Washington State Department of Financial Institutions

DIVISION OF CREDIT UNIONS

BULLETINS 2001

Part D Bulletins 01-16 to 01-24

 

DCU Bulletin

Division of Credit Unions
Washington State Department of Financial Institutions
Phone: (360) 902-8701 FAX: (360) 704-6901

BULLETINS LIST PAGE

October 3, 2001
No. B-01-16

Earnings Weakness

While individual credit unions may have demonstrated results contrary to the trend, the return on assets for all state chartered credit unions further declined 9 basis points to .63% annualized for the six month ending June 30, 2001.  One of the key factors in that decline was the erosion of net interest margin.  Over 70 credit unions reflected a decline in the net interest margin.

Many credit unions have not yet implemented an effective process to control the impact of interest rate changes despite the increased attention by examiners to asset / liability management (ALM) issues.  Examiners are finding that policies, training, and committees are beginning to be implemented.  However, the erosion of net interest margin noted above indicates that many credit unions have not yet been effective with the ALM process.

In some cases, the recent decline in interest rates has led to lower returns on assets, but many credit unions simply have not adjusted liability rates to maintain the net interest margin.  A number of credit unions do not have a process in place to quickly adjust the liability rates when the market indicates the need for a decrease.  Any number of alternatives are open to boards of directors.  For example, they could:

In part, this situation has been the result of the 13% growth in assets as members increase shares or certificates of deposit rapidly but without loan growth keeping pace.  In many cases the failure to earn a positive spread on the new liabilities has eroded the net interest margin.  Should this condition continue, credit unions may be tempted into higher risk assets with inadequate controls.  Careful attention should be given to the types of assets obtained and to avoid inappropriate or uncontrolled risks.   For further discussion of managing highly rate sensitive and volatile funding sources, see NCUA Letter to Federally Insured Credit Unions 01-CU-08.

Credit unions that find themselves with a deteriorating net interest margin may also find that examiners will be giving them lower ratings in the “L” (asset / Liability) component of the CAMEL rating.  The rating will depend upon circumstances in each credit union.  One mitigating factor may be the level of net worth for the credit union.  Credit unions with higher net worth ratios may have the strength to see them through an extended adjustment process.

A number of credit unions have taken appropriate action to correct the adverse impact on earnings discussed in this Bulletin.  Those who have not taken action should give immediate attention to the impact on the earnings of their credit union.

Should you wish to discuss these conditions further, please contact Linda Jekel, Program Manager, (360) 902-8753.


DCU Bulletin

Division of Credit Unions
Washington State Department of Financial Institutions
Phone:  (360) 902-8701  FAX:  (360) 704-6901

October 22, 2001
No. B-01-18

Division Distributes Revised Version of WAC 208-418

As you know, the Division of Credit Unions recently completed the revision of Chapter 208-418 WAC regarding fees charged to credit unions and other persons.  The Office of the Code Reviser has now completed the revisions, and the new version can be found on our web site at http://www.dfi.wa.gov/cu/default.htm.

Included is a copy of the CR-103, the marked-up version of the rule, and the new (clean) version of the rule, for your convenience in reviewing the changes.  If you have any questions, please contact:

Parker Cann
Director of Credit Unions
PO Box 41200
Olympia, WA 98504-1200
Phone: (360) 902-8778
Fax: (360) 704-6978
E-mail:pcann@dfi.wa.gov

RULE-MAKING ORDER
(RCW 34.05.360)

CR-103
(12/31/00)

Agency:  Department of Financial Institutions

  x Permanent Rul

p Emergency Rule

(1)   Date of adoption:   May 23, 2001

  p Expedited Repeal

(2)   Purpose:   To increase assessments and fees paid by credit unions and other parties to the Division of Credit Unions

(3)   Citation of existing rules affected by this order:

Repealed:  WAC 208-418-060
Amended:   WAC 208-418-020, -040, -050, -070
Suspended:

(4) Statutory authority for adoption: RCW 31.12.426(1), RCW 31.12.516(2), RCW 43.320.040

          Other Authority:    

PERMANENT RULE ONLY (Including EXPEDITED ADOPTION

Adopted under notice filed as WSR  01-07-082   on March 21, 2001.

Describe any changes other than editing from proposed to adopted version:  Based on comments received, the Division changed the rule in its final version to limit to two the number of automatic annual increases in the rate of assessments/fees: one on July 1, 2001, and one on July 1, 2002.

EMERGENCY RULE ONLY

            Under RCW 34.05.350 the agency for good cause finds:

          p  (a) That immediate adoption, amendment, or repeal of a rule is necessary for the preservation of the public health, safety, or general welfare, and that observing the time requirements of notice and opportunity to comment upon adoption of a permanent rule would be contrary to the public interest.

p (b) That state or federal law or federal rule or a federal deadline for state receipt of federal funds requires  immediate adoption of a rule.

Reasons for this finding:     

EXPEDITED REPEAL ONLY

Under Preproposal Statement of Inquiry filed as WSR      on      (date)

(5.3)   Any other findings required by other provisions of law as precondition to adoption or effectiveness of rule?

p Yes         x No          If Yes, explain:     

(6)   Effective date of rule:
Permanent Rules

x 31 days after filing

p Other (specify) *


Emergency Rules

  p Immediately

  p Later (specify)   

CODE REVISER USE ONLY

*(If less than 31 days after filing, specific
finding in 5.3 under RCW 34.05.380(3) is required)

Name (Type or Print)

John L. Bley

Signature

Title
Director

Date
May 1, 2001

Note:   If any category is left blank, it will be calculated as zero.
No descriptive text.

