If the proposed area consists of a single Metro unit of any kind, it may also meet the following criterion, as reported by the most recent decennial Census:

If the proposed area consists of a single NonMetro unit of any kind, it may also meet the following criterion, as reported by the most recent decennial Census:

12 CFR 1805.201(b)(3)(ii)(D)(2)(i) and (ii) (2008).

Finally, if the proposed area consists of a single NonMetro county, it may meet one of the following two additional criteria, as reported by the most recent decennial Census:

12 CFR 1805.201(b)(3)(ii)(D)(4) and (5) (2008).

Multiple Contiguous Metro or NonMetro Units. If a proposed area consists of multiple contiguous Metro units (e.g., a group of adjoining census tracts) or multiple contiguous NonMetro units (e.g., a group of adjoining counties), the area is subject to a population threshold that does not apply to a proposed area consisting of a single unit. Thus, when a proposed area consists of multiple contiguous units, at least 85 percent (85%) of the area's total population must reside within the units that ``together meet one of the [applicable distress] criteria'' set forth above (``the 85% population threshold''). 12 CFR 1805.201(b)(3)(ii)(C)(2) (2008).

The language of the 85% population threshold suggests that all of the ``distressed'' units must qualify as such under the same criterion, but in practice, the CDFI Fund allows each ``distressed'' tract within a group to qualify under any one of the criteria. Also, the decennial Census itself does not apply the 85% population threshold to a proposed area consisting of multiple contiguous units; it only reports whether an individual unit meets an applicable distress criterion.

A proposed area consisting either of a single Metro or NonMetro unit, or of multiple contiguous units in which the ``distressed'' units represent at least 85 percent of the area's population, will meet the definition of an ``investment area'' provided that, as explained below, it also has ``significant unmet needs'' for loan products and applicable financial services.

Resources for Determining If Distress Criteria Are Met. The CDFI Fund's ``My CDFI Fund'' Web site is an invaluable resource for determining whether a proposed area is ``distressed,'' but only if the area's unit(s) conform to one or more census tracts or counties, or to an independent city (which is treated as equivalent to a county); the site is not equipped to analyze any other kind of geographic unit.\5\ Using its ``Information and Mapping System'' feature, the ``My CDFI Fund'' Web site allows the user to enter selected units that it then analyzes individually and as a proposed area. The analysis reflects the most recent decennial Census data.\6\ The results are displayed on a comprehensive ``Investment Area/Hot Zone Worksheet'' (``IA Worksheet'').
\5\ The ``My CDFI Fund'' Web site's ``Information and Mapping System'' (``CIMS'') is available at: https://www.cdfifund.gov/ myCDFI/Organization/Mapping/Mapping.asp The ``Welcome to CIMS'' page explains the options for identifying ``CDFI Investment Areas'' and a ``Mapping System Overview and Tutorial.'' The ``My CDFI Fund'' Web site is accessible to registered users through an organizational account holder. For instructions on how to become a registered user, see http://www.ncua.gov/CreditUnionDevelopment//Underserved/ underserved.html. Under the ``Expanding into Investment Areas'' section is a link entitled ``Instructions to Use the CDFI Web site.''
\6\ Typically, there is an 18month lag between the taking of a decennial U.S. Census and the publication of the results. Thus, for example, the results of the 2000 census became available when published in 2002 and will remain the most recent census until the results of the 2010 census are published.

For each unit individually, the IA Worksheet shows: Whether it is located within an MSA; its total population; its poverty rate; the percent of benchmark MFI; the unemployment rate; and most importantly, whether the unit is ``distressed'' under the distress criteria.\7\ For the proposed area as a whole, the IA Worksheet shows: Whether the population of the non``distressed'' units is less than 15 percent of the whole area's population (i.e., applies the 85% population threshold); the exact percentage of the area's population that resides in the non``distressed'' units; the total population of the non ``distressed'' units; and whether the combined units are contiguous. When the IA Worksheet indicates that a proposed area does not qualify as ``distressed,'' none of these details is provided.
\7\ The ``My CDFI Fund'' Web site implies that it determines whether a proposed area ``qualifies as an investment area.'' If so, it would not be necessary for an applicant to meet a further criteriondemonstrating ``significant unmet needs for loans,'' etc., within the proposed area. In fact, it is apparent that the Web site determines only whether a unit or proposed area is
``distressed,'' meaning that an applicant still must independently demonstrate the proposed area's ``significant unmet needs for loans,'' etc., in order to qualify as an ``investment area.''

