Section 1. General definitions: When used in these bylaws the terms: “Act” means the Federal Credit Union Act, as amended. “Administration” means the National Credit Union Administration.
“Agency” means the Regional Director, the Director of the Office of National Examinations and Supervision, or the Director of the Office of Credit Union Resources and Expansion.
“Applicable law and regulations” means the Federal Credit Union Act and rules and regulations issued thereunder or other applicable federal and state statutes and rules and regulations issued thereunder as the context indicates.
“Board” means board of directors of the federal credit union. “Board officers” means:
- “Chair” means Presiding Board officer, President of the Board, Presiding Board Officer, or
- “Vice Chair” means Vice
- “Financial Officer” means
- “Secretary” means Recording
- “Management Official” means General Manager, Manager, President, or Chief Executive Officer. “Charter” means the approved organization certificate and field of membership issued by the National Credit Union Administration or one of its It is the document that authorizes a group to operate as a credit union, defines the fundamental limits of its operating authority, and includes the persons the credit union is permitted to accept for membership.
“Field of membership” means the persons (including organizations and other legal entities) a credit union is permitted to accept for membership.
“Immediate family member” means spouse, child, sibling, parent, grandparent, grandchild, stepparents, stepchildren, stepsiblings, and adoptive relationships.
“Loans” means any type of loan product the credit union offers. This includes, but is not limited to, consumer loans, lines of credit, credit cards, member business loans, commercial loans, and real estate loans.
“Management” means the Board, Financial Officer, and Management Official. “Member” means a person must:
- Be eligible for membership under Section 5 of the charter;
- Sign membership forms as approved by the credit union board;
- Subscribe to at least one share (par value) of stock;
- Pay the initial installment;
- Pay an entrance fee, if required; and
- Be eligible to vote upon reaching the minimum age the credit union establishes for voting and participation in the affairs of the credit union.
“Membership Officer” means a majority of the board of directors, a majority of the members of a duly authorized executive committee, or an individual(s) appointed by the board of directors to serve as such. “NCUA Board” means the Board of the National Credit Union Administration.
“Person in the same household” means an individual living in the same residence maintaining a single economic unit.
“Regulation” or “regulations” means rules and regulations issued by the NCUA Board.
“Share” or “shares” means all classes of shares and share certificates that may be held in accordance with applicable law and regulations.
Official NCUA Commentary Federal Credit Union Bylaws
Article II. Qualifications for Membership
- Entrance fee: FCUs may not vary the entrance fee among different classes of members (such as students, minors, or non-natural persons) because the Act requires a uniform fee. FCUs may, however, eliminate the entrance fee for all applicants.
- Membership application procedures: Under section 113 of the Act,3 the board acts upon applications for However, the board can appoint membership officers from among the members of the credit union. Such membership officers cannot be a paid officer of the board, the financial board officer, any assistant to the paid officer of the board or to the financial officer, or any loan officer. As described under section 2 of this Article, an applicant becomes a member upon approval by a membership officer and payment of at least one share (or installment) and uniform entrance fee, if applicable.
Violent, belligerent, disruptive, or abusive members: Many credit unions have confronted the issue of handling a violent, belligerent, disruptive, or abusive individual. Doing so is not a simple matter, insofar as it requires the credit union to balance the need to preserve the safety of individual staff, other members, and the integrity of the workplace, on one hand, with the rights of the affected member on the other.
In accordance with the Act and applicable interpretations by the NCUA’s Office of General Counsel, there is a reasonably wide range within which FCUs may fashion a policy that works in their case. Thus, an individual that has become violent, belligerent, disruptive, or abusive may be prohibited from entering the premises or making telephone contact with the credit union, and the individual may be severely restricted in terms of eligibility for products or services.
So long as the individual is not barred from exercising the right to vote at annual meetings and is allowed to maintain a regular share account, the FCU may fashion and implement a policy that is reasonably designed to preserve the safety of its employees and the integrity of the workplace.4
The policy need not be identical nor applied uniformly in all cases—there is room for flexibility and a customized approach to fit the particular circumstances. In fact, the NCUA anticipates that some circumstances, such as violence against another member or credit union staff in the FCU or its surrounding property, an FCU may take immediate action to restrict most, if not all, services to the violent member. In other situations, such as a member that frequently writes checks with insufficient funds, the FCU may attempt to resolve the matter with the member before limiting check writing services. Once adopted, members must receive notice.