Count by whole WAC sections only, from the WAC number through the history note.
A section may be counted in more than one category.


    The number of sections adopted in order to comply with:
Federal statute: New 0 Amended 0 Repealed 0
Federal rules or standards: New 0 Amended 0 Repealed 0
Recently enacted state statutes: New 0 Amended 0 Repealed 0

    The number of sections adopted at the request of nongovernmental entity:
New 0 Amended 0 Repealed 0

The number of sections adopted on the agency’s own initiative:
New 3 Amended 4 Repealed 1
The number of sections adopted in order to clarify, streamline, or reform agency procedures:
New 0 Amended 0 Repealed 0
    The number of sections adopted using:
Negotiated rule making: New 0 Amended 0 Repealed 0
Pilot rule making: New 0 Amended 0 Repealed 0
Other alternative rule making: New 0 Amended 0 Repealed 0

 


(Marked-up Version of the Rule)

 

 


(New Version of the Rule)

Chapter 208-418 WAC
Fees Charged to Credit Unions and Other Persons

(Formerly chapter 419-18 WAC)
Last Update: 5/23/01

WAC

08-418-010 - Definitions.
08-418-020 - Collection of fees.
08-418-040 - Quarterly asset assessments.
08-418-050 - Pass through of attorney general costs.
08-418-070 - Other fees.
08-418-090 - Rate increase.
08-418-100 - Waiver of fees.

DISPOSITION OF SECTIONS FORMERLY CODIFIED IN THIS CHAPTER

208-418-030 Hourly charge for examinations. [96-06-011, recodified as § 208-418-030, filed 2/23/96, effective 6/1/96.  Statutory Authority:  RCW 31.12.535 and 31.12.545.  95-06-066, § 419-18-030, filed 2/28/95, effective 3/31/95; 91-06-062, § 419-18-030, filed 3/1/91, effective 4/1/91.  Statutory Authority:  RCW 31.12.545(1).  85-07-008 (Order 85-2), § 419-18-030, filed 3/8/85.  Statutory Authority:  RCW 31.12.320.  82-13-016 (Order 82-5), § 419-18-030, filed 6/7/82.]    Repealed by 96-12-058, filed 5/31/96, effective 7/1/96.  Statutory Authority:  1996 c 274.

208-418-045 Credit unions examination fund--Minimum cash balance--Acceleration of semiannual asset charge.  [96-06-011, recodified as § 208-418-045, filed 2/23/96, effective 6/1/96.  Statutory Authority:  RCW 31.12.535 and 31.12.545.  95-06-066, § 419-18-045, filed 2/28/95, effective 3/31/95.]    Repealed by 96-17-072, filed 8/20/96, effective 9/20/96.  Statutory Authority:  RCW 42.320.040 [43.320.040].

208-418-060 One-time special assessment for fiscal 1997.  [Statutory Authority:  1996 c 274.  96-12-058, § 208-418-060, filed 5/31/96, effective 7/1/96.  96-06-011, recodified as § 208-418-060, filed 2/23/96, effective 6/1/96.  Statutory Authority:  RCW 31.12.535 and 31.12.545.  95-06-066, § 419-18-060, filed 2/28/95, effective 3/31/95; 91-06-062, § 419-18-060, filed 3/1/91, effective 4/1/91.  Statutory Authority:  RCW 31.12.545(1).  85-07-008 (Order 85-2), § 419-18-060, filed 3/8/85.  Statutory Authority:  RCW 31.12.320.  83-20-027 (Order 83-4), § 419-18-060, filed 9/26/83.]    Repealed by 01-12-004, filed 5/23/01, effective 6/23/01.  Statutory Authority:  RCW 31.12.426(1), 31.12.516(2), 43.320.040.

208-418-080 Scheduled increases in rate of examination and supervision charges. [96-06-011, recodified as § 208-418-080, filed 2/23/96, effective 6/1/96.  Statutory Authority:  RCW 31.12.535 and 31.12.545.  95-06-066, § 419-18-080, filed 2/28/95, effective 3/31/95.]    Repealed by 96-12-058, filed 5/31/96, effective 7/1/96.  Statutory Authority:  1996 c 274.

WAC 208-418-010  Definitions.  Unless the context clearly requires otherwise, as used in this chapter:

  1. "Credit union" includes a Washington credit union, an out-of-state credit union and a foreign credit union.
  2. "Foreign credit union" means a credit union organized and operating under the laws of another country or other foreign jurisdiction, that is operating a branch in Washington in accordance with RCW 31.12.471.
  3. "Hourly fee" means a fee of $57.42 per hour per examiner or other staff person of the division.
  4. "Out-of-state credit union" means a credit union organized and operating under the laws of another state or U.S. territory or possession, that is operating a branch in Washington in accordance with RCW 31.12.471.
  5. (a) "Total assets" of a Washington credit union includes all assets of the credit union as reported on the credit union's most recent form 5300 or similar financial report .

(b) "Total assets" of an out-of-state or foreign credit union is derived from the following fraction:

Total assets x in-state branch shares and deposits

Total shares and deposits

"Total assets" and "shares and deposits" include respectively all assets and shares and deposits as reported on the credit union's most recent form 5300 or similar financial report.

  1. "Washington credit union" means a credit union organized and operating under chapter 31.12 RCW.

[Statutory Authority:  RCW 31.12.426(1), 31.12.516(2), 43.320.040.  01-12-004, § 208-418-010, filed 5/23/01, effective 6/23/01.]

WAC 208-418-020  Collection of fees.

