12 U.S.C. § 1759 — Membership

Page 866 TITLE 12—BANKS AND BANKING § 1758 (iv) the repayment of which is fully in- sured or fully guaranteed by, or where there is an advance commitment to pur- chase in full by, any agency of the Federal Government or of a State, or any political subdivision thereof; or (v) that is granted by a corporate credit union (as that term is defined by the Board) to another credit union. (2) the term ‘‘net worth’’— (A) with respect to any insured credit union, means the credit union’s retained earnings balance, as determined under gen- erally accepted accounting principles; and (B) with respect to a credit union that serves predominantly low-income members, as defined by the Board, includes secondary capital accounts that are— (i) uninsured; and (ii) subordinate to all other claims against the credit union, including the claims of creditors, shareholders, and the Fund; and (3) the term ‘‘associated member’’ means any member having a shared ownership, in- vestment, or other pecuniary interest in a business or commercial endeavor with the bor- rower. (d) Effect on existing loans An insured credit union that has, on August 7, 1998, a total amount of outstanding member business loans that exceeds the amount per- mitted under subsection (a) shall, not later than 3 years after August 7, 1998, reduce the total amount of outstanding member business loans to an amount that is not greater than the amount permitted under subsection (a). (e) Consultation and cooperation with State credit union supervisors In implementing this section, the Board shall consult and seek to work cooperatively with State officials having jurisdiction over State- chartered insured credit unions. (June 26, 1934, ch. 750, title I, § 107A, as added Pub. L. 105–219, title II, § 203(a), Aug. 7, 1998, 112 Stat. 920; amended Pub. L. 115–174, title I, § 105(a), May 24, 2018, 132 Stat. 1301.) Editorial Notes AMENDMENTS 2018—Subsec. (c)(1)(B)(i). Pub. L. 115–174 struck out ‘‘that is the primary residence of a member’’ after ‘‘dwelling’’. Statutory Notes and Related Subsidiaries RULE OF CONSTRUCTION Pub. L. 115–174, title I, § 105(b), May 24, 2018, 132 Stat. 1301, provided that: ‘‘Nothing in this section [amending this section] or the amendment made by this section shall preclude the National Credit Union Administra- tion from treating an extension of credit that is fully secured by a lien on a 1- to 4-family dwelling that is not the primary residence of a member as a member busi- ness loan for purposes other than the member business loan limitation requirements under section 107A of the Federal Credit Union Act (12 U.S.C. 1757a).’’ STUDY AND REPORT Pub. L. 105–219, title II, § 203(b), Aug. 7, 1998, 112 Stat. 922, required the Secretary to conduct a study of mem- ber business lending by insured credit unions, with a final report to be sent to Congress not later than 12 months after Aug. 7, 1998. § 1758. Bylaws In order to simplify the organization of Fed- eral credit unions the Board shall from time to time cause to be prepared a form of organization certificate and a form of bylaws, consistent with this chapter, which shall be used by Federal credit union incorporators, and shall be supplied to them on request. At the time of presenting the organization certificate the incorporators shall also submit proposed bylaws to the Board for its approval. (June 26, 1934, ch. 750, title I, § 108, formerly § 8, 48 Stat. 1219; 1947 Reorg. Plan No. 1, § 401, eff. July 1, 1947, 12 F.R. 4534, 61 Stat. 952; June 29, 1948, ch. 711, §§ 1, 2, 62 Stat. 1091; renumbered § 9 and amended Pub. L. 86–354, § 1, Sept. 22, 1959, 73 Stat. 631; Pub. L. 91–206, § 2(1), Mar. 10, 1970, 84 Stat. 49; renumbered title I, § 108, Pub. L. 91–468, § 1(2), Oct. 19, 1970, 84 Stat. 994; amended Pub. L. 95–630, title V, § 502(b), Nov. 10, 1978, 92 Stat. 3681.) Editorial Notes AMENDMENTS 1978—Pub. L. 95–630 substituted ‘‘Board’’ for ‘‘Admin- istrator’’ in two places, and ‘‘its approval’’ for ‘‘his ap- proval’’. 1970—Pub. L. 91–206 substituted ‘‘Administrator’’ for ‘‘Director’’ in two places. 