At present, the ``My CDFI Fund'' Web site's analysis is the most expeditious means of establishing that a proposed area is sufficiently ``distressed,'' thus conserving credit union resources. To benefit from the convenience of the ``My CDFI Fund'' Web site, the NCUA Board encourages credit unions to conform their proposed ``underserved areas'' to the ``geographic units'' the site is limited tocensus tracts and county boundaries, as the case may be.

Approval to Serve an Already Approved ``Underserved Area''. Once a credit union is initially approved to serve an area that qualifies as ``underserved,'' other credit unions may be approved to serve the area provided it is ``underserved'' at the time they apply. The proposed rule ``grandfathers'' all credit unions approved to serve an area while it qualifies as ``underserved,'' allowing them to continue serving that area in the event it no longer qualifies. To terminate the approval to serve an area that no longer is ``underserved'' would penalize the credit union for its efforts to bring an adequate level of service to the area.

An area that previously was approved as ``underserved'' may still qualify as ``distressed'' when the proposed rule is applied using the decennial Census in effect when the new applicant applies. When that is the case, the new applicant must show at the time it applies that the area still has ``significant unmet needs for loans and financial services'' (to qualify as an ``investment area'') and still is ``underserved by other depository institutions'' (to qualify as ``underserved''). These criteria may become more difficult to meet as the number of depository institutions serving the area increases.

Issues for Comment. The NCUA Board invites public comment on the application of the economic distress
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criteria, including whether a proposed area should be required to conform to county or census tract boundaries, as the case may be, so that census tracts apply uniformly to areas located within a Metropolitan Area, and counties apply uniformly to areas located outside a Metropolitan Area.

C. Significant Unmet Needs for Loans or Financial Services

Apart from applying the economic distress criteria, the CDFI Fund definition of an ``investment area'' requires a showing of ``significant unmet needs for loans or equity investments'' within the proposed area. 12 U.S.C. 4702(16)(A)(ii). Because credit unions are not authorized to offer equity investments, the scope of this ``unmet needs'' test initially was limited by definition to the unmet needs for loans.\8\ In implementing the ``significant unmet needs test,'' the CDFI Fund added the alternative of addressing the unmet needs for a range of financial services including many that credit unions are authorized to offer: Checking accounts, savings accounts, check cashing, money orders, certified checks, automated teller machines, deposit taking, safe deposit box services, and other similar services.\9\ 12 CFR 1805.102(b)(3)(ii)(A)(2).
\8\ Credit unions are not authorized to offer ``equity investments,'' which are defined to include ``a stock purchase, a purchase of a partnership interest, a purchase of a limited liability company membership interest, a loan made on such terms that it has sufficient characteristics of equity [and] a purchase of secondary capital.'' 12 CFR 1805.104(t) (2008).
\9\ The financial services credit unions are authorized to offer are drawn from the CDFI Fund's definition of ``financial services'' that institutions generally offer. 12 CFR 1805.104(v) (2008). To these financial services, the Fund also added certain ``financial products'' that, except for loans, credit unions do not offer to their members. 12 CFR 1805.104(u) (2008).

From 1998 through 2000, NCUA permitted the ``significant unmet needs'' showing to be made through the Business Plan required to be developed by a credit union seeking to add an ``underserved area.'' 63 FR at 72042. The Business Plan already was required to ``identify the credit and depository needs of the community and detail how the credit union plans to serve those needs.'' Id. For that reason, NCUA revised its policy to recognize that a proposed area that is ``distressed'' is presumed to have ``significant unmet needs.'' 65 FR 64512, 64518 (Oct. 27, 2000).

Since the enactment of CUMAA, the CDFI Fund has modified the documentation and scope requirements for a proposed area to meet the ``significant unmet needs'' test. ``Studies or other analyses'' were originally required to ``adequately demonstrate a pattern of unmet needs for loans and equity investments.'' 12 CFR 1805.301(e) (1998). As modified, a ``narrative analysis'' is the only supporting documentation now required. 12 CFR 1805.201(b)(3)(ii)(E) (2008). In practice, the CDFI Fund accepts a onepage Narrative Statement describing the significant unmet capital or financial services of a proposed area. ``CDFI Certification Application'' (June 2007) at 11. The analysis must be supported by relevant statistical evidence. There are no definitive standards of evaluation; the statements are evaluated on a casebycase basis.