Chapter 31.12 RCW authorizes the director to charge fees to credit unions and certain other persons in order to cover the costs of the operation of the division of credit unions and to establish a reasonable reserve for the division.  As set forth in more detail in this chapter, the fees for this purpose shall consist of:

  1. Quarterly asset assessments charged to credit unions;
  2. Charges to a credit union for costs incurred by the division for certain types of attorney general or special counsel assistance in regard to the credit union; and
  3. Certain other fees charged by the director.

The director may waive all or any portion of any fee payable by a credit union or other person.

[Statutory Authority:  RCW 31.12.426(1), 31.12.516(2), 43.320.040.  01-12-004, § 208-418-020, filed 5/23/01, effective 6/23/01.  Statutory Authority:  1996 c 274.  96-12-058, § 208-418-020, filed 5/31/96, effective 7/1/96.  96-06-011, recodified as § 208-418-020, filed 2/23/96, effective 6/1/96.  Statutory Authority:  RCW 31.12.535 and 31.12.545.  95-06-066, § 419-18-020, filed 2/28/95, effective 3/31/95.  Statutory Authority:  RCW 31.12.320.  83-20-027 (Order 83-4), § 419-18-020, filed 9/26/83; 82-13-016 (Order 82-5), § 419-18-020, filed 6/7/82.]


WAC 208-418-040   Quarterly asset assessments.

  1. The director will charge each credit union a quarterly asset assessment at the rate set forth in subsection
  2. of this section. Asset assessments will be due on January 1, April 1, July 1, and October 1. Asset assessments must be paid no later than thirty days after their due date.  The assessments will be computed on total assets as of the prior June 30 for the October 1 and January 1 assessments, and as of the prior December 31 for the April 1 and July 1 assessments.

(2)  Credit Unions
      Total Assets

Quarterly
Asset Assessment

over $500M $18,357 .+ .000015 x total assets over $500M
over $100M up to $500M $5,250 .+ 0.00003408 x total assets over $100M
over $25M up to $100M 0.00005250 x total assets
over $10M up to $25M $1,157
over $2M up to $10M $771
over $500K up to $2M over $500K up to $2M
up to $500K $0
M .= Million   K .= Thousand
  1. Quarterly asset assessments are charged for the calendar quarter that begins on the due date of the assessment.  No rebates will be made to credit unions that cease to be state-chartered during the quarter.  A credit union converting to state charter will pay a prorated quarterly asset assessment for the quarter during which the conversion is completed.

  2. From time to time, the director may determine that asset assessments on an out-of-state credit union or foreign credit union are inappropriate relative to the level of examination and supervision of that credit union by the division.  In that event, the director may charge the credit union hourly fees for examination and supervision of the credit union, including, but not limited to, off-site monitoring, in lieu of asset assessments.  Such fees are due upon receipt of billing from the division.

[Statutory Authority:  RCW 31.12.426(1), 31.12.516(2), 43.320.040.  01-12-004, § 208-418-040, filed 5/23/01, effective 6/23/01.  Statutory Authority:  1996 c 274.  96-12-058, § 208-418-040, filed 5/31/96, effective 7/1/96.  96-06-011, recodified as § 208-418-040, filed 2/23/96, effective 6/1/96.  Statutory Authority:  RCW 31.12.535 and 31.12.545.  95-06-066, § 419-18-040, filed 2/28/95, effective 3/31/95; 91-06-062, § 419-18-040, filed 3/1/91, effective 4/1/91.  Statutory Authority:  RCW 31.12.545(1).  85-07-008 (Order 85-2), § 419-18-040, filed 3/8/85.  Statutory Authority:  RCW 31.12.320.  83-20-027 (Order 83-4), § 419-18-040, filed 9/26/83; 82-13-016 (Order 82-5), § 419-18-040, filed 6/7/82.]


WAC 208-418-050   Pass through of attorney general costs.

  1. The director will charge each credit union the actual cost incurred by the division of credit unions for certain legal assistance rendered by an assistant attorney general or special counsel in regard to the credit union.  Legal assistance includes legal assistance rendered in connection with:  Supervisory committee meetings and board meetings; receiverships, conservatorships, liquidations and declarations of insolvency; enforcement agreements or actions; collection actions; administrative hearings; and opinions requested by a credit union or the division of credit unions. Charges are due upon receipt of billing from the division.
  2. The division will notify a credit union before the division incurs expense for legal assistance which may be charged to the credit union under this section.

[Statutory Authority:  RCW 31.12.426(1), 31.12.516(2), 43.320.040.  01-12-004, § 208-418-050, filed 5/23/01, effective 6/23/01.  Statutory Authority:  1996 c 274.  96-12-058, § 208-418-050, filed 5/31/96, effective 7/1/96.  96-06-011, recodified as § 208-418-050, filed 2/23/96, effective 6/1/96.  Statutory Authority:  RCW 31.12.535 and 31.12.545.  95-06-066, § 419-18-050, filed 2/28/95, effective 3/31/95; 91-06-062, § 419-18-050, filed 3/1/91, effective 4/1/91.  Statutory Authority:  RCW 31.12.320.  83-20-027 (Order 83-4), § 419-18-050, filed 9/26/83.]


WAC 208-418-07070  Other fees.

