, such as a transactional website. The proposal explains that the online internet channel must be capable of accepting deposits for the member's accounts, accepting loan applications from the member, or disbursing loan proceeds to the member.

However, it is important to note that the service facility definition change would only apply to the reasonable proximity requirement of a multiple common bond credit union and its select occupational and associational groups. The amended definition of service facility would not apply to the requirement that a credit union serving an underserved area must establish and maintain an office or facility in [the underserved area].

SEG Contractors

Under NCUA's current rules, multiple common bond credit unions cannot add individuals who regularly work for an entity that is under contract to the sponsor of the SEG listed in its charter. Instead, the agency only presently allows a single occupational common bond to add these SEG contractors, so long as the contractor has a strong dependency relationship with that sponsor.

Acknowledging that there is no distinction between a single and multiple common bond credit unions in this area, the proposal would to extend to multiple occupational common bond credit unions the ability to add individuals who regularly work for an entity that is under contract to the sponsor of the SEG listed in its charter, so long as the contractor has a strong dependency relationship with that sponsor.

Office/Industrial Park Tenants

The proposal would permit a multiple common bond credit union to include as a SEG the employees of an office or industrial park tenant, such as the retail tenants of a shopping mall or business tenants of an office building. This inclusion would be subject to two conditions:

  1. Each tenant within the group must have fewer than 3,000 employees working at a facility within the park, and
  2. Only those employees who work regularly at the park during their employer's tenancy would be eligible for FCU membership.

The proposal notes that a credit union would not need to individual list each tenant in its charter as a group sponsor, but could instead list the office/industrial park itself. Through this streamlined approach, a multiple common bond credit union would not need to obtain letters from each tenant requesting credit union services. In the preamble, NCUA explains that a multiple common bond credit union could serve the tenant employees by obtaining a letter from an authorized representative of the park itself, such as a leasing agent.

What do the multiple common bond charters think? Would these tweaks provide you all the relief that you need in today's marketplace? Does your credit union anticipate utilizing any of these amendments? As you saw in the bullets above, NCUA proposes to look at whether a group of more than 3,000, but less than 5,000, lacks the ability to establish a new single common bond credit union. Should NCUA consider a larger number than 5,000 members for this threshold? How many actual members does your credit union believe are needed to charter a viable new credit union?

As you consider these questions, be sure to take a look at NAFCU's Regulatory Alert 15-EA-20, our Field of Membership Issue Page, or reach out to me directly (, 703-842-2266) with your thoughts.

Also, a holiday reminder to give yourself or someone else in your credit union the best gift this year- a chance to attend NAFCU's 2016 Regulatory Compliance School. NAFCU is currently offering an early registration savings of $200 but it ends soon! Use code HOLIDAY by 1/8 to save. Check out the agenda.