Instead of a presumption of ``significant unmet needs,'' the proposed rule revises the Chartering Manual to require a credit union to support its ``underserved area'' application with a onepage ``Narrative Statement'' demonstrating a pattern of ``significant unmet needs'' in the proposed area for loans or for one or more of the financial services that credit unions are authorized to offer. However, a credit union may choose which of these services to address and need not address all of them.

Under the proposed rule, the Narrative Statement on ``significant unmet needs'' must be supported by relevant, objective statistical data reflecting, among other things, loan and financial services activity in the proposed areamuch of which is now publicly available over the Internet. The Narrative Statement also may be supplemented by objective testimonial evidence. The supporting data and evidence should be appended to the Narrative Statement.

In addressing a proposed area's unmet needs, for example, a credit union might focus on the need for cash operations to replace check cashing outlets and on the need for personal loans at reasonable rates to replace pawn brokers, payday lenders and rentacenters. To support such a Narrative Statement, the credit union might rely on statistics and conclusions about these needs published by the proposed area's Chamber of Commerce.

Issues for Comment. Public commenters are invited to address the ``significant unmet needs'' criterion, including whether the Narrative Statement should be integrated into the Business Plan a credit union is already required to submit. Further, the NCUA Board asks commenters to identify available statistical data that would assist credit unions in demonstrating the unmet needs for loans and credit union services in a proposed area.

D. Underserved by Other Depository Institutions

The CDFI Fund's ``significant unmet needs'' test focuses on the need for products and services within a proposed area. In contrast, CUMAA's demand that a proposed area be ``underserved * * * by other depository institutions'' focuses on the presence of providers of products and services within the area. CUMAA did not specify a methodology for determining whether a proposed area meets this test; instead, it broadly refers to unspecified ``data of the [NCUA] Board and the Federal banking agencies.'' 12 U.S.C. 1759(c)(2)(A)(ii).

In the decade since CUMAA, raw data has accumulated within government on branch locations and the volume of business in certain products and services, but meaningful and reliable data on these points has only recently become readily accessible. This data makes it possible to quantify and compare the presence of financial institution facilities in a given area. The proposed rule suggests a flexible methodology that relies on publicly available population data and data on the location of financial institution branches.

Concentration of Facilities. The proposed methodology compares two measures to determine whether an area is adequately served according to the concentration of depository institution facilities within the area. The first measurewhich sets a benchmark level of adequate serviceis the ratio of depository institution facilities to the population of the non``distressed'' tracts in a proposed area, regardless whether those tracts are contiguous. In cases where there are no non``distressed'' tracts within a proposed area, a non``distressed'' tract or larger unit immediately adjoining the proposed area (e.g., county or city) may be used to set the benchmark ratio. The second measure is the ratio of facilities to the combined population of all of the tracts within the proposed area.

As shown in the example below, if the benchmark ratio of facilities within the non``distressed'' tracts (column A below) exceeds the ratio of facilities within all the tracts of the proposed area as a whole (column B below), the proposed rule deems the area to be ``underserved by other depository institutions,'' and vice versa (column C below): [[Page 34370]]

[GRAPHIC] [TIFF OMITTED] TP17JN08.000

The proposed methodology does not distinguish between Metro and NonMetro locations, and need not be limited to census tracts as its unit of measure for each ratio. Census tracts are proposed as the unit of measure, however, because most credit unions are likely to have already used them in determining whether the proposed area is sufficiently ``distressed,'' and thus will be familiar with the data and data sources associated with the tracts within the area.

Data on Population and Location of Facilities. Current tractby tract population data is available online from the ``My CDFI Fund'' Web site's IA Worksheet or from the most recent decennial Census itself. Current data on the location of facilities of institutions insured by the Federal Deposit Insurance Corporation (``FDIC'') or regulated by the Office of Thrift Supervision is available online on the FDIC's ``Summary of Deposits'' webpage sorted by state, county and MSA.\10\ Current data on the location of credit union facilities is collected by NCUA annually from a credit union's ``Report of Officials.'' NCUA plans to organize that data and make it available on line at the NCUA Web site. This data can be sorted manually on a tract bytract basis.
\10\ FDIC Summary of Deposits webpage: http://www2.fdic.gov/sod/ sodSummary.asp?baritem=3.

