NCUA Letter to Federal Credit Unions on Potential Violations of Common Bond Advertising Requirements

Written by Michael Coleman, Regulatory Compliance Counsel

NCUA recently released Letter to Federal Credit Unions 13-FCU-03 which concerns potential violations of common bond advertising requirements. The letter expresses strong concern over some advertising practices which imply that the field of membership in federal credit unions is “open to anyone” without any limitations. Specifically, the letter is directed at what it considers “overly aggressive marketing campaigns” advertising membership in FCUs through associational groups that NCUA feels is “providing consumers with misleading information about single and multiple common bond membership requirements.”

The letter warns FCUs that if they are advertising that membership is open to anyone without limitations they may be in violation of the common bond requirements of the Federal Credit Union Act (FCUA) and NCUA regulations, NCUA’s accuracy in advertising rules (See, 12 C.F.R. 740.2) and the consequences of non-compliance with these requirements.  

What should federal credit unions take away from this letter? I think the most important take away is that FCUs should review their advertising practices concerning field of membership (FOM). The letter states that advertisements which include language to the effect that “anyone can join” or “membership is open to everyone” that do not contain qualifying language on the FOM restrictions would violate the prohibition on inaccurate or deceptive advertisements contained in 12 C.F.R. 740.2. If you have been advertising membership in your FCU through an associational group, make sure the ads conform to these directives from the NCUA.

Another thing to keep in mind is the requirements for associational common bonds, which are explained in NCUA’s Chartering and Field of Membership Manual (Chapter 2, Section III.A.1). Here is an excerpt from the letter:  

“NCUA determines whether a group satisfies the associational common bond requirements based on a “totality of the circumstances” test, which has the following seven factors:⁴

 1) Whether members pay dues;

 2) Whether members participate in the furtherance of the goals of the association;

 3) Whether the members have voting rights;

 4) Whether the association maintains a membership list;

 5) Whether the association sponsors other activities;

 6) The association’s membership eligibility requirements; and

 7) The frequency of meetings.

 NCUA’s Office of Consumer Protection has begun conducting quality control reviews of federal credit unions that may be improperly using associations to sign up members without a common bond.”

This letter is a must read, be sure to take a look at the full letter and pass it along to your marketing department.