The FCU should disclose the policy to new members when they join and notify existing members of the policy at least 30 days before it becomes effective. The FCU’s board has the option to adopt the optional amendment addressing members in good standing. Examples of violent, belligerent, disruptive, or abusive conduct include, but are not limited to, a member threatening physical harm to employees, a member repeatedly purchasing gifts for or asking tellers on dates, a member repeatedly cursing at employees, and a member threatening to follow a loan officer home for a denying loan.
FCUs should also make specific note of Article XIV, section 1 of the bylaws, which spells out in detail the procedure required to expel an individual from membership. This procedure is mandated by the Act.5 Furthermore, Article XVI specifies that the credit union, its powers and duties, and the functions of its members, officers and directors, are all strictly circumscribed by law and regulation. The commentary for Article XVI provides more details on members using accounts for unlawful purposes.
Article III. Shares of Members
- Installments: FCUs may insert zero for the number of installments. The Act allows membership upon the payment of the initial installment of a membership share, but the NCUA no longer views this provision as requiring FCUs to offer the option of paying for the membership share in installments.
- Par value: FCUs may establish differing par values for different classes of members or types of accounts (such as students, minors, or non-natural persons), provided this action does not violate any federal, state or local antidiscrimination laws. For example, an FCU may want to establish a higher par value for recent credit union members, without requiring long-time members to bring their accounts upto the new par value. A differing par value may also be permissible for different types of accounts, such as requiring a higher par value for a member with only a share draft account.
If a credit union adopts differing par values, all of the possible par values must be stated in section 1. The FCU Bylaws include several options for differing par values. The credit union may select one or more of these or establish its own.
- Regular share account: To establish membership, the member must subscribe to one par value of share. The share does not have to be in a regular share account. The bylaws include two options. One option requires the member to have a regular share account to open membership, and one option allows them to use any other account. The board may select which option to use. If the board does not select an option, the member must have a regular share account to open an Please note, if the board selects an account other than the regular share, the requirements of Article III, section 3 still apply. The member must maintain one share to remain a member.
Reduction in share balance below par value: When a member’s account balance falls below the par value, section 3 of this article requires FCUs to allow members a minimum time period to restore their account balance to the par value before membership is terminated. FCUs may not delete this requirement or delete references to this requirement in Article II, section 3. If the share balance falls below the par value and does not increase the balance within the time set by the board, membership is terminated.
- Trusts: Trusts and shares issued in trust can be a complicated For purposes of the FCU Bylaws, perhaps the main issue is the distinction between revocable and irrevocable trusts. In the case ofa revocable trust, the individual who establishes the trust is essentially still in control of the funds during his lifetime. Thus, the account owner can change the designated beneficiary at any time, and he or she can determine whether the identified beneficiary actually receives any money simply by deciding to withdraw the funds before his or her own death. Accordingly, the requirement in the case of revocable trust accounts is simply that the owner of the funds be a member of the FCU. Furthermore, provided the owner of the funds is within the field of membership and eligible for membership, he or she may use the vehicle of the payable-on-death or revocable trust account itself as the method of becoming a member. There is no requirement that the account holder first establish a regular share account to become a member. In accordance with legal opinions issued by the NCUA’s Office of General Counsel, an individual may fulfill the requirement of becoming a member by subscribing to the equivalent of the par value of one share, which can be done through the opening of any type of account the credit union offers.6
There is no requirement that the beneficiaries be members, since they may never actually come to own the funds or have a right to them. Furthermore, in the case of a revocable trust, since it is essentially indistinguishable from the member, there is no need for the trust to have a separate account number assigned or for it to be viewed as a legal entity separate from the member who set it up.
In the case of an irrevocable trust, the requirements are somewhat different. Membership requirements here may be met though either the settlor, who is the original owner of the funds, or the beneficiary, who obtains an equitable, beneficial interest in the funds once the trust is established. So long as one or the other is eligible for membership, the credit union may accept the account. Furthermore, as with revocable trusts, the membership obligation can be met through the opening of the trust account itself; it is not required that the beneficiary or the settlor have previously established a separate, regular share account. Most irrevocable trusts have a trustee who has administrative responsibility for the account, and so the credit union will typically deal with the trustee for purposes such as sending monthly statements and year-end tax reporting.
However, the trustee need not actually be a member of the credit union, and the credit union need not necessarily view the trust account as a separate legal entity, with its own separate tax ID number. Instead, it need only verify and confirm the eligibility of either the settlor or the beneficiary (or all of the settlors or all of the beneficiaries in the case of multiple settlors or beneficiaries) to join the credit union.