Issues for Comment. Public commenters are invited to address the ``underserved by other depository institutions'' criterion, including whether the facilities of such institutions should be defined to include ATMs and shared branches. Further, the NCUA Board asks commenters to suggest methodologies other than the concentration of facilities to assess whether a proposed area is ``underserved by other depository institutions,'' and to identify sources of data on the location depository institution facilities that is sorted by census tract.

E. Service Status Reports

The current rule authorizes NCUA's regional directors to obtain from FCUs adding ``underserved areas'' reports on their success in serving members in these areas. Manual, Ch. 3, Sec. III.A. Some commenters have in the past recommended that NCUA affirmatively require these reports. That issue is not addressed in this proposed rulemaking because the Board is as a separate matter considering recommendations of NCUA's Outreach Task Force that would call for NCUA to obtain information from credit unions on member income levels and products and services offered to members, and to organize the data by census tract. Consideration of the issue in this rulemaking would therefore be an unnecessary duplication.

F. Pending Applications To Serve an ``Underserved Area''

If, as a result of its review of public comments on this proposed rule, the NCUA Board adopts a final rule modifying the current Chartering Manual, the modifications will apply prospectively. Pending applications for approval to serve an ``underserved area'' and applications received after the date of publication of this rule will be deferred until the rulemaking process is completed.
Regulatory Procedures

Regulatory Flexibility Act

The Regulatory Flexibility Act requires NCUA to prepare an analysis to describe any significant economic impact a regulation may have on a substantial number of small credit unions (primarily those under $10 million in assets). The proposed amendments will not have a significant economic impact on a substantial number of small credit unions and therefore, a regulatory flexibility analysis is not required. Paperwork Reduction Act

This proposed rule imposes a requirement that any multiple common bond federal credit union that wishes to add an underserved area must apply for the NCUA Board's written approval to do so. This proposed rule mandates certain specific information that must be included in the application. NCUA requests public comment on all aspects of the collection of information in this proposed rule. Based upon past experience NCUA anticipates approximately 100 applications per year. Given the type of information required to be included in the application, NCUA estimates a burden of 8 hours per application and will revisit this estimate in light of the comments NCUA receives.

NCUA will submit the collection of information requirements contained in this proposed rule to the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act of 1995. 44 U.S.C. 3507. NCUA will use any comments received to develop its new burden estimates. Comments on the collections of information should be sent to Office of
[[Page 34371]]
Management and Budget, Reports Management Branch, New Executive Office Building, NCUA Desk Officer, Room 10202, 725 17th St., NW., Washington, DC 20503; or by fax to (202) 3956974; Attention: Desk Officer for NCUA. Please send NCUA a copy of any comments you submit to OMB.

NCUA made the following assumptions about this proposed rule:

In addition to comments on the proposed rule, NCUA invites comment on:

Recordkeepers are not required to respond to this collection of information unless it displays a currently valid OMB control number. NCUA is currently requesting a control number for this information collection from OMB.

Executive Order 13132

Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. In adherence to fundamental federalism principles, NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order. The proposed rule would not have substantial direct effects on the states, on the connection between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. NCUA has determined that this proposed rule does not constitute a policy that has federalism implications for purposes of the executive order. The Treasury and General Government Appropriations Act, 1999

The NCUA has determined that this proposed rule would not affect family wellbeing within the meaning of section 654 of the Treasury and General Government Appropriations Act of 1999, Public Law 105277, 112 Stat. 2681 (1998).

List of Subjects in 12 CFR Part 701

Credit, Credit unions, Reporting and recordkeeping requirements.

By the National Credit Union Administration Board on May 29, 2008.
Mary Rupp,

Secretary of the Board.

For the reasons stated above, 12 CFR Part 701 is proposed to be amended as follows:
PART 701ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

1. The authority citation for part 701 continues to read as follows:

Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a, 1761b, 1766, 1767, 1782, 1784, 1787, 1789. Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 is also authorized by 15 U.S.C. 1601, et seq., 42 U.S.C. 1981 and 36013610. Section 701.35 is also authorized by 12 U.S.C. 43114312.

2. Section 701.1 is revised to read as follows:
Sec. 701.1 Federal credit union chartering, field of membership modifications, and conversions.

