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Spring 2003-08 Federal Credit Union fields of membership enlarged

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Number 51
Spring 2003

Federal Credit Union fields of membership enlarged

Via a new regulation promulgated on March 27, 2003, the National Credit Union Administration has enlarged the membership base of federal credit unions.

By law, members of a federal credit union must have a "common bond." In 1998 Congress enacted Public Law 105-219, known as the "Credit Union Membership Access Act," which adopted a "multiple common bond" concept with respect to groups that have less than 3,000 members. As a result, the law and its implementing regulation allow three basic types of federal credit unions, each defined by a different "membership field":

q Single common-bond credit unions are comprised of one group having a common occupational or associational bond.

q Multiple common-bond credit unions consist of more than one such group.

q Community credit unions, in turn, are those whose membership is comprised of groups within a well-defined local neighborhood, community or rural district.

New regulation

The March, 2003, regulation now allows a membership field to include a trade, industry or profession, again with respect to groups of less than 3,000 members. It also premises that any county or city, regardless of its size, qualifies under the community criteria. The new regulation becomes effective on May 15, 2003.

Banker reaction

The American Bankers Association issued a press release denouncing the regulation on grounds that the NCUA disregarded legally imposed limits to membership requirements, with the intent of creating "large, bank-like credit unions." "NCA has also created a new wild-card category of credit union charters-based on trade, industry or profession (TIP)-that mocks congressional intent," the ABA stated. The ABA also took issue with the community size determination, citing as an example a city the size of New York. n


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