A trust itself, either revocable or irrevocable, may be a member of the credit union in its own right if all parties to the trust, including all settlors, beneficiaries and trustees, are within the field of membership.7 If all parties to the trust are within a credit union’s field of membership, the trust will qualify as “an organization of such persons,” which is a standard clause in FCU fields of membership.
Article IV. Meetings of Members
- Annual and special meetings: FCUs are encouraged to provide a live webcast of annual and special meetings for interested members, and/or post a video of the annual meeting on the FCU’s website. The NCUA Board encourages this policy for FCUs that currently have a website.
Article V. Elections
- Eligibility requirements: The Act and the FCU Bylaws contain the only eligibility requirements for membership on an FCU’s board of directors, which are as follows:
- The individual must be a member of the FCU before distribution of ballots;
- The individual cannot have been convicted of a crime involving dishonesty or breach of trust unless the NCUA Board has waived the prohibition for the conviction; and
- The individual meets the minimum age requirement established under Article V, 7 of the FCU Bylaws.
Anyone meeting the three eligibility requirements may run for a seat on the board of directors if properly nominated. It is the nominating committee’s duty to ascertain that all nominated candidates, including those nominated by petition, meet the eligibility requirements.
- Nomination criteria for nominating committee: The Act and the FCU Bylaws do not prohibit a board of directors from establishing reasonable criteria, in addition to the eligibility requirements, for a nominating committee to follow in making its nominations, such as financial experience, years of membership, or conflict of interest The board’s nomination criteria, however, applies only to individuals nominated by the nominating committee; they cannot be imposed on individuals who meet the eligibility requirements and are properly nominated from the floor or by petition.
- Candidates’ names on ballots: When producing an election ballot, the FCU’s secretary may order the names of the candidates on the ballot using any method for selection provided it is random and used consistently from year to year so as to avoid manipulation or favoritism.
Iv. Secret ballots: An FCU must establish an election process that assures members their votes remain confidential and secret from all interested parties. If the election process does not separate the member’s identity from the ballot, FCUs should use a third-party teller that has sole control over completed ballots. If the ballots are designed so that members’ identities remain secret and are not disclosed on the ballot, FCUs may use election tellers from the FCU.
In any case, FCU employees, officials, and members must not have access to ballots identifying members or to information that links members’ votes to their identities.
- Plurality voting: At least one nominee must be nominated for each vacant When there are more nominees than seats open for election, the nominees who receive the greatest number of votes are elected to the vacant seats.
- Minimum age requirement: The age the board selects may not be greater than eighteen or the age of majority under the state law applicable to the credit union, whichever is lower.
- Electronic voting: Some members lack digital access or wish to have a choice to vote non-electronically. The FCU Bylaws protect members who cannot or choose not to vote For those members who vote electronically, credit unions have the flexibility to use as many forms of electronic voting (phone, internet, etc.) as they wish.
Voting methods: Options A1, A2 and A3 provide for in-person voting at the annual meeting, or, for Option A3, by voting machine. Option A4 provides for remote voting by electronic device or mail ballot. The NCUA has approved several bylaw amendments for FCUs that combine in-person and remote options for member voting. The NCUA encourages FCUs using one of the first three options to consider whether they can also incorporate mail ballots or electronic voting. Likewise, the NCUA encourages FCUs using Option A4 to consider whether they can also provide a means to vote for members who come to the annual meeting but have not voted in the election, such as a paper ballot.
- Uncontested elections: Options A2, A3 and A4 provide for election by acclamation or consensus when the number of nominees for board positions equals the number of positions to be filled. These options do not permit nominations from the floor at the meeting, so a petition is the only way for members to nominate a candidate not on the nominating committee’s slate. Accordingly, section (1)(c)in each of these options requires the notice to members to include the fact that there are no nominations from the floor at the meeting, as well as a notice that the credit union will not conduct a vote by ballot if the number of nominees equals the number of positions to be filled. The FCU Bylaws do not require a particular procedure for uncontested elections.
The contents of the notice to members required in section (1)(c) does not alter the basic election procedures the credit union has selected. Should the number of the nominating committee nominees fall below the number of positions to be filled after the member notice is sent, this section does not permit nominations from the floor. Only option A1 permits nominations from the floor.
