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OGC Legal Opinion 13-0903 Low Income Credit Unions
NCUA was asked if a low-income designated community federal credit union (FCU) may serve any individual participant in an association headquartered in the community. NCUA answered “YES” so long as the group was not formed for the purposes of providing credit union services to low-income persons and the FCU is a community chartered low-income FCU.
The question, and NCUA’s answer, apply only to federal credit unions. State Chartered credit unions will look to their state field of membership rules for any questions about membership eligibility.
For FCUs, NCUA’s Chartering Manual provides “special” rules for FCUs serving low-income members. The rules permit the formation of associational groups for the sole purpose of making FCU membership available to low-income persons. In those cases, every member of the group must meet the low-income definition. However, if the FCU is a community charter is has the ability to serve all persons affiliated with the low-income community, regardless of whether the persons are themselves low-income. With respect to a group headquartered in the community, the FCU may serve the members of the group regardless of their income level so long as the group was not formed with the purpose of making credit union membership available.
OGC Legal Opinion 13-0244 Overseas Private Investment Corporation (OPIC)
NCUA was asked if federal credit unions (FCUs) could invest in obligations that are fully guaranteed by the Overseas Private Investment Corporation (OPIC). NCUA answered “YES” citing the Federal Credit Union Act Section 1757’s authorization of investments in “obligations, participations, securities, or other instruments of, or fully guaranteed as to principal and interest by any . . . agency of the United States.” See 12 U.S.C. §1757(7)(E). OPIC is an agency of the United States. See 22 U.S.C. §2191. Therefore obligations fully guaranteed by OPIC are permissible investments for FCUs.
NASCUS notes that currently NCUA’s investment rules do not apply to state-chartered natural person credit unions. Federally insured state-chartered credit unions would look to state law to determine the permissibility of investing in OPIC.
OGC Legal Opinion 13-0444 Electric Cooperatives
Legal Opinion 13-0444 deals with federal credit union (FCU) field of membership (FOM). It applies only to FCUs. State-charted credit unions should look to state law and regulation for any FOM questions.
NCUA was asked to clarify what standard it uses to determine if an electric cooperative qualifies to be included in a FCU’s FOM. NCUA responded that in making the determination it applies a totality of the circumstances test to determine if an electric cooperative shares a sufficient associational common bond to be included in the FOM. The test considers the following 7 factors:
- Whether members pay dues
- Whether members participate in the furtherance of the goals of the association
- 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
- Whether the association maintains a membership list
- Whether the association sponsors other activities
- The association’s membership eligibility requirements
- The frequency of meetings
In the legal opinion, NCUA notes that it considers all of the factors together with no one factor alone being determinative of membership eligibility. However, in the past NCUA has stated
that a cooperative that is based primarily on a client-customer relationship fails to satisfy the associational common bond requirements.
OGC Legal Opinion 13-XXX* Balloting at Special Meetings of Members
March 29, 2013
NCUA’s Office of General Counsel (OGC) issued this legal opinion in response to questions regarding federal credit union (FCU) bylaws and the role of state courts in enforcing FCU bylaws. The legal opinion applies only to FCUs.
In its opinion, NCUA’s OGC states that the use of mail ballots in an election to remove the directors of a FCU is a violation of NCUA’s mandatory FCU bylaws. See FCU Bylaws, §XVI.3. OGC notes in its opinion that the standard bylaws for FCUs are very specific in stating that the member vote to remove a director must take place at an in-person meeting and therefore precludes the use of absentee ballots (mail ballots).
As to the enforcement of FCU bylaws, the NCUA OGC stated that NCUA incorporated the FCU bylaws into its regulations in 2007, in part to clarify NCUA’s authority to take action on bylaw violations. The opinions states:
NCUA has full authority to interpret and enforce the FCU Bylaws. State law has no role where the FCU Bylaws are clear and unambiguous.
In concluding its opinion, the OGC noted that NCUA has the discretion to take action on bylaw violations not only when related to safety and soundness, but also when “a bylaw violation poses a threat to fundamental, material, credit union member rights.”
**The Legal Opinion Letter was published without a reference number.