1959—Pub. L. 86–354 substituted ‘‘from time to time’’ for ‘‘, upon the passage of this Act,’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1978 AMENDMENT Amendment by Pub. L. 95–630 effective on expiration of 120 days after Nov. 10, 1978, and transitional provi- sions, see section 509 of Pub. L. 95–630, set out as a note under section 1752 of this title. Executive Documents TRANSFER OF FUNCTIONS Transfer of functions of Farm Credit Administration and Governor thereof, generally, see notes set out under section 1751 of this title. Functions of Governor of Farm Credit Administra- tion under this section transferred to Federal Deposit Insurance Corporation by Reorg. Plan No. 1 of 1947. § 1759. Membership (a) In general Subject to subsection (b), Federal credit union membership shall consist of the incorporators and such other persons and incorporated and un- incorporated organizations, to the extent per- mitted by rules and regulations prescribed by the Board, as may be elected to membership and as such shall each, subscribe to at least one share of its stock and pay the initial install- ment thereon and a uniform entrance fee if re- quired by the board of directors. Shares may be issued in joint tenancy with right of survivor- ship with any persons designated by the credit union member, but no joint tenant shall be per- mitted to vote, obtain loans, or hold office, un- less he is within the field of membership and is a qualified member. Page 867 TITLE 12—BANKS AND BANKING § 1759 (b) Membership field Subject to the other provisions of this section, the membership of any Federal credit union shall be limited to the membership described in one of the following categories: (1) Single common-bond credit union One group that has a common bond of occu- pation or association. (2) Multiple common-bond credit union More than one group— (A) each of which has (within the group) a common bond of occupation or association; and (B) the number of members, each of which (at the time the group is first included with- in the field of membership of a credit union described in this paragraph) does not exceed any numerical limitation applicable under subsection (d). (3) Community credit union Persons or organizations within a well-de- fined local community, neighborhood, or rural district. (c) Exceptions (1) Grandfathered members and groups (A) In general Notwithstanding subsection (b)— (i) any person or organization that is a member of any Federal credit union as of August 7, 1998, may remain a member of the credit union after August 7, 1998; and (ii) a member of any group whose mem- bers constituted a portion of the member- ship of any Federal credit union as of Au- gust 7, 1998, shall continue to be eligible to become a member of that credit union, by virtue of membership in that group, after August 7, 1998. (B) Successors If the common bond of any group referred to in subparagraph (A) is defined by any par- ticular organization or business entity, sub- paragraph (A) shall continue to apply with respect to any successor to the organization or entity. (2) Exception for underserved areas Notwithstanding subsection (b), in the case of a Federal credit union, the field of member- ship category of which is described in sub- section (b)(2), the Board may allow the mem- bership of the credit union to include any per- son or organization within a local community, neighborhood, or rural district if— (A) the Board determines that the local community, neighborhood, or rural dis- trict— (i) is an ‘‘investment area’’, as defined in section 4702(16) of this title, and meets such additional requirements as the Board may impose; and (ii) is underserved, based on data of the Board and the Federal banking agencies (as defined in section 1813 of this title), by other depository institutions (as defined in section 461(b)(1)(A) of this title); and (B) the credit union establishes and main- tains an office or facility in the local com- munity, neighborhood, or rural district at which credit union services are available. (d) Multiple common-bond credit union group re- quirements (1) Numerical limitation Except as provided in paragraph (2), only a group with fewer than 3,000 members shall be eligible to be included in the field of member- ship category of a credit union described in subsection (b)(2). (2) Exceptions In the case of any Federal credit union, the field of membership category of which is de- scribed in subsection (b)(2), the numerical lim- itation in paragraph (1) of this subsection shall not apply with respect to— (A) any group that the Board determines, in writing and in accordance with the guide- lines and regulations issued under paragraph (3), could not feasibly or reasonably estab- lish a new single common-bond credit union, the field of membership category of which is described in subsection (b)(1) because— (i) the group lacks sufficient volunteer and other resources to support the effi- cient and effective operation of a credit