National Credit Union Administration policies concerning chartering, field of membership modifications, and conversions are set forth in Interpretive Ruling and Policy Statement 082, Chartering and Field of Membership Manual (IRPS 082) published as Appendix B to this part. The Chartering and Field of Membership Manual also is available online at http://www.ncua.gov.

3. Appendix B to 12 CFR Part 701 is added to read as follows: Appendix B To Part 701Chartering and Field of Membership Manual Chapter 1
Federal Credit Union Chartering

IGoals of NCUA Chartering Policy

The National Credit Union Administration's (NCUA) chartering and field of membership policies are directed toward achieving the following goals:

NCUA may grant a charter to single occupational/associational groups, multiple groups, or communities if:

Generally, these are the primary criteria that NCUA will consider. In unusual circumstances, however, NCUA may examine other factors, such as other federal law or public policy, in deciding if a charter should be approved.

Unless otherwise noted, the policies outlined in this manual apply only to federal credit unions.

IITypes of Charters

The Federal Credit Union Act recognizes three types of federal credit union charterssingle common bond (occupational and
associational), multiple common bond (more than one group each having a common bond of occupation or association), and community.

The requirements that must be met to charter a federal credit union are described in Chapter 2. Special rules for credit unions serving lowincome groups are described in Chapter 3.

If a federal credit union charter is granted, Section 5 of the charter will describe the credit union's field of membership, which defines those persons and entities eligible for membership. Generally, federal credit unions are only able to grant loans and provide services to persons within the field of membership who have become members of the credit union.

IIISubscribers

Federal credit unions are generally organized by persons who volunteer their time and resources and are responsible for determining the interest, commitment, and economic advisability of forming a federal credit union. The organization of a successful federal credit union takes considerable planning and dedication.

Persons interested in organizing a federal credit union should contact one of the credit union trade associations or the NCUA regional office serving the state in which the credit union will be organized. Lists of NCUA offices and credit union trade associations are shown in the appendices. NCUA will provide information to groups interested in pursuing a federal charter and will assist them in contacting an organizer.

While anyone may organize a credit union, a person with training and experience in chartering new federal credit unions is generally the most effective organizer. However, extensive involvement by the group desiring credit union service is essential.

The functions of the organizer are to provide direction, guidance, and advice on the chartering process. The organizer also provides the group with information about a credit union's functions and purpose as well as technical assistance in preparing and submitting the charter application. Close
[[Page 34372]]
communication and cooperation between the organizer and the proposed members are critical to the chartering process.

The Federal Credit Union Act requires that seven or more natural personsThe ``subscribers''present to NCUA for approval a sworn organization certificate stating at a minimum:

False statements on any of the required documentation filed in obtaining a federal credit union charter may be grounds for federal criminal prosecution.
IVEconomic Advisability

IV.AGeneral

Before chartering a federal credit union, NCUA must be satisfied that the institution will be viable and that it will provide needed services to its members. Economic advisability, which is a determination that a potential charter will have a reasonable opportunity to succeed, is essential in order to qualify for a credit union charter.

NCUA will conduct an independent onsite investigation of each charter application to ensure that the proposed credit union can be successful. In general, the success of any credit union depends on: (a) The character and fitness of management; (b) the depth of the members' support; and (c) present and projected market conditions. IV.BProposed Management's Character and Fitness

The Federal Credit Union Act requires NCUA to ensure that the subscribers are of good ``general character and fitness.'' Prospective officials and employees will be the subject of credit and background investigations. The investigation report must demonstrate each applicant's ability to effectively handle financial matters. Employees and officials should also be competent, experienced, honest and of good character. Factors that may lead to disapproval of a prospective official or employee include criminal convictions, indictments, and acts of fraud and dishonesty. Further, factors such as serious or unresolved past due credit obligations and bankruptcies disclosed during credit checks may disqualify an individual.

NCUA also needs reasonable assurance that the management team will have the requisite skillsparticularly in leadership and accountingand the commitment to dedicate the time and effort needed to make the proposed federal credit union a success.

Section 701.14 of NCUA's Rules and Regulations sets forth the procedures for NCUA approval of officials of newly chartered credit unions. If the application of a prospective official or employee to serve is not acceptable to the regional director, the group can propose an alternate to act in that individual's place. If the charter applicant feels it is essential that the disqualified individual be retained, the individual may appeal the regional director's decision to the NCUA Board. If an appeal is pursued, action on the application may be delayed. If the appeal is denied by the NCUA Board, an acceptable new applicant must be provided before the charter can be approved.

