Compliance Blog

When a credit union is formed, its field of membership is set by its charter. However, with the right application, a credit union can amend its charter and expand its field of membership. Section 5 of a multiple common bond federal credit union’s charter contains information regarding a federal credit union’s field of membership and any select groups that the federal credit union (FCU) can serve.  However, Section 5 can be amended to expand a FCU's field of membership under certain circumstances. In this blog, I am going to discuss how a multiple common bond FCU can amend Section 5 in order to directly add a new select group to the FCU’s field of membership. Appendix B to Part 701, the Chartering and Field of Membership Manual (Manual), Section IV.B, contains instructions for adding a select group to a multiple common bond FCU’s charter.

Criteria for Adding a Select Group

Section IV.B.2 discusses criteria that must be met before the NCUA will approve of an amendment adding a select group to a FCU’s field of membership. The Manual lists the following requirements:

·       The FCU has not engaged in unsafe or unsound practice during a one-year period prior to adding the select group;

·       The FCU must be adequately capitalized in accordance with Part 702 of NCUA’s Rules and Regulations; however, some exceptions may apply;

·       The FCU has the capacity to serve the select group and the ability to add new staff or assets to serve the select group;

·       If the addition of the select group has the potential to harm another credit union or its members, the beneficial effect of the expansion must outweigh the potential harm; and

·       The select group must not be able to form its own credit union.

If a select group has 3,000 or more members, the NCUA presumes that the select group can form its own credit union. However, a FCU can overcome this presumption if it can show that it would be infeasible for the select group to form its own credit union. For example, the FCU can show that “[t]he group lacks sufficient volunteer and other resources to support the efficient and effective operation of its own credit union.”

 Documentary Requirements

When requesting a select group expansion, a FCU must submit a formal request to the Office of Credit Union Resources and Expansion of the NCUA. The request must be made using the Field Membership Amendment forms. The size of the select group will determine which form to use.

For select groups that have less than 3,000 members, the credit union must file a form NCUA 4015-EZ accompanied with a letter from the select group requesting credit union service. The letter must indicate the groups desired to be added to the FCU’s field of membership, the number of persons in the group and their locations, and the group’s proximity to the FCU's closest service facility. The application must also contain the most recent copy of the groups charter and bylaws.

For select groups with 3,000 or more members, the FCU must file a form NCUA 4015, also accompanied with a letter from the group. The letter must indicate the groups desired to be added to the FCU’s field of membership, the number of persons in the group and their locations, the group’s proximity to the FCU's closest service facility, and an explanation why forming a separate credit union for the group is not “practical or consistent with safety and soundness standards.”

Under Section IV.E, if the select group has 5,000 or more members, the FCU must “investigate the possibility of an overlap with federally insured credit unions prior to submitting an expansion request” and should submit documentation that supports inclusion of the group under Section IV.E’s overlap standards.

NCUA’s Procedures

Section IV.C details the NCUA’s procedures for amending a FCU’s field of membership. Once an application has been submitted, NCUA staff will review the request to ensure that the amendment conforms with NCUA policy. While reviewing an application, the NCUA will take into account a FCU’s financial and operational condition and, in some cases, the NCUA may require an on-site review or require the FCU to submit a business plan. If the application is approved, the Office of Credit Union Resources and Expansion will issue an amendment to Section 5 of the FCU’s charter. If the application is denied, a FCU can still ask the Office of Credit Union Resources and Expansion to reconsider and/or appeal to the NCUA Board.

For more information regarding adding select groups and a FCU’s field of membership, credit unions can review the NCUA’s page on chartering and field of membership and this NAFCU FAQs blog on common field of membership issues.