- Nomination procedures: Under all options under this Article, the nominating committee must widely publicize the call for nominations to all members by any medium. This requirement can be satisfied by publicizing the information to a large audience, whether by newsletter, email, or any other satisfactory medium that reaches as many members as possible. The NCUA emphasizes that member participation is important during an election, and FCUs must make sure that members are aware of the nomination
Article VI. Board of Directors
- Vacancies: In accordance with the Act, when a vacancy on the board of directors occurs between annual elections, the remaining directors are to appoint a This replacement will serve as a director until the next annual meeting. The vacancy is then to be filled at the next annual meeting
through the normal membership voting process, with the newly elected director serving out the remainder of the original term.8 The number of director positions may be changed to any odd number between 5 and 15, inclusive, but a position may not be eliminated if it is currently an occupied position. As the bylaw itself specifies, no reduction in the number of director positions may be made unless there is a corresponding vacancy, caused by death, resignation, expiration of term or other action permissible under the FCU Bylaws. In other words, the FCU may not arbitrarily propose to reduce the number of director positions and terminate one or more incumbent directors.
- Director emeritus: As a matter of board policy, the board may establish the position of director emeritus for former directors who faithfully fulfilled their responsibilities as members of the board for at least a specified minimum number of years. The board may determine that director emeritus status confers authority to attend board meetings and to participate in discussions and other board events; however, directors emeritus may not vote on any matter before the board or exercise any official duties of a director. The position is essentially an honorary title designed to recognize and reward the good service of those designated and to retain some of their institutional knowledge for the benefit of the board and the FCU. The decision to establish a director emeritus position, as well as the selection of individuals to become directors emeritus, is solely within the discretion of the board. The board may establish a director emeritus position by adopting either the optional bylaw amendment or a board
To assist them in providing advice, Directors emeriti have access to confidential information, including but not limited to the credit union’s examination reports and CAMEL ratings, to the same extent as members of the board. Directors emeriti are also subject to the same confidentiality and conflict of interest standards applicable to directors.
- Associate directors: The board may also establish the position of associate director through board policy. This position is designed to provide qualified individuals with an opportunity to gain exposure to board meetings and discussions but without formal director responsibility or the right to It may be thought of as an apprenticeship position in which the incumbent receives training and knowledge about the business of the board, with the expectation that the experience will prepare him or her for an eventual election to a director position. As with the director emeritus position, the decision to establish an associate director position, as well as the selection of individuals to become associate directors, is solely within the discretion of the board.
To assist their learning process, the board may determine to permit associate directors to have access to confidential information, including but not limited to the credit union’s examination reports and CAMEL ratings, to the same extent as members of the board. Associate directors are also subject to the same confidentiality and conflict of interest standards applicable to directors.
- Composition of the board: The NCUA Board encourages the composition of the board of directors to reflect the field of membership of the FCU.
- Notice to members of change in size of board: The NCUA encourages FCUs changing the size of their boards to post a notice of the change on the FCU’s website (if the FCU maintains a website). An FCU is not required to establish and maintain a website solely for this purpose, however. An FCU that does not maintain a website can post such a notice in a conspicuous place in the office of the FCU, such as at the teller window or on the front door of the FCU.
Article VII. Board Officers, Management Officials and Executive Committee
- Board officers: As specified in this bylaw, members of the board are elected by the credit union membership to the board itself. Once on the board, the directors themselves vote to select individuals from among their number to serve as officers of the board (chair, one or more vice chairs, secretary, and financial officer). One board officer may be compensated as such for services he or she performs in that capacity. The offices of financial officer and secretary may be held by the same person.
Members of the board must hold the vote for the specified officer positions at the first board meeting following the annual meeting of the members. This board meeting should be held not later than seven days after the annual meeting. The Act requires the credit union to file a record of the names and addresses of the executive offices, members of the supervisory committee, credit committee, and loan officers with the Administration within ten days after election or appointment.9 The NCUA’s regulations also require federally insured credit unions to file NCUA Form 4501 or its equivalent within 10 days after an election or appointment of senior management or volunteer officials.10
Officers hold their respective officer positions for a term of one year, until the first board meeting that follows the next annual meeting of the members. At that board meeting, officer positions are again filled. Each board officer holds his or her position until the election and qualification of his or her successor. Thus, a board officer who is re-elected to the position he or she is currently holding serves for
another year. Where another director is chosen to fill the position, he or she takes office effective as of the date of the election, assuming he or she is qualified—meaning simply that he or she was properly elected by the membership to the board in the first place and is in good standing as a director.