union; (ii) the group does not meet the criteria that the Board has determined to be im- portant for the likelihood of success in es- tablishing and managing a new credit union, including demographic characteris- tics such as geographical location of mem- bers, diversity of ages and income levels, and other factors that may affect the fi- nancial viability and stability of a credit union; or (iii) the group would be unlikely to oper- ate a safe and sound credit union; (B) any group transferred from another credit union— (i) in connection with a merger or con- solidation recommended by the Board or any appropriate State credit union super- visor based on safety and soundness con- cerns with respect to that other credit union; or (ii) by the Board in the Board’s capacity as conservator or liquidating agent with respect to that other credit union; or (C) any group transferred in connection with a voluntary merger, having received conditional approval by the Administration of the merger application prior to October 25, 1996, but not having consummated the merger prior to October 25, 1996, if the merg- er is consummated not later than 180 days after August 7, 1998. (3) Regulations and guidelines The Board shall issue guidelines or regula- tions, after notice and opportunity for com- ment, setting forth the criteria that the Board will apply in determining under this sub- section whether or not an additional group may be included within the field of member- ship category of an existing credit union de- scribed in subsection (b)(2). Page 868 TITLE 12—BANKS AND BANKING § 1759 (e) Additional membership eligibility provisions (1) Membership eligibility limited to immediate family or household members No individual shall be eligible for member- ship in a credit union on the basis of the rela- tionship of the individual to another person who is eligible for membership in the credit union, unless the individual is a member of the immediate family or household (as those terms are defined by the Board, by regulation) of the other person. (2) Retention of membership Except as provided in section 1764 of this title, once a person becomes a member of a credit union in accordance with this sub- chapter, that person or organization may re- main a member of that credit union until the person or organization chooses to withdraw from the membership of the credit union. (f) Criteria for approval of expansion of multiple common-bond credit unions (1) In general The Board shall— (A) encourage the formation of separately chartered credit unions instead of approving an application to include an additional group within the field of membership of an existing credit union whenever practicable and consistent with reasonable standards for the safe and sound operation of the credit union; and (B) if the formation of a separate credit union by the group is not practicable or con- sistent with the standards referred to in sub- paragraph (A), require the inclusion of the group in the field of membership of a credit union that is within reasonable proximity to the location of the group whenever prac- ticable and consistent with reasonable standards for the safe and sound operation of the credit union. (2) Approval criteria The Board may not approve any application by a Federal credit union, the field of member- ship category of which is described in sub- section (b)(2) to include any additional group within the field of membership of the credit union (or an application by a Federal credit union described in subsection (b)(1) to include an additional group and become a credit union described in subsection (b)(2)), unless the Board determines, in writing, that— (A) the credit union has not engaged in any unsafe or unsound practice (as defined in section 1786(b) of this title) that is mate- rial during the 1-year period preceding the date of filing of the application; (B) the credit union is adequately capital- ized; (C) the credit union has the administrative capability to serve the proposed membership group and the financial resources to meet the need for additional staff and assets to serve the new membership group; (D) any potential harm that the expansion of the field of membership of the credit union may have on any other insured credit union and its members is clearly outweighed in the public interest by the probable bene- ficial effect of the expansion in meeting the convenience and needs of the members of the group proposed to be included in the field of membership; and (E) the credit union has met such addi- tional