  1. The director will charge hourly fees as follows:
  1. An hourly fee will be charged to a person other than a credit union or a subsidiary of one or more credit unions for each electronic data processing examination of the person by the division of credit unions.
  2. An hourly fee will be charged to a credit union for the processing of the credit union's application to add a community group to its field of membership.
  3.  An hourly fee will be charged to a credit union for a fraud investigation of the credit union and/or persons involved with the credit union by the division.
  4. An hourly fee will be charged to an out-of-state or foreign credit union for examination and supervision by the division under WAC 208-418-040(4).
  5. An hourly fee will be charged to an out-of-state or foreign credit union for the processing of the credit union's application to operate a branch in this state.
  6. An hourly fee will be charged to other divisions or agencies for examinations, investigations, or similar undertakings performed on their behalf by the division.
  1. In addition, the director will charge a credit union or other person for the actual cost incurred by the division for an examination or investigation of the credit union or person performed under personal services contract by third parties.
  2. Charges under this section are due upon receipt of billing from the division.

[Statutory Authority:  RCW 31.12.426(1), 31.12.516(2), 43.320.040.  01-12-004, § 208-418-070, filed 5/23/01, effective 6/23/01.  Statutory Authority:  1996 c 274.  96-12-058, § 208-418-070, filed 5/31/96, effective 7/1/96.  96-06-011, recodified as § 208-418-070, filed 2/23/96, effective 6/1/96.  Statutory Authority:  RCW 31.12.535 and 31.12.545.  95-06-066, § 419-18-070, filed 2/28/95, effective 3/31/95; 91-06-062, § 419-18-070, filed 3/1/91, effective 4/1/91.  Statutory Authority:  RCW 31.12.545(1).85-07-008 (Order 85-2), § 419-18-070, filed 3/8/85.  Statutory Authority:  RCW 31.12.320. 83-20-027 (Order 83-4), § 419-18-070, filed 9/26/83.]


WAC 208-418-090  Rate increase.  The division intends to increase its assessment and fee rates each year for several bienniums.  The division intends to initiate a rule making for this purpose each biennium.  This rule provides for an automatic annual increase in the rate of assessments and fees each fiscal year during the 2001-03 biennium.

  1. On July 1, 2001, and July 1, 2002, the fee and assessment rates under WAC 208-418-010(3) and 208-418-040, as increased in the prior fiscal year, will increase by a percentage rate equal to the fiscal growth factor for the then current fiscal year.  As used in this section, "fiscal growth factor" has the same meaning as the term is defined in RCW 43.135.025.
  2. The director may round off a rate increase under subsection (1) of this section.  However, no rate increase may exceed the applicable fiscal growth factor.
  3. By June 1 of each year, the director will make available a chart of the new rates that will take effect on the immediately following July 1.

[Statutory Authority:  RCW 31.12.426(1), 31.12.516(2), 43.320.040.  01-12-004, § 208-418-090, filed 5/23/01, effective 6/23/01.]


    WAC 208-418-100  Waiver of fees.

  1. The director may waive any or all of the fees and assessments imposed under WAC 208-418-040 and 208-418-070, in whole or in part, when he or she determines that both of the following factors are present:
  2. The credit union program fund exceeds the projected acceptable minimum fund balance level approved by the office of financial management; and
  3. That such course of action would be fiscally prudent.

[Statutory Authority:  RCW 31.12.426(1), 31.12.516(2), 43.320.040.  01-12-004, § 208-418-100, filed 5/23/01, effective 6/23/01.]


DCU Bulletin

Division of Credit Unions
Washington State Department of Financial Institutions
Phone:  (360) 902-8701    FAX:  (360) 704-6901

November 2, 2001
No. B-01-19

Division Issues Opinion Regarding
Credit Unions and Incidental Powers

As explained in the enclosed DCU Opinion No. 01-08, Washington State-chartered credit unions possess incidental powers through two sources:

  1. The state parity provisions (RCW 31.12.404); and
  2. The state incidental powers provision (RCW 31.12.402(23)).

If you have any questions regarding the Opinion, please contact:

Parker Cann
Director of Credit Unions
PO Box 41200
Olympia, WA 98504-1200
Phone: (360) 902-8778
Fax: (360) 704-6978
E-mail:  pcann@dfi.wa.gov

 

DCU Opinion Number 01-8

Date: November 8, 2001

From: Parker Cann, Director

Subject:

Credit Unions Possess Incidental Powers through Two Sources -

  1. The State Parity Provision (RCW 31.12.404); and
  2. The State Incidental Powers Provision (RCW 31.12.402(23))

By: Parker Cann, Director of Credit Unions

 

Issue – State Parity Provision

The Washington State Credit Union Act (WSCUA) grants Washington State-chartered credit unions (WaSCUs) the powers and authorities (powers) that federally-chartered credit unions (FCUs) possessed on December 31, 1993 or a subsequent date not later than July 22, 2001.  RCW 31.12.404 (state parity provision).  In addition, the Director of the Department of Financial Institutions (DFI) may grant WaSCUs the powers and authorities that FCUs have subsequent to July 22, 2001

… if the director finds that the exercise of the power and authority serves the convenience and advantage of members of credit unions, and maintains the fairness of competition and parity between credit unions and federal or out-of-state credit unions.

RCW 31.12.404(2).  The Director’s power to reach such a finding and to interpret Chapter 31.12 RCW generally has been delegated to the Director of the Division of Credit Unions.  Of course, in exercising an FCU power, WaSCUs must comply with any restrictions or limitations on the specific exercise of the power under NCUA statutes or rules.  RCW 31.12.404(3).

The Federal Credit Union Act (FCUA) provides that a FCU has the power to

exercise such incidental powers as shall be necessary or requisite to enable it to carry on effectively the business for which it is incorporated.

12 U.S.C. Section 1757(17).  On September 5, 2001, the National Credit Union Administration (NCUA) amended its rules to grant FCUs broader incidental powers under the FCUA.  12 C.F.R. Part 721; see also 66 Federal Register 40845 – 40859 (August 6, 2001) (NCUA’s amended IP rule). 