As specified in this bylaw, the board chair presides at all board meetings. In the absence of the chair or his or her inability to act, the vice chair presides at the meeting. In the absence or inability to act of both the chair and the vice chair, those directors who are present may select from among their number an individual director to act as temporary chair for that particular meeting. Actions taken by the board under the direction of the temporary chair have the same validity and effect as if taken under the direction of the chair or the vice chair, provided a quorum of the board, including the temporary chair, is present. If the board secretary is absent for any reason from a meeting, the chair (or acting chair) must select another director to fulfill the secretary’s function at the meeting.
- Committee Membership: The NCUA encourages FCUs to publicize the names of the members of each FCU committee to FCU FCUs could provide this information either on the FCU’s publicwebsite or to the portion of the website only accessible to members after logging in. The NCUA encourages this policy for FCUs that have a website. An FCU is not required to establish and maintain a website solely for this purpose, however. Providing a short description of the committee’s duties also assists members in better understanding the leadership structure of the FCU.
Article VIII. Credit Committee or Loan Officers
Many FCUs now use automated systems for accepting loan applications, loan underwriting, and loan processing, as permitted by several of the NCUA Office of General Counsel’s legal opinions. The bylaws reflect that FCUs may use automated lending systems, as long as the credit committee or a loan officer:
- reviews the loans the automated system granted for fraud and other purposes; and
- reviews loans the automated system
Article IX. Supervisory Committee
- Nominations: The Act requires that the FCU’s board appoint the members of the Supervisory Committee. It is permissible for the board to seek nominations from members before making Supervisory Committee appointments.
Article XIV. Expulsion and Withdrawal
- Expulsion procedures: As noted in the commentary to Article II, there is a fairly wide range of measures available to the credit union in responding to abusive or disruptive members. However, in accordance with the Act, there are only two ways a member may be expelled:
- A two-thirds vote of the membership present at a special meeting called for that purpose, and only after the individual is provided an opportunity to be heard; and
- for non-participation in the affairs of the credit union, as specified in a policy adopted and enforced by the board.11 Only in-person voting is permitted in conjunction with the special meeting, so that the affected member has an opportunity to present their case and respond to the credit union’s concerns. In addition, FCUs should consider the commentary under Article XVI about members using accounts for unlawful purposes.
Article XVI. General
- Special meeting requirements: To remove a director under section 3 of this Article requires a majority vote of members present at a special meeting called for the purpose of voting on removal. The bylaw requires that the affected director have the “opportunity to be heard.” NCUA interprets this provision as requiring the vote to occur at an in-person meeting rather than by mail ballot. At an in-person meeting, the director subject to the removal vote can make his or her case before the members. The director removal provisions derive from provisions of the Act, as follows:
- The bylaws govern the conduct of special meetings;12
- Members must have the opportunity to vote, at a meeting, on the Supervisory Committee’s suspension of a director;13 and
- FCU members may be expelled by vote of members present at a meeting called for that 14
- Unlawful purposes: FCUs expressed concerns that some members may be using their accounts for unlawful Section 1 of this Article specifies that the credit union, its powers and duties, and the functions of its members, officers and directors, are all strictly circumscribed by law and regulation. Insofar as this provision is included in the bylaws, an FCU need not adopt a specific policy or requirement that members conform their use of credit union products or services to lawful purposes. Furthermore, the existence of this bylaw provides ample support should an FCU determine to impose strict limits on products and services available to any individual who is found to be using the FCU in furtherance of unlawful purposes.
- Posting of bylaws on website: FCUs that maintain a website must post a copy of the FCU’s bylaws on the After adopting amendments, FCUs must post an updated copy of the bylaws. An FCU is not required to establish and maintain a website solely for this purpose, however.
- 2. 12 S.C. 1758.
- 3. See 12 S.C. 1761b.
- 4. See OGC No. 08–0431 (Aug. 12, 2008).
- 5. 12 S.C. 1764.
- See OGC Op. No. 92–0522 (June 15, 1992).
- OGC Op. No. 99–1110 (Feb. 25, 2000).
- 12 U.S.C. 1761(a).
- 12 U.S.C. 1761(b).
- 10. 12 CFR 6.
- 11. See 12 S.C. 1764.
- 12. 12 S.C. 1760.
- 13. 12 S.C. 1761d.
- 14. 12 S.C. 1764(a).