Written by Victoria Daka, Regulatory Compliance Counsel
In early July, NCUA issued Letter to Federal Credit Unions 15-FCU-03, which provides guidance describing the modernized associational common bond rule. In April 2015, the Board finalized amendments to its Chartering and Field of Membership Manual that make substantial changes to how the agency will evaluate an application to add an association to a federal credit union’s (FCU) field of membership (FOM). While the preamble to the final rule provided some guidance on how to add an association to an FCU's FOM, many questions were left unanswered.
For background, the modernized rule encompasses three main changes to adding an association to an FCU's FOM. First, the final rule adds a preliminary threshold determination. Second, the final rule expands the “totality of the circumstances” test to eight factors. Third, final rule also provides twelve types of associations that automatically qualify for membership.
With the benefit of the recently issued guidance, FCUs now have further guidance on adding an association to its FOM. While this Letter and accompanying enclosures clarify quite a few things, for purposes of this blog, I would like to highlight the following: 1) the “totality of the circumstances” test; and 2) the updated field of membership internet application (FOMIA) – including, the procedural aspects of the application.
Totality of the Circumstances Test
In the accompanying enclosure highlighting the Office of Consumer Protection’s (OCP) instruction to OCP staff, it is made clear that if five specific factors in the “totality of the circumstances” test are satisfied – factors 1, 2, 3, 4 and 8 – “the association is deemed to have met the totality of the circumstances test.” However, the guidance reiterates that no single factor is controlling, in the test.
The five most important factors are provided below:
"1. Whether the association provides opportunities for members to participate in the furtherance of the goals of the association;
2. Whether the association maintains a membership list;
3. Whether the association sponsors other activities;
4. Whether the association's membership eligibility requirements are authoritative; and
8. Separateness – whether the respective business transactions, accounts, and corporate records of the FCU and the group are not intermingled."
Updated Field of Membership Internet Application (FOMIA)
As of now, NCUA has updated its FOMIA to include the twelve categories of associations eligible for automatic approval. Additionally, this online system provides FCUs with an immediate electronic confirmation of approval. The decision is based off of the threshold determination and the Chartering and Field of Membership regulatory requirements.
FCUs seeking to add associations to its FOM that are not automatically qualifying can still receive an electronic immediate confirmation response determination of either: approved or pending, on the FOMIA. In these instances, however, the decision is based off of the threshold determination, totality of the circumstances test and the Chartering and Field of Membership regulatory requirements.
It is important to note, that while FCUs may be granted an immediate response, an FCU may only begin serving members of an approved group after “the board adopts the required resolution to expand its field of membership.” Moreover, upon receipt of completed applications, OCP will respond to FCUs no later than 15 days.
However, “NCUA will continue to require each FCU to obtain and retain the following documentation when seeking to add groups to its field of membership through FOMIA:
1) A letter or equivalent documentation from the association indicating it wants to be
added to the FCU’s field of membership; the number of primary potential members
for the association; and the associational group’s proximity to the FCU or its nearest
service facility; and
2) A copy of the most recent bylaws or other equivalent documentation (such as the
charter or articles of incorporation) for the association the FCU wishes to add to its
field of membership.”
NCUA’s Letter to Federal Credit Unions 15-fcu-03 and the accompanying enclosures are available here.