In part, the NCUA’s amended IP rule also outlined a three-part test to determine what activities fall within the purview of incidental powers.  See 12 C.F.R. Section 721.2 of the rule.  The test was derived from the U.S. Supreme Court decision in Nationsbank of North Carolina v. Variable Annuity Life Insurance Co., 513 U.S. 251 (1995) (VALIC).  

The Washington Credit Union League (WCUL) has inquired whether WaSCUs enjoy the same incidental powers that were granted to FCUs by the NCUA’s amended IP rule.

Analysis – State Parity Provision

As noted above, WaSCUs are granted FCU powers in effect on December 31, 1993, or a subsequent date no later than July 22, 2001.  RCW 31.12.404(1).  A finding by the Director is not required to grant WaSCUs any FCU power unless it took effect after July 22, 2001.

In regard to interpretation of the state parity provision, the Division continues to take the position that the effective date of a power derived from the FCUA is based on the enactment of the FCUA provision, even though the power is not recognized or acknowledged by NCUA rule or interpretation until later.  Such is the case in this instance.

The NCUA’s amended IP rule took effect on September 5, 2001.  However, the incidental powers provision in the FCUA was in effect on July 22, 2001.  Consequently, the state parity provision does grant the incidental powers recognized in the NCUA’s amended IP rule, without the need for a finding by the Director under RCW 31.12.404(2).

Conclusion – State Parity Provision

We conclude that WaSCUs possess the powers granted to FCUs by the NCUA’s amended IP rule.  This includes incidental powers and authorities granted to a FCU in the future through application to the NCUA or opinion of its General Counsel.  As is the case with the exercise of any parity power, a credit union should:

  1. Consider whether Board of Directors’ approval of the exercise is necessary;;
  2. Maintain legal citations and other documentation evidencing the FCU power and the restrictions and limitations on the power; and
  3. Comply with the NCUA restrictions and limitations on the power.

State Incidental Powers Provision

The WSCUA also grants WaSCUs certain incidental powers.  A WaSCU may:

exercise such incidental powers as are necessary or convenient to enable it to conduct the business of a credit union.

RCW 31.12.402(23) (state incidental powers provision).  Although we have not been asked to opine on this provision, we feel that it would be helpful to WaSCUs to explain the application of this provision in the context of this opinion.

We believe that WaSCUs may possess incidental powers under the incidental powers provision that are different than the incidental powers they possess under the state parity provision, as determined above in this opinion.  In addition, we would like to note that we intend to use the test outlined in VALIC as a test for determining what is an incidental power for WaSCUs under RCW 31.12.402(23).

Exercising Incidental Powers

A WaSCU should obtain the Division’s written approval before undertaking any new activity in exercise of its incidental powers under either the state parity provision or the state incidental powers provision, unless:

  1. The activity is within a category that has been preapproved by the NCUA under 12 C.F.R. Section 721.3;
  2. The activity has been approved by the NCUA in writing or has been determined to be an incidental power of FCUs by written opinion of the NCUA’s General Counsel; or
  3. The activity has been approved by the Division in writing or has been determined to be an incidental power of WaSCUs by written opinion of the Division.

We strongly encourage credit unions, when applying to the Division for approval of the exercise of an incidental power, to submit a written opinion of knowledgeable counsel that addresses:

WaSCUs using the exceptions in 1, 2 or 3 above should maintain documentation demonstrating compliance with the exception.

Of course, credit unions must use caution in undertaking any new activity to ensure that all related risks are appropriately assessed and mitigated and that the activity is conducted in a safe and sound manner.  For the sake of convenience, we have reprinted below the NCUA’s discussion of safety and soundness considerations from its amended IP rule.

NCUA Discussion of Safety and Soundness Considerations

The NCUA Board wants to emphasize that, while the incidental powers rule identifies categories of activities the Board has identified as within a federal credit union’s (FCU’s) incidental powers under the Federal Credit union Act (FCU Act), an FCU must comply with all applicable legal requirements and give due consideration to safety and soundness concerns before engaging in an incidental powers activity.

To carry out its responsibilities, FCU management must consider whether its policies for new activities are realistic and carefully designed to enable the FCU to serve the interests and needs of the membership.  In addition to meeting various legal requirements, many incidental powers activities require management to provide direction and instruction for officers, employees, and committees delegated the responsibility for implementing new activities.

FCU management is responsible for developing proper internal safeguards such as management oversight, internal controls and quality control.  FCUs must examine the strategic risk, reputation risk, transaction risk and compliance risk before engaging in a new activity.  In addition, management must exercise due diligence before devoting resources to a new activity or entering into any arrangements with third parties.  Activities that involve the use of new technologies must rely on acceptable information systems and operations architecture.  FCUs capable of providing advanced technological services must employ appropriate internal controls to minimize technological and legal risk and to address safety and soundness considerations.  FCUs must also adjust their risk management process and insurance coverage to correlate with additional risk taken on by engaging in new activities.

NCUA has published guidance papers to assist FCUs in evaluating the risks and understanding the legal requirements involved in some of these activities.  This guidance includes:

NCUA’s published guidance, along with NCUA’s regulations, are available from the agency’s website at www.ncua.gov.  The Board also recommends that FCUs review interpretive letters and guidance issued by other federal financial institution regulators for assistance in understanding an activity’s risks, for example, OCC Bulletin 2001-12 on bank-provided account aggregation services and OCC Advisory Letter 2000-9 on third-party risk.  Depending on the activities an FCU undertakes, it may also need to consult with its own legal counsel and other professional advisers.


