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Field of Membership


Overview

Virtually all credit unions have a specific field of membership (FOM), which covers the potential members a credit union may enroll. As defined by the National Credit Union Administration (NCUA), an institution's FOM is "the legal definition of who is able to join." Depending on a credit union's individual charter, it may be able to expand or amend its FOM to include additional members.

The NCUA outlines three basic types of federal credit union field of membership – single common bond, multiple common bond, and community – and explains the options under NCUA’s rules for expanding each type.

Backstory: In 1934, Congress passed the Federal Credit Union Act “to establish a Federal Credit Union System, to establish a further market for securities of the United States and to make more available to people of small means credit for provident purposes through a national system of cooperative credit, thereby helping to stabilize the credit structure of the United States.”

That Act, as amended, sets forth the basic structure which governs federal credit unions today:

  • Each credit union is funded by shares purchased by its members. The purchase of a share allows the member to become an owner with the right to vote;
  • Membership is limited to a group, or multiple groups, each defined in the credit union's charter, each of which have a common bond of occupation or association or are located within a well-defined neighborhood, community, or rural district;
  • Member control is democratically exercised regardless of the number of shares held. No member has more than one vote;
  • Management is placed in the hands of volunteers. Only one board officer may be compensated. No other member of the board of directors or any other committee member shall, as such, be compensated;
  • Loans, which are the primary investment for credit unions, are made exclusively to members.
Insignia and logo of the National Credit Union Administration
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Single Common Bond Charter

A single common bond federal credit union serves a group of persons who share a common bond based upon their occupation or membership in one or more related associations. Thus, the two types of single common bond – occupational and associational.

Occupational Common Bond — If a credit union serves a single occupational sponsor, such as ABC Corporation, it will be designated as an occupational credit union.

Tip Charter — A single occupational common bond credit union may also serve a trade, industry, or profession (TIP), such as all teachers.

Associational Common Bond — An associational common bond federal credit union serves members of an associational group, such as a church or labor union. An associational federal credit union normally has no geographic limits other than ability to serve, and it may serve both the association and all of its members.

A Single Common Bond
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Multiple Common Bond Charter

A multiple common bond federal credit union serves more than one distinct group, each of which has its own occupational or associational common bond. A multiple common bond federal credit union must submit a separate application to the NCUA for each group it wishes to serve.

Such a credit union may include two unrelated employers, or two unrelated associations, or a combination of two or more employers or associations. Additionally, these groups must be within reasonable geographic proximity of the credit union. That is, the groups must be within the service area of one of the credit union’s service facilities.

Underserved Areas — In addition to serving multiple groups, a multiple common bond federal credit union is oddly enough the one charter type that Congress has authorized to serve underserved communities. The Federal Credit Union Act defines an “underserved area” as (1) a “local community, neighborhood, or rural district” that (2) meets the definition of an “investment area” under section 103(16) of the Community Development Banking and Financial Institutions Act of 1994 (“CDFI”), 12 U.S.C. 4702(16), and (3) is “underserved by other depository institutions” based on data of the NCUA Board and the federal banking agencies.

Select Groups — A Multiple Common Bond Credit Union may also add what are commonly referred to as Select Employee Groups or SEGs to a Field of Membership. These groups may share any common bond of association or occupation, not just a single employer.

Common types of SEGs include:

  • Employees of a company;
  • Employees of a government agency;
  • Contractors who commonly work for the same company;
  • Members of a church;
  • Members of a fraternal association.

NB: A Single Common Bond Credit Unions may also add Select Employee Groups, however in doing so may become Multiple Common Bond.

A map outlining FOM expansion through a multiple common bond charter
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Community Charter

A community federal credit union serves a single well-defined community or rural district. A community federal credit union serves persons who live, worship, attend school or work in the community. A community federal credit union is also permitted to serve businesses or other legal entities located within the community boundaries.

A community charter can be established in one of four ways:

  • Any single city or county or a designated portion thereof qualifies as a well-defined community;
  • A core-based statistical area – typically an MSA as designated by OMB, or a portion of an MSA – automatically qualifies as a well-defined community, subject to a population limit of 2.5 million;
  • For an area that exceeds the limits of 1 or 2, a federal credit union can provide a detailed narrative report showing the area is a community;
  • An area can qualify as a “rural district” community if the area (usually a county or group of contiguous counties) has a population of one million or less and a population density of 100 persons or fewer per square mile.
A map outlining FOM Expansion through a Community Charter
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