IV.CMember Support

Economic advisability is a major factor in determining whether the credit union will be chartered. An important consideration is the degree of support from the field of membership. The charter applicant must be able to demonstrate that membership support is sufficient to ensure viability.

NCUA has not set a minimum field of membership size for chartering a federal credit union. Consequently, groups of any size may apply for a credit union charter and be approved if they demonstrate economic advisability. However, it is important to note that often the size of the group is indicative of the potential for success. For that reason, a charter application with fewer than 3,000 primary potential members (e.g., employees of a corporation or members of an association) may not be economically advisable. Therefore, a charter applicant with a proposed field of membership of fewer than 3,000 primary potential members may have to provide more support than an applicant with a larger field of membership. For example, a small occupational or associational group may be required to demonstrate a commitment for longterm support from the sponsor.

IV.DPresent and Future Market ConditionsBusiness Plan

The ability to provide effective service to members, compete in the marketplace, and to adapt to changing market conditions are key to the survival of any enterprise. Before NCUA will charter a credit union, a business plan based on realistic and supportable

projections and assumptions must be submitted.

The business plan should contain, at a minimum, the following elements:

While the business plan may be prepared with outside assistance, the subscribers and proposed officials must understand and support the submitted business plan.
VSteps in Organizing a Federal Credit Union

V.AGetting Started

Following the guidance contained throughout this policy, the organizers should submit wording for the proposed field of membership (the persons, organizations and other legal entities the credit union will serve) to NCUA early in the application process for written preliminary approval. The proposed field of membership must meet all common bond or community requirements.

Once the field of membership has been given preliminary approval, and the organizer is satisfied the application has merit, the organizer should conduct an organizational meeting to elect seven to ten persons to serve as subscribers. The subscribers should locate willing individuals capable of serving on the board of directors, credit committee, supervisory committee, and as chief operating officer/manager of the proposed credit union.

Subsequent organizational meetings may be held to discuss the progress of the charter investigation, to announce the proposed slate of officials, and to respond to any questions posed at these meetings.

If NCUA approves the charter application, the subscribers, as their final duty, will elect the board of directors of the proposed federal credit union. The new board of directors will then appoint the supervisory committee.
V.BCharter Application Documentation

V.B.1General

As discussed previously in this Chapter, the organizer of a federal credit union charter must, at a minimum, provide evidence that:

As part of the application process, the organizer must submit the following forms, which are available in Appendix 4 of this Manual:

Each of these forms is described in more detail in the following sections.

V.B.2Federal Credit Union Investigation Report, NCUA 4001

The application for a new federal credit union will be submitted on NCUA 4001. Statechartered credit unions applying for conversion to a federal charter will use NCUA 4000. (See Chapter 4 for a full discussion.) The organizer is required to certify the information and recommend approval or disapproval, based on the investigation of the request.

V.B.3Organization Certificate, NCUA 4008

This document, which must be completed by the subscribers, includes the seven criteria established by the Federal Credit Union Act. NCUA staff assigned to the case will assist in the proper completion of this document.

V.B.4Report of Official and Agreement to Serve, NCUA 4012

This form documents general background information of each official and employee of the proposed federal credit union. Each official and employee must complete and sign this form. The organizer must review each of the NCUA 4012s for elements that would prevent the prospective official or employee from serving. Further, such factors as serious, unresolved past due credit obligations and bankruptcies disclosed during credit checks may disqualify an individual.
V.B.5Application and Agreements for Insurance of Accounts, NCUA 9500

This document contains the agreements with which federal credit unions must comply in order to obtain National Credit Union Share Insurance Fund (NCUSIF) coverage of member accounts. The document must be completed and signed by both the chief executive officer and chief financial officer. A federal credit union must qualify for federal share insurance.

V.B.6Certification of Resolutions, NCUA 9501

This document certifies that the board of directors of the proposed federal credit union has resolved to apply for NCUSIF insurance of member accounts and has authorized the chief executive officer and recording officer to execute the Application and Agreements for Insurance of Accounts. Both the chief executive officer and recording officer of the proposed federal credit union must sign this form.