DCU Bulletin

Division of Credit Unions
Washington State Department of Financial Institutions
Phone:  (360) 902-8701 FAX:  (360) 704-6901

November 09, 2001
No. B-01-20

Division Announces Meetings To Discuss
Field of Membership Rules

As you know, the Division of Credit Unions has begun the rule-making process to update and streamline its field of membership (FOM) rules.  The Division has decided to conduct three meetings with credit unions around the state to gather input regarding the Division’s FOM rules.  We will distribute a preliminary draft of the FOM rule changes prior to the meetings.

The meetings are scheduled as follows:

Tuesday, November 27, 2001 at 10:00 a.m. in Spokane, at Numerica Credit Union, 4217 E. Main.

Wednesday, November 28, 2001 at 10:00 a.m. at Federal Way, at the Washington Credit Union League, 33320 - 9th Avenue So.

Tuesday, December 4, 2001 at 1:00 p.m. in Yakima, at Catholic Credit Union, 110 North Fifth Avenue.

After the meetings, the Division will file a CR-102 form to publish proposed FOM rules and to schedule a formal hearing on the proposal.  The CR-102 will be distributed to all state credit unions.

Please RSVP to Tina Philippsen at the Division by phone (360) 902-8718 or e-mail tphilippsen@dfi.wa.gov by November 21, 2001. Indicate which session and the number of people from your credit union who plan to attend.


DCU Bulletin

Division of Credit Unions
Washington State Department of Financial Institutions
Phone:  (360) 902-8701  FAX:  (360) 704-6901

November 16, 2001
No. B-01-21

Division Distributes Information For
Field of Membership Meetings

As a follow-up to the most recent Bulletin, the Division is sending the attached information sheet for its upcoming meetings on field of membership (FOM).

As a reminder, the meetings are scheduled as follows:

If you have not already done so, please RSVP to Tina Philippsen at the Division by phone (360) 902-8718 or e-mail tphilippsen@dfi.wa.gov by November 21, 2001.  Please indicate:

  1. How many people from your credit union and which session they plan to attend.
  2. If you would like us to send you a preliminary draft of the FOM rule changes prior to the meeting.

Information for FOM Meetings
With the Division of Credit Unions

Nov./Dec. 2001

Rationale for changes under consideration

  1. The NCUA has streamlined its process for federal credit unions to add occupational groups under 500 persons, allowing on-line application with near immediate approval, without regard to overlaps.
  2. The NCUA has approved the addition of communities in excess of 1 million persons.
  3. Regulatory protection against overlaps is virtually gone.
  4. The Division approves almost 100% of FOM applications from CAMEL 1s and 2s, typically within 30 days.
  5. The Division believes that the addition of groups that clearly constitute FOM groups should be a business decision for the Board of Directors of CAMEL 1s and 2s, without requirement for application to the Division.
  6. The Division needs to seek out more efficiency in its operation, and focus on its core function – examinations.

Significant points of changes under consideration

  1. CAMEL 1s and 2s would be able to add “qualified” FOM groups with Board approval, without application to the Division.
  2. A qualified occupational or associational group is:
  1. Up to 6,299 persons, or
  2. 6,300 or more if the group is included in the FOM of another credit union.
  1. A qualified community is a school district; city; or rural county (less than 75 persons per square mile).
  2. CAMEL 1s and 2s would not be able to add “non-qualified” groups without Division approval.
  3. CAMEL 3s, 4s and 5s would not be able to add FOM groups without Division approval, except for small occupational groups (SOGs) under a previously-approved SOG enabling amendment.  No new SOG enabling amendments would be approved.
  4. The 75,000 population limit on communities would be eliminated.
  5. Overlap protection would be eliminated.  The prohibition on a credit union’s direct marketing to occupational groups in its communities would be eliminated.
  6. The Division’s requirements on the content of applications would be significantly reduced.
  7. CUs would be required to keep their FOM Bylaws in Model form, and to convert to the Model form by June 30, 2002.

DCU Bulletin

Division of Credit Unions
Washington State Department of Financial Institutions
Phone:  (360) 902-8701   FAX:  (360) 704-6901

December 3, 2001
No. B-01-22

Summary of Federal Requirements and Requests
 Relating to Recent Terrorist Attacks; 
Reporting Required to DCU by January 15, 2002

In response to the recent terrorist attacks, various federal agencies have issued new regulatory requirements and requests.  We have summarized below these issuances in order to assist credit unions in understanding and complying with them.

Updates to OFAC List

The federal Office of Foreign Assets Control (OFAC) has long had a Specially Designated Nationals and Blocked Persons List (SDN List).  New names have been added to the SDN List since September 11, 2001.  As you know, credit unions are required to block assets held by the individuals and entities on the SDN List and give immediate notice to the OFAC.  When assets are blocked, there are annual reporting requirements and record retention requirements.  See NCUA Regulatory Alerts 01-RA-10 and 01-RA-12.  These are mandatory requirements.

Resources:

We expect that the SDN List will be updated frequently, at least for the near term.  Under federal law, credit unions and persons that fail to block or report as required are subject to severe financial penalties and imprisonment.

Credit unions should be aware that OFAC requirements apply to all transactions that a credit union might undertake including: safe deposit boxes, ACH, and wire transfers as well as loan payments and deposit accounts.

