Considerations for Associations Within a Credit Union Field of Membership


There are numerous organizations and associations which are doing great work within our communities—from supporting local museums to providing scholarships and assistance for the disadvantaged—to organizations with missions of community service.

In many cases, credit unions have already added these organizations and associations to their Field of Membership (FOM) or are considering adding the organizations or associations to their FOM. By adding these groups to their FOM, credit unions can offer accounts and services to members of those groups whose missions align with the purpose of the credit union.

But, there are some things to consider when it comes to adding associations. While most of the following comes from National Credit Union Association (NCUA) guidance, the state regulators follow similar considerations.

First, credit unions can only serve people within their FOM. The regulators will need to approve any additions to your FOM before you can start serving members of any new organization or association. This involves going through the formal process of making changes. If you are considering adding a group, start the conversation with your regulator early.

Second, not just any associational group can be added. The NCUA takes a Totality of the Circumstances into consideration. From the NCUA Chartering and Field of Membership Manual:

As a threshold matter, when reviewing an application to include an association in a federal credit union’s field of membership, NCUA will determine if the association has been formed primarily for expanding credit union membership. If NCUA makes such a determination, then the analysis ends, and the association is denied inclusion in the federal credit union’s field of membership. If NCUA determines that the association was formed to serve some other separate function as an organization, then NCUA will apply the following totality of the circumstances test to determine if the association satisfies the associational common bond requirements. The totality of the circumstances test consists of the following factors:

  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;
  5. Whether members pay dues;
  6. Whether the members have voting rights; to meet this requirement, members need not vote directly for an officer, but may vote for a delegate who in turn represents the members’ interests;
  7. The frequency of meetings; and
  8. Separateness—NCUA reviews if there is corporate separateness between the group and the federal credit union. The group and the federal credit union must operate in a way that demonstrates the separate corporate existence of each entity. Specifically, this means the federal credit unions and the group’s respective business transactions, accounts, and corporate records are not intermingled.

The NCUA also provides a list of Pre-Approved Groups. NCUA automatically approves the below groups as satisfying the associational common bond provisions. NCUA only approves regular members of an approved group. Honorary, affiliate, or non-regular members do not qualify.

These groups are:

  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 (PTAs) organized at the local level to serve a single school district;
  8. Chamber of commerce groups (members only and 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 having a mission based on preserving or furthering the culture of a national or ethnic origin; and
  12. Organizations promoting social interaction or educational initiatives among persons sharing a common occupational profession.

Even after adding a new organization or association to a credit union’s FOM, there are advertisement concerns to be aware of, as detailed in the NCUA’s Letter to Federal Credit Unions 13-FCU-03, and the NCUA’s Supervisory Letter SL. No. 15-12.

As the NCUA’s Letter to Federal Credit Unions points out, advertising that “anyone” can join or that you have a FOM that is “open to anyone” might be a violation of law and regulation.

Section 740.2 of NCUA’s Accuracy of Advertising rule prohibits any advertising or representation that is inaccurate or deceptive. Advertisements that include language to the effect that “anyone can join” or “membership is open to everyone”—without any qualifying language—can give the impression that the Federal Credit Union Act’s single or multiple common bond requirements do not apply. When this occurs, the advertisements are inaccurate or deceptive.

In the end, there are numerous great organizations and associations that are providing support in our communities. Credit unions can consider serving the members of those groups, but make sure you are doing it right. That way it is a win for everyone.

Question of the Week

Is there a legal requirement to contact Adult Protective Services if a credit union has reason to believe that an elderly member may be a victim of abuse (financial, neglect, etc.)?

Although there is not a requirement to contact Adult Protective Services if a credit union suspects elderly abuse, it is suggested that the credit union do so. Any privacy concerns should be mitigated by the fact that the law shields people from liability who report elder abuse in good faith. The shield protects individuals even when the report is made over the phone.

Employees of financial institutions are considered permissive reporters. Permissive reporters may report to their local Adult Protective Services or a law enforcement agency when there is a reasonable cause to believe that a vulnerable adult is being financial exploited.

Related Links:

Legal Briefs

Consumer Financial Protection Bureau (CFPB)

The CFPB issued a final rule that amends and clarifies portions of the TILA/RESPA rule regarding when increased closing costs can be passed on to the borrower and disclosed on the Closing Disclosure.

Office of the Comptroller of the Currency (OCC)

The OCC released a new Comptroller’s Handbook Booklet, “Recovery Planning,” which is part of the Safety and Soundness portion of the Booklet.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of April 27, 2018. The last update prior to this was April 26, 2018.

Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Compliance News.