The oft-heard and cited provision regarding credit union field of membership is not always as straightforward as it seems.
At first glance, the Federal Credit Union Act’s “once a member, always a member” provision reads clear enough. Essentially, the stipulation appears to imply that if someone becomes a member at any point, they will remain a member regardless of changes to either their own status or that of the credit union itself.
A pair of questions recently posed by a CUCollaborate client, however, serves to highlight the limitations of the seemingly straightforward regulation.
What if a Member Closes Their Accounts?
The credit union in question reached out regarding members who had closed their accounts and moved beyond the prescribed field of membership (FOM) boundaries, however had later sought to rejoin. Would they still qualify based on their past membership?
According to the standard Federal Credit Union (FCU) Bylaws, the answer is no, as the bylaws provide: “Once a member, always a member until the person or organization chooses to withdraw its membership or is expelled under the Act and Article XIV of these bylaws.”
Those same bylaws, under the section “Maintenance of ship share required,” note further:
A member who withdraws all shareholdings or fails to comply with the time requirements for restoring his or her account balance to par value in Article III, Section 3, ceases to be a member. By resolution, the board may require persons readmitted to membership to pay another entrance fee.
In this instance, therefore, as the member themselves chose to close their accounts, the bylaw is clear—the “once a member, always a member” status would no longer apply and they would thus have to re-qualify for membership under the FCU’s current FOM requirements.
What if a Credit Union Closes a Member’s Account?
A follow-up query presents a similarly interesting scenario: A member moves beyond the prescribed field of membership and eventually their savings account is closed by the credit union due to inactivity. Would they also need to re-qualify for membership should they seek to rejoin?
The answer to this is slightly more complicated, ultimately coming down to the individual credit union and bringing into play the above-mentioned Article III, Section 3 of the bylaws. This rule, titled “Time periods for payment and maintenance of membership share,” outlines that:
The credit union will terminate from ship who:
– Fails to complete payment of one share within _____ of
– Fails to complete payment of one share within ____ from the increase in the par value of shares, or
– Reduces the share balance below the par value of one share nd does not increase the balance to t least the par value of one share within ____ of the reduction.
Put simply, if a member’s account is withdrawn below the minimum shares to maintain membership, they have a set period of time to bring those shares back up to the minimum level. Should they fail to do so, their membership would be terminated and they would again have to rejoin the credit union and be eligible under its current FOM.
Where a gray area emerges is due to the fact the credit union itself is responsible for filling in the above blanks as part of its own bylaws. Depending on those values, it may be possible for a credit union to consider a member’s account as not having been closed definitively, but rather as momentarily failing to meet the required shares threshold. Under such an interpretation, a member could therefore still qualify, provided they increase their shares to the necessary level within the prescribed timeframe.
A further wrinkle is added by the possibility a credit union’s bylaws might predate the current standard FCU Bylaws, in which case: “FCUs may retain any previously approved version of the FCU Bylaws.”
In such an instance, the credit union’s existing bylaws would take precedence.
What is clear from both these scenarios is the “once a member, always a member” provision and general maxim is, despite its uncomplicated wording, more complex than first appears. Further, understanding the bylaw’s nuances is vital to keeping track of members’ statuses and making sure they remain eligible regardless of certain changes to their profile.
As is often the case, by digging beneath the surface, new interpretations and ideas can arise to help a credit union better gauge where it stands on regulatory issues. The key is to keep asking the questions.