Insurance does not apply to fines

There are substantial fines or prison penalties that may be imposed upon individuals and credit unions for failure to comply with the OFAC requirements.  This is an exposure where loss control and compliance is the only option.  One insurance company recently sent a “Scam Alert” on this topic, which stated, in part:

“We do not offer insurance protection for liability related to outgoing funds to people or organizations on the prohibited list by the Office of Foreign Assets Control for monetary transactions.  We do not insure the fines and penalties that could be assessed against the credit union.  It is considered by many states to be against public policy to insure such an exposure.  Fines and penalties are intended to serve as a deterrent to businesses from doing wrong.  Also, there is no coverage for the possible forfeiture of funds and property involved in the transaction.  These are not insurable exposures.”

Law enforcement requests for information on terrorists

a.   FBI list of alleged subjects under investigation.

The FBI has requested that financial institutions, including credit unions, check their records for, and report to the FBI, any relationships or transactions with certain named individuals allegedly involved in the September 11th attacks.  See NCUA Letter 01-CU-15.  Although the FBI’s request is not mandatory, the Division strongly encourages credit unions to comply with the FBI request.

Credit unions having any relationships or transactions with these individuals should also file a Suspicious Activity Report (SAR) in accordance with NCUA rules at 12 C.F.R. Section 748.1(c).

Resources:

b.   Joint Agency Request for Information Pertaining to the Terrorist Attacks.

The federal banking agencies, including the NCUA, have issued a letter requesting financial institutions to cooperate with U.S. law enforcement authorities in providing information pertaining to the terrorist attacks.  See NCUA Letter 01-CU-18.  Law enforcement will from time to time provide a Control List of entities and individuals to institutions, including credit unions.  Credit unions should check their records to determine if they have had any relationships or transactions with the entities or individuals on the list, and report as requested.

The NCUA has requested that each credit union notify it of a senior-level employee to receive the Control Lists who appreciates the sensitive nature of the task.  This can be done by submitting the contact information by faxing a contact information sheet to (703) 519-4080.

Although the Joint Agency Request is not mandatory, the Division strongly encourages credit unions to comply with the Request.

In addition, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has established a Financial Institutions Hotline for institutions to voluntarily report to law enforcement authorities suspicious transactions that may relate to the recent terrorist activity.  See NCUA Regulatory Alert 01-RA-10.

Resources:

Compliance Tips

If you have not already done so:

  1. The board of directors of each credit union should adopt appropriate policies on carrying out these responsibilities and designate a senior-level individual(s) to be responsible for compliance in these areas.
  2. The designated individual should monitor the lists frequently for changes.
  3. The credit union should maintain the necessary software (or other methods) to do adequate record checks, and maintain appropriate blocking and reporting processes.

Division of Credit Unions Monitoring

The Division of Credit Unions will be monitoring credit union compliance with these requirements and requests during regular safety and soundness exams.  Since that effort will take as much as 18 months before we visit all credit unions, we are also requesting that credit unions complete the attached questionnaire and fax or sent it back to the Division by January 15, 2002.  Should you have any questions about the questionnaire please call Doug Lacy-Roberts at (360) 902-0507 or Mike Delimont at (360) 902-8790.

Report to Division of Credit Unions

COMPLIANCE WITH FEDERAL REQUIREMENTS AND REQUESTS

RELATING TO RECENT TERRORIST ATTACKS

___________________ Credit Union

DIRECTIONS:  Complete this report and fax it to 360 704-6901 before January 15, 2002.  Attach additional sheets as necessary.

Resources:

Has your Board of Directors approved a policy to ensure compliance with applicable federal requirements and requests relating to the recent terrorist attacks? Has your Board of Directors assigned responsibility for compliance to a specific senior officer and has that individual been identified to NCUA to receive the Control Lists provided by the FBI?

  1. a) If yes, provide the name and phone number of that officer.

How frequently does your credit union check for revised listings with the Office of Foreign Assets Control (OFAC)?

Since September 11, 2001, have any OFAC listed transactions or accounts been identified that require blocking or rejecting?

  1. If yes, has OFAC been notified within the appropriate 10 days?
  2. If yes, is your credit union in compliance with the annual reporting (due September 30 for accounts or activity blocked as of June 30 each year) and record keeping requirements (five year retention)?

Since September 11, 2001, has your credit union checked your records for, and reported to the FBI, any relationships or transactions with certain named individuals on the FBI’s Control Lists?

If any such relationships or transactions were identified, has a Suspicious Activity Report been filed?

Are procedures in place to review your records from time to time for activity or accounts possibly associated with individuals or entities on the Control Lists?

Briefly describe the process or procedures your credit union has or will adopt to ensure that each provider of software or services has adopted adequate measures to ensure that your credit union will remain in compliance with these federal requirements.

I hereby certify the above information is complete and accurate to the best of my knowledge.

_____________________________             ____________________
CEO, President, or Manager                                                                  Date

 


DCU Bulletin

Division of Credit Unions
Washington State Department of Financial Institutions
Phone:  (360) 902-8701  FAX:  (360) 704-6901

December 18, 2001
No. B-01-23

Division Schedules Hearing on
Proposed Revisions to Field of Membership Rules;
Comments Invited

The Division recently filed a CR-102 form to publish its proposed revisions to its field of membership rules and to schedule a hearing on the proposal.  Enclosed is a copy of the CR-102 and the text of the proposed rule. 

Hearing time and location

The hearing on the proposed rule will be held on January 23, 2002, beginning at 1:00 p.m., at the WestCoast Olympia Hotel located at 2300 Evergreen Park Dr. S.W, Olympia, WA.  Please contact Diane Moye at the Division, at (360) 902-8791, if you would like a map to the hearing site.

Comments on the proposed rule

We are interested in your comments on all aspects of the proposed rule.  In particular, though, we are interested in your views on the direct/targeted marketing restriction in the proposal (see WAC 208-472-030):

We are also interested in your comments in response to the seven questions posed in Executive Order 97-02, listed on the following page.