requirements as the Board may pre- scribe, by regulation. (g) Regulations required for community credit unions (1) Definition of well-defined local community, neighborhood, or rural district The Board shall prescribe, by regulation, a definition for the term ‘‘well-defined local community, neighborhood, or rural district’’ for purposes of— (A) making any determination with regard to the field of membership of a credit union described in subsection (b)(3); and (B) establishing the criteria applicable with respect to any such determination. (2) Scope of application The definition prescribed by the Board under paragraph (1) shall apply with respect to any application to form a new credit union, or to alter or expand the field of membership of an existing credit union, that is filed with the Board after August 7, 1998. (June 26, 1934, ch. 750, title I, § 109, formerly § 9, 48 Stat. 1219; July 31, 1946, ch. 711, § 2, 60 Stat. 744; 1947 Reorg. Plan No. 1, § 401, eff. July 1, 1947, 12 F.R. 4534, 61 Stat. 952; June 29, 1948, ch. 711, §§ 1, 2, 62 Stat. 1091; renumbered § 10 and amended Pub. L. 86–354, § 1, Sept. 22, 1959, 73 Stat. 631; Pub. L. 91–206, § 2(1), Mar. 10, 1970, 84 Stat. 49; re- numbered title I, § 109, Pub. L. 91–468, § 1(2), Oct. 19, 1970, 84 Stat. 994; amended Pub. L. 93–383, title VII, § 722, Aug. 22, 1974, 88 Stat. 719; Pub. L. 95–630, title V, § 502(b), Nov. 10, 1978, 92 Stat. 3681; Pub. L. 105–219, title I, §§ 101–103, Aug. 7, 1998, 112 Stat. 914–917; Pub. L. 109–351, title VII, § 726(9), Oct. 13, 2006, 120 Stat. 2002.) Editorial Notes AMENDMENTS 2006—Subsec. (c)(2)(A)(i). Pub. L. 109–351 made tech- nical amendment to reference in original act which ap- pears in text as reference to section 4702(16) of this title. 1998—Subsec. (a). Pub. L. 105–219, § 101(1)(A), des- ignated existing provisions as subsec. (a) and inserted heading and ‘‘Subject to subsection (b),’’ before ‘‘Fed- eral credit union membership shall consist of’’. Pub. L. 105–219, § 101(1)(B), which directed the amend- ment of subsec. (a) by striking out ‘‘, except that Fed- eral credit union membership shall be limited to groups having a common bond of occupation or association, or to groups within a well-defined neighborhood, commu- nity, or rural district’’ after ‘‘directors’’, was executed by striking out such language which began with a semi- colon rather than a comma after ‘‘directors’’ to reflect the probable intent of Congress. Subsecs. (b) to (e). Pub. L. 105–219, § 101(2), added sub- secs. (b) to (e). Subsec. (f). Pub. L. 105–219, § 102, added subsec. (f). Subsec. (g). Pub. L. 105–219, § 103, added subsec. (g). 1978—Pub. L. 95–630 substituted ‘‘Board’’ for ‘‘Admin- istrator’’. 1974—Pub. L. 93–383 substituted ‘‘a uniform entrance fee if required by the board of directors’’ for ‘‘the en- trance fee’’. Page 869 TITLE 12—BANKS AND BANKING § 1761 1970—Pub. L. 91–206 substituted ‘‘Administrator’’ for ‘‘Director’’. 1959—Pub. L. 86–354 substituted ‘‘persons’’ for ‘‘per- son’’ before ‘‘designated’’. 1946—Act July 31, 1946, inserted sentence at end per- mitting a Federal credit union to issue shares in joint tenancy with a right of survivorship. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1978 AMENDMENT Amendment by Pub. L. 95–630 effective on expiration of 120 days after Nov. 10, 1978, and transitional provi- sions, see section 509 of Pub. L. 95–630, set out as a note under section 1752 of this title. REPORT AND CONGRESSIONAL REVIEW REQUIREMENT FOR CERTAIN REGULATIONS Pub. L. 105–219, title II, § 205, Aug. 7, 1998, 112 Stat. 923, provided that: ‘‘A regulation prescribed by the Board [National Credit Union Administration Board] shall be treated as a major rule for purposes of chapter 8 of title 5, United States Code, if the regulation de- fines, or amends the definition of— ‘‘(1) the term ‘immediate family or household’ for purposes of section 109(e)(1) of the Federal Credit Union Act [12 U.S.C. 1759(e)(1)] (as added by section 101 of this Act); or ‘‘(2) the term ‘well-defined local community, neigh- borhood, or rural district’ for purposes of section 109(g) of the Federal Credit Union Act (as added by section 103 of this Act).’’ § 1760. Members’ meetings The fiscal year of all Federal credit unions shall end December 31. The annual meeting of each Federal credit union shall be held at such place as its bylaws shall prescribe. Special meet- ings may be held in the manner indicated in the bylaws. No member shall be entitled to vote by proxy, but a member other than a natural per- son may vote through an agent designated for the purpose. Irrespective of the number of shares held, no member shall have more than one vote. (June 26, 1934, ch. 750, title I, § 110, formerly § 10, 48 Stat. 1219; renumbered § 11, Pub. L. 86–354, § 1, Sept. 22, 1959, 73 Stat. 631; amended Pub. L. 88–150, § 1, Oct. 17, 1963, 77 Stat. 270; renumbered title I, § 110, Pub. L. 91–468, § 1(2), Oct. 19, 1970, 84 Stat. 994; amended Pub. L. 97–320, title V, § 519, Oct. 15, 1982, 96 Stat. 1531.) Editorial Notes AMENDMENTS 1982—Pub. L. 97–320 struck out ‘‘at such time during the following January, February, or March and’’ after ‘‘shall be held’’, and ‘‘by him’’ after ‘‘shares held’’. 1963—Pub. L. 88–150 substituted ‘‘during the following January, February, or March’’ for ‘‘during the month of the following January’’. § 1761. Management (a) Board of directors, credit committee, and su- pervisory committee; election to board The management of a Federal credit union shall be by a board of directors, a supervisory committee, and where the bylaws so provide, a credit committee. The board shall consist of an odd number of directors, at least five in number, to be elected annually by and from the members as the bylaws provide. Any vacancy occurring on the board shall be filled until the next annual election by appointment by the remainder of the directors. (b) Membership on supervisory committee; names and addresses of officers and com- mittee members The supervisory committee shall be appointed by the board of directors and shall consist of not less than three members nor more than five members, one of whom may be a director other than the compensated officer of the board. A record of the names and addresses of the execu- tive officers, members of the supervisory com- mittee, credit committee, and loan officers, shall be filed with the Administration within ten days after their election or appointment. (c) Compensation No member of the board or of any other com- mittee shall, as such, be compensated, except that reasonable health, accident, similar insur- ance protection, and the reimbursement of rea- sonable expenses incurred in the execution of the duties of the position shall not be considered compensation. (June 26, 1934, ch. 750, title I, § 111, formerly § 11, 48 Stat. 1219; June 15, 1940, ch. 366, 54 Stat. 398; July 31, 1946, ch. 711, §§ 3–6, 60 Stat. 745; 1947 Reorg. Plan No. 1, § 401, eff. July 1, 1947, 12 F.R. 4534, 61 Stat. 952; June 29, 1948, ch. 711, §§ 1, 2, 62 Stat. 1091; Oct. 25, 1949, ch. 713, § 2, 63 Stat. 890; June 30, 1954, ch. 426, § 1, 68 Stat. 335; Aug. 24, 1954, ch. 905, §§ 1, 2, 68 Stat. 792; renumbered § 12 and amended Pub. L. 86–354, § 1, Sept. 22, 1959, 73 Stat. 632; Pub. L. 88–353, § 2, July 2, 1964, 78 Stat. 269; Pub. L. 91–206, § 2(3), Mar. 10, 1970, 84 Stat. 49; renumbered title I, § 111, Pub. L. 91–468, § 1(2), Oct. 19, 1970, 84 Stat. 994; amended Pub. L. 93–495, title I, § 116, Oct. 28, 1974, 88 Stat. 1507; Pub. L. 95–630, title V, § 502(b), Nov. 10, 1978, 92 Stat. 3681; Pub. L. 97–320, title V, § 520, Oct. 15, 1982, 96 Stat. 1531.) Editorial Notes AMENDMENTS 1982—Pub. L. 97–320 substituted provisions divided into subsecs. (a), (b), and (c) relating to the manage- ment of a Federal credit union, including the board of directors, credit and supervisory committees, and the matter of their compensation, for provisions which read as follows: ‘‘The business affairs of a Federal cred- it union shall be managed by a board of not less than five directors, and a credit committee of not less than three members, all to be elected at the annual mem- bers’ meeting by and from the members, and by a su- pervisory committee of not less than three members nor more than five members, one of whom may be a di- rector other than the treasurer, to be appointed by the board. Any vacancy occurring in the supervisory com- mittee shall be filled in the same manner as original appointments to such committee. All members of the board and of such committees shall hold office for such terms, respectively, as the bylaws may provide. A record of the names and addresses of the members of the board and such committees and of the officers of the credit union shall be filed with the Administration within ten days after their election or appointment. No member of the board or of either such committee shall, as such, be compensated: Provided, however, That rea- sonable health, accident, and similar insurance protec- tion shall not be considered compensation under regu- lations promulgated by the Board.’’