OGC Legal Opinion

October 5, 2012

OGC Legal Opinion 12-1007 Charter Change

NCUA's Office of General Counsel (OGC) has issued a Legal Opinion to all federally chartered credit unions (FCUs) regarding confirming that NCUA has the authority to approve a credit union’s request to receive a change in its charter and subsequently merge with another credit union with the same type of field of membership. The Legal Opinion does not contain any background as to a specific fact pattern that formed the basis for the question, but OGC cites statute and case law as the foundation for NCUA authority to approve mergers between multiple common bond credit unions.

The OGC notes that the Federal Credit Union Act (“FCUA”) permits mergers subject to NCUA approval and that NCUA may approve a charter conversion application if the applicant satisfies the criteria for a charter change set forth in the FCUA and NCUA’s regulations. The OIG Legal Opinion next cites case law upholding NCUA regulations permitting multiple common bonds as well as the voluntary merger of healthy credit unions. See ABA v. NCUA, 93 F.Supp.2d 35 (D.D.C. 2000) and ABA v. NCUA, 271 F.3d 262 (D.C. Cir. 2001).

In those opinions, the courts rejected the assertion that NCUA's rules permitting the voluntary merger of healthy multiple common bond credit unions containing select employee groups of less than 3,000 members violated CUMAA’s express mandate that, whenever NCUA should encourage the formation of separately chartered credit unions. Instead, the courts held that the mandate to encourage separate credit unions likely applied only to the “expansions” of existing credit unions affected by the addition of a single group, and not to mergers of multiple common bond credit unions

The OIG states those decisions support NCUA’s discretion under the FCUA to approve the voluntary merger of two healthy multiple common bond credit unions. In addition NCUA also has clear authority to approve a change to a credit union’s charter. The OIG concludes that taken together, these statutory provisions provide NCUA authority to permit charter conversions to facilitate subsequent mergers.