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NCUA Passes Amended Associational Common Bond Rule
Friday, May 1, 2015 6:35 AM

The National Credit Union Administration yesterday morning voted 2-1 to approve a rule to limit credit unions' use of associational common bonds to add to fields of membership (FOM). NCUA Chair Debbie Matz and Vice Chair Rick Metsger voted for the final rule, while board member J. Mark McWatters voted against it.

Aspects of the final rule were met with strong opposition by CUNA when it was first proposed last year, and the NCUA made changes to its final version that address some of CUNA's recommendations. For instance, before its final vote, the board added five categories of association that will automatically qualify for NCUA approval as a common bond.

A proposed threshold test also was named as a major concern for CUNA and credit unions. It is intended to allow the NCUA to determine whether an association was organized primarily for the purpose of expanding credit union membership. Yesterday, as recommended by CUNA, the NCUA removed a one-year requirement from that threshold test.

CUNA has also advocated that, instead of a threshold test for associations, the agency should coordinate with a credit union and association during an FOM application review process, and then allow a final decision to be appealed to the NCUA board, if needed. CUNA also pushed for a clear appeals process.

The NCUA said it will issue guidance for its "totality of circumstances test," and all existing associations will be grandfathered, another provision strongly supported by CUNA.

Also in response to comments by CUNA's and credit union stakeholders, the board acknowledged that the numerous factors comprising its "corporate separateness" criterion for associational common bonds could be too difficult for some credit unions and associations to demonstrate.

The sole factor included in the final rule prohibits a federal credit union's and an association's respective business transactions, accounts, and records to be intermingled.

CUNA also requested that NCUA develop a mechanism for adding groups to fields of membership that now fall outside of the rulemaking process. This would allow federal credit unions to add associations, without prior approval, that have a purpose comparable to that of an association already on a pre-approved list.