Compliance Center: NCUA Releases Letter to Federal Credit Unions on FOM Rule Changes

The National Credit Union Administration (NCUA) sent Letter to Federal Credit Unions 15-FCU-03, which includes guidance on the Associational Common Bond rule that recently went into effect.

The Letter includes information on the rule’s Implementation Policy and a Supervisory Letter to field staff.

On April 30, 2015, a majority of the NCUA Board approved the new FOM rule which went into effect on July 6, 2015.  The rule allows for automatic approval of 12 categories of associations which include:

  1. Alumni associations;
  2. Religious organizations, including churches or groups of related churches;
  3. Electric cooperatives;
  4. Homeowner associations;
  5. Labor unions;
  6. Scouting groups;
  7. Parent-teacher associations organized at the local level to serve a single school district;
  8. Chamber of Commerce groups (members only, not employees of members);
  9. Athletic booster clubs whose members have voting rights;
  10. Fraternal organizations or civic groups with a mission of community service whose members have voting rights;
  11. Organizations with a mission based on preserving or furthering the culture of a particular national or ethnic origin; and
  12. Organizations promoting social interaction or educational initiatives among persons sharing a common occupational profession.

The NCUA also updated the Field of Membership Internet Application (FOMIA) system to accommodate the 12 categories of association that automatically qualify as valid associations.

For associations that do not qualify for the above categories of pre-approved association groups, NCUA is streamlining the approval process. The rule clarifies the four most important criteria NCUA considers to approve a valid association:

  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; and
  4. Whether the association’s membership eligibility requirements are authoritative.

Compliance Question of the Week

If an account has three beneficiaries listed and one beneficiary passed away, should the remaining funds be split between the two remaining beneficiaries, or should one third go to the estate of the deceased beneficiary?

Typically, the division of property among multiple beneficiaries is determined by the member in writing before his/her death.  This can be done on the account card.  If there is nothing written, the default assumption is that the money is split evenly among the beneficiaries.  In the event of a beneficiary dying before the member, it is as if he or she were never listed on the card at all.  The remaining beneficiaries split the money equally (default), or in the ratio set out by the member with the dead beneficiary’s share being split equally.

In practice, you can make the check closing the account out to all beneficiaries jointly, rather than three individual checks.

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Federal Deposit Insurance Corporation (FDIC)

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Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance, Federal, NCUA.