VIName Selection

It is the responsibility of the federal credit union organizers or officials of an existing credit union to ensure that the proposed federal credit union name or federal credit union name change does not constitute an infringement on the name of any corporation in its trade area. This responsibility also includes researching any service marks or trademarks used by any other corporation (including credit unions) in its trade area. NCUA will ensure, to the extent possible, that the credit union's name:

The last three words in the name of every credit union chartered by NCUA must be ``Federal Credit Union.''

The word ``community,'' while not required, can only be included in the name of federal credit unions that have been granted a community charter.
VIINCUA REVIEW

VII.AGeneral

Once NCUA receives a complete charter application package, an acknowledgment of receipt will be sent to the organizer. At some point during the review process, a staff member will be assigned to perform an onsite contact with the proposed officials and others having an interest in the proposed federal credit union.

NCUA staff will review the application package and verify its accuracy and reasonableness. A staff member will inquire into the financial management experience and the suitability and commitment of the proposed officials and employees, and will make an assessment of economic advisability. The staff member will also provide guidance to the subscribers in the proper completion of the Organization Certificate, NCUA 4008.

Credit and background investigations may be conducted concurrently by NCUA with other work being performed by the organizer and subscribers to reduce the likelihood of delays in the chartering process.

The staff member will analyze the prospective credit union's business plan for realistic projections, attainable goals, adequate service to all segments of the field of membership, sufficient startup capital, and time commitment by the proposed officials and employees. Any concerns will be reviewed with the organizer and discussed with the prospective credit union's officials. Additional onsite contacts by NCUA staff may be necessary. The organizer and subscribers will be expected to take the steps necessary to resolve any issues or concerns. Such resolution efforts may delay processing the application.

NCUA staff will then make a recommendation to the regional director regarding the charter application. The recommendation may include specific provisions to be included in a Letter of
Understanding and Agreement. In most cases, NCUA will require the prospective officials to adhere to certain operational guidelines. Generally, the agreement is for a limited term of two to four years. A sample Letter of Understanding and Agreement is found in Appendix 2.

VII.BRegional Director Approval

Once approved, the board of directors of the newly formed federal credit union will receive a signed charter and standard bylaws from the regional director. Additionally, the officials will be advised of the name of the examiner assigned responsibility for supervising and examining the credit union.

VII.CRegional Director Disapproval

When a regional director disapproves any charter application, in whole or in part, the organizer will be informed in writing of the specific reasons for the disapproval. Where applicable, the regional director will provide information concerning options or suggestions that the applicant could consider for gaining approval or otherwise acquiring credit union service. The letter of denial will include the procedures for appealing the decision.

VII.DAppeal of Regional Director Decision

If the regional director denies a charter application, in whole or in part, that decision may be appealed to the NCUA Board. An appeal must be sent to the appropriate regional office within 60 days of the date of denial and must address the specific reasons for denial. The regional director will then forward the appeal to the NCUA Board. NCUA central office staff will make an independent review of the facts and present the appeal with a recommendation to the NCUA Board.

Before appealing, the prospective group may, within 30 days of the denial, provide supplemental information to the regional director for reconsideration. A reconsideration will contain new and material evidence addressing the reasons for the initial denial. The regional director will have 30 days from the date of the receipt of the request for reconsideration to make a final decision. If the request is again denied, the applicant may proceed with the appeal process within 60 days of the date of the last denial. A second request for reconsideration will be treated as an appeal to the NCUA Board.

VII.ECommencement of Operations

Assistance in commencing operations is generally available through the various credit union trade organizations listed in Appendix 5.

All new federal credit unions are also encouraged to establish a mentor relationship with a knowledgeable, experienced credit union individual or an existing, welloperated credit union. The mentor should provide guidance and assistance to the new credit union through attendance at meetings and general oversight. Upon request, NCUA will provide assistance in finding a qualified mentor. VIIIFuture Supervision

Each federal credit union will be examined regularly by NCUA to determine that it
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remains in compliance with applicable laws and regulations and to determine that it does not pose undue risk to the NCUSIF. The examiner will contact the credit union officials shortly after approval of the charter in order to arrange for the initial examination (usually within the first six months of operation).

The examiner will be responsible for monitoring the progress of the credit union and providing the necessary advice and guidance to ensure it is in compliance with applicable laws and regulations. The examiner will also monitor compliance with the terms of any required Letter of Understanding and Agreement. Typically, the examiner will require the credit union to submit copies of monthly board minutes and financial statements.

