Final Rule Summary

Final Rule Summary
12 CFR Part 701 NCUA Chartering & FOM Manual

Prepared by NASCUS Legislative and Regulatory Affairs Department

November, 2016

NCUA has issued a final rule amending numerous elements of the field of membership (FOM) rules for federal credit unions (FCUs). Changes to FCU FOM include:

  • Changes to the definition of a local community, a rural district and an underserved area
  • Changes to the chartering and expansion of multiple common bond FCUs
  • Changes to the expansion of a single common bond FCU that serves a trade , industry or profession (TIPs)
  • Changes to the chartering or expanding any FCU

NCUA FOM rules only apply to FCUs. State chartered credit unions look to state law for their FOM rules.

NCUA’s final FOM rule takes effect Feb. 6, 2017, 60 days after the scheduled publication date in the Federal Register (Dec. 7, 2016).

The final rule may be read in its entirety here.


The statutory basis for FCU FOM is established in §1759 of the Federal Credit Union Act (FCUA). The implementing regulation is Appendix B of Part 701. Together, the rules provide for 3 kinds of FCU memberships:

  • A single common bond whose members all share the same occupation or association
  • A multiple common bond whose various groups share distinct occupation or association bonds
  • A community common bond among persons or organizations within a well-defined local community, neighborhood, or rural district 

An FCU must choose one of the above FOMs, it cannot mix them together.

  • Core-Based Statistical Area

The final rule retains the 2.5 million population limit for a Core-Based Statistical Area (CBSA). This population limit corresponds to the limit used by the Office of Management and Budget (OMB) to designate a Metropolitan Division within a CBSA. There is no statutory mandate for the limit.

NCUA finds merit in the idea of eliminating the population limit, and has issued another proposed FOM rule soliciting comments on that concept.

  • Core Area Service Requirement

Since 2010 NCUA has required a community FOM that includes a portion of a CBSA to include the CBSA’s “core area,” defined as the most populous county or named municipality. There was no statutory requirement for this. NCUA created the requirement to help ensure FCUs were serving moderate income members in the CBSA.

The final rule repeals this requirement. NCUA’s Office of Consumer Financial Protection and Inclusion will periodically review FCU service to low income members.

  • Population Limit as applied to a Core-Based Statistical Area

NCUA’s existing FCU FOM rule disqualified a portion of a CBSA from qualifying as a community for FOM if the entire CBSA exceeded the 2.5 million cap, even if the portion did not.

The final rule eliminates this prohibition, clarifying that a portion of a CBSA is acceptable as a community FOM if that portion has a population less than 2.5 million.

  • Combined Statistical Area as a Well Defined Local Community

The current FCU FOM rule recognizes 2 presumptive well defined local comminutes (WDLCs) for FOM: a single political jurisdiction (SPJ) and a CBSA subject to the 2.5 million limit.

The final rule adds a third presumptive WDLC, any of the 174 Combined Statistical Areas, or portions thereof, recognized by the OMB that fall below the 2.5million limit (152 of them).

  • Addition of an Adjacent Area to a Well Defined Local Community

For several years, NCUA has prohibited a FCU from using a narrative approach to demonstrate an area adjacent to a recognized WDLC had common interests and characteristics and should be included within the FOM.

The final rule once again allows FCUs to use a narrative to apply to NCUA for inclusion of an adjacent community within the FOM if the FCU can demonstrate common connections. NCUA will publish additional guidance as to what FCUs would need to demonstrate in their narrative.

  • Single Congressional District as a Well Defined Local Community

NCUA declined to expand FCU FOM to include single Congressional Districts, which would have granted state-wide FOM in the 7 states with a single Congressional District. However, NCUA most decidedly left the door open to return to this issue in the future.

  • Definition of a Rural District

While not mandated by statute, NCUA has limited community FOMs in rural districts by regulation. For FCUs, rural districts are limited to the greater of 250,000 people or 3% of the state’s population; and 50% of the proposed district must live in an area designated rural by the Census or the density of the proposed district must not exceed 100 persons per square mile.

The final rule raises the population limit to 1 million people from the existing 250,000 limit. The final rule also eliminates the alternative 3% of state population limit. The boundaries of a rural district are limited to states whose borders are contiguous to the state in which the FCU is headquartered. The requirements for the census designation and the density limit are retained.

  • Underserved Areas

The FCUA allows a multiple common bond FCU add an underserved area to its FOM if the FCU places a facility in the underserved area. NCUA defines “underserved” area in part by availability of service from “financial institutions.”

The final FOM rule will exclude non-community credit unions and non-depository institutions from the calculation of available financial services. The final rule will include CFPB designated underserved areas. FCUs will also be allowed to use other metrics to submit for NCUA’s consideration for designation.

  • Multiple Common Bond

The FCUA requires a new occupational or associational groups to be in “reasonable proximity” to the FCU seeking to add them to its FOM. The proposed rule raised the issue of using a transactional website to satisfy the requirement. Similar to the single congressional district, NCUA declined to include that provision in the final rule at this time, but suggested it would revisit the issue in the future.

NCUA did include in the final rule an expansion of the multiple common bond by allowing the employees of the contractors of an occupation group within the FOM. Single occupational FOM FCUs could already do this, and now NCUA expands that authority to the multiple common bond FCUs.

The final rule also clarifies that existing authority allows the employees of the tenants of an office park to join a multiple common bind FCU.

  • Streamlined Documentation

The FCUA requires NCUA to evaluate the feasibility of a group of 3k or more creating a stand-alone CU before permitting it to join a multiple common bond FCU. In the final rule, NCUA has created a streamlined documentation system for this analysis. For groups under 3K, the existing method/form remains in use. For groups between 3K and 5K NCUA now will rely on the groups’ self-certification that they cannot form their own CU. For groups over 5K, the existing documentation will continue to be required.

  • Veterans Eligibility for Membership

The final rule extends automatic membership eligibility to any honorably discharged veteran to the FCU in which her/his branch of service is included in the FOM.

  • The TIP Charter

Finally, NCUA’s new rule reiterates that there is no geographic limit on a TIP charter (Trade, Industry, or Profession). Furthermore, NCUA is expanding the TIP charter to include the employees of a TIPs contractors where a strong dependency relationship exists.