The Federal Credit Union Act requires all newly chartered credit unions, up to two years after the charter anniversary date, to obtain NCUA approval prior to appointment of any new board member, credit or supervisory committee member, or senior executive officer. Section 701.14 of the NCUA Rules and Regulations sets forth the notice and application requirements. If NCUA issues a Notice of Disapproval, the newly chartered credit union is prohibited from making the change.

NCUA may disapprove an individual serving as a director, committee member or senior executive officer if it finds that the competence, experience, character, or integrity of the individual indicates it would not be in the best interests of the members of the credit union or of the public to permit the individual to be employed by or associated with the credit union. If a Notice of Disapproval is issued, the credit union may appeal the decision to the NCUA Board.

IXCorporate Federal Credit Unions

A corporate federal credit union is one that is operated primarily for the purpose of serving other credit unions. Corporate federal credit unions operate under and are administered by the NCUA Office of Corporate Credit Unions.

XGroups Seeking Credit Union Service

NCUA will attempt to assist any group in chartering a credit union or joining an existing credit union. If the group is not eligible for federal credit union service, NCUA will refer the group to the appropriate state supervisory authority where different requirements may apply.

XIField of Membership Designations

NCUA will designate a credit union based on the following criteria:

Single Occupational: If a credit union serves a single occupational sponsor, such as ABC Corporation, it will be designated as an occupational credit union. A single occupational common bond credit union may also serve a trade, industry, or profession (TIP), such as all teachers.

Single Associational: If a credit union serves a single associational sponsor, such as the Knights of Columbus, it will be designated as an associational credit union.

Multiple Common Bond: If a credit union serves more than one group, each of which has a common bond of occupation and/or association, it will be designated as a multiple common bond credit union.

Community: All community credit unions will be designated as such, followed by a description of their geographic boundaries (e.g. city or county).

Credit unions desiring to confirm or submit an application to change their designations should contact the appropriate NCUA regional office.

XIIForeign Branching

Federal credit unions are permitted to serve foreign nationals within their fields of membership wherever they reside provided they have the ability, resources, and management expertise to serve such persons. Before a credit union opens a branch outside the United States, it must submit an application to do so and have prior written approval of the regional director. A federal credit union may establish a service facility on a United States military installation or United States embassy without prior NCUA approval. Chapter 2
Field of Membership Requirements for Federal Credit Unions
IIntroduction

I.A.1General

As set forth in Chapter 1, the Federal Credit Union Act provides for three types of federal credit union charterssingle common bond (occupational or associational), multiple common bond (multiple groups), and community. Section 109 (12 U.S.C. 1759) of the Federal Credit Union Act sets forth the membership criteria for each of these three types of credit unions.

The field of membership, which is specified in Section 5 of the charter, defines those persons and entities eligible for membership. A single common bond federal credit union consists of one group having a common bond of occupation or association. A multiple common bond federal credit union consists of more than one group, each of which has a common bond of occupation or association. A community federal credit union consists of persons or organizations within a welldefined local community, neighborhood, or rural district.

Once chartered, a federal credit union can amend its field of membership; however, the same common bond or community requirements for chartering the credit union must be satisfied. Since there are differences in the three types of charters, special rules, which are fully discussed in the following sections of this Chapter, may apply to each.

I.A.2Special LowIncome Rules

Generally, federal credit unions can only grant loans and provide services to persons who have joined the credit union. The Federal Credit Union Act states that one of the purposes of federal credit unions is ``to serve the productive and provident credit needs of individuals of modest means.'' Although field of membership requirements are applicable, special rules set forth in Chapter 3 may apply to lowincome designated credit unions and those credit unions assisting lowincome groups or to a federal credit union that adds an underserved community to its field of membership.
IIOccupational Common Bond

II.A.1General

A single occupational common bond federal credit union may include in its field of membership all persons and entities who share that common bond. NCUA permits a person's membership eligibility in a single occupational common bond group to be established in five ways:

FOR FURTHER INFORMATION CONTACT Michael J. McKenna, Deputy General Counsel; John K. Ianno, Associate General Counsel; or Steven W. Widerman, Trial Attorney, Office of General Counsel, 1775 Duke Street, Alexandria, Virginia 22314 or telephone (703) 5186540.