Persons wishing to comment on the proposed rule may present their comments at the hearing or submit their comments in writing prior to the close of business on January 23, 2002.

Please submit your comments to:

Parker Cann
Director of Credit Unions
Division of Credit Unions
PO Box 41200
Olympia, WA 98504-1200

Phone: (360) 902-8778
Fax: (360) 704-6978
E-mail:  pcann@dfi.wa.gov

 

Questions under Executive Order 97-02

  1. Need.  Is the proposed rule necessary to comply with the statutes that authorize it? Is the rule obsolete, duplicative, or ambiguous to a degree that warrants repeal or revision? Have laws or other circumstances changed so that the rule should be amended or repealed? Is the rule necessary to protect or safeguard the health, welfare, or safety of Washington's citizens?
  2. Effectiveness and Efficiency. Is the proposed rule providing the results that it was originally designed to achieve in a reasonable manner? Are there regulatory alternatives or new technologies that could more effectively or efficiently achieve the same objectives?
  3. Clarity. Is the proposed rule written and organized in a clear and concise manner so that it can be readily understood by those to whom it applies?
  4. Intent and Statutory Authority. Is the proposed rule consistent with the legislative intent of the statutes that authorize it? Is the rule based upon sufficient statutory authority? Is there a need to develop a more specific legislative authorization in order to protect the health, safety, and welfare of Washington's citizens?
  5. Coordination. Could additional consultation and coordination with other governmental jurisdictions and state agencies with similar regulatory authority eliminate or reduce duplication and inconsistency?
  6. Cost. Have qualitative and quantitative benefits of the proposed rule been considered in relation to its cost?
  7. Fairness. Does the proposed rule result in equitable treatment of those required to comply with it? Should it be modified to eliminate or minimize any disproportionate impacts on the regulated community? Should it be strengthened to provide additional protection?

Chapter 208-472 WAC

CREDIT UNION FIELD OF MEMBERSHIP ((EXPANSION))

AMENDATORY SECTION (Amending WSR 96-06-011, filed 2/23/96, effective 6/1/96)

WAC 208-472-010  ((Purpose.)) Authority.  ((This chapter is adopted by the director for the purpose of establishing the application process for a credit union to include in its field of membership a separate group:

  1. With a common bond of occupation or association; or
  2. That constitutes a community.)) A credit union may admit to membership those persons qualified for membership who are within its field of membership as stated in its bylaws.  RCW 31.12.382.  A credit union may amend its field of membership bylaws to add one or more occupational groups, associational groups and communities to its field of membership, as approved by the director pursuant to this chapter.  The FOM groups may be located inside or outside the state.

Once a person becomes a member of a credit union, the person may continue to be a member even though the person is no longer within the field of membership of the credit union, subject to the credit union's right to terminate the person's membership in accordance with law.

In addition to the field of membership powers or authorities reflected in this chapter, a credit union has the field of membership powers and authorities granted pursuant to RCW 31.12.404.

AMENDATORY SECTION (Amending WSR 96-17-070, filed 8/20/96, effective 9/20/96)

WAC 208-472-015  Definitions.  Unless the context clearly requires otherwise, as used in this chapter:

  1. "Affiliate" of an enterprise or organization means a person that controls, is controlled by, or is under common control with, the enterprise or organization.  "Control" means twenty-five percent or greater stock ownership.
  2. (("Common bond of association" means a current, unifying factor among a group of natural persons, that is based on membership in a bona fide organization whose primary purpose is other than providing eligibility for credit union services.  Such an organization must be primarily composed of natural persons who are eligible to participate in the organization's activities.  Such an organization also must have clearly defined membership eligibility and must hold regular meetings at least once each year. Matriculating students of an accredited college or university, who are members of an identified organization, other than general members of the applicant's credit union, are deemed to have a common bond of association.  The organization need not satisfy the requirements set forth in the prior paragraph.
  3. "Common bond of occupation" means a current, unifying factor among a group of natural persons that is based on employment by or a work-related relationship with an enterprise.  The group may include only the following categories of persons:
  1. Employees of the enterprise, and their family members;
  2. Employees of any subsidiaries of the enterprise, and their family members;
  3. Employees of the affiliates of the enterprise, and their family members;
  4. Nonemployee officials of the enterprise, and their family members; and
  5. Natural persons under contract to work regularly for the enterprise, and their family members.

Each of these categories may be included if they are separately identified in the credit union's bylaws.

  1. "Community" means a current unifying factor among a group of natural persons, that is based on residence or employment within a well-defined and relatively limited geographic area, with a relatively limited population, that is recognized by those who live or work there as a neighborhood, community, or rural district. For example, the city of Seattle and King County do not constitute a community for this purpose, because they do not have a relatively limited population.  On the other hand, the city of Chelan and Chelan school district are within a well-defined and relatively limited geographic area, with a relatively limited population, and may constitute a community if they are recognized by those who live or work there as a neighborhood, community or rural district.  (These examples are based on circumstances existing on December 1, 1994.)
  2. )) "Associational group" is a group with a common bond of association related to membership in an organization.  The organization must satisfy each of the following criteria:
  1. The organization's primary purpose must be other than providing eligibility for credit union services;
  2. The organization's membership must be primarily composed of natural persons; and
  3. The organization's organizational documents must clearly define membership eligibility.

In regard to an associational group within a credit union's FOM, the credit union may admit to membership:

  1. Members of the organization;
  2. Directors, employees, volunteers and retirees of the organization, and its subsidiaries and affiliates;
  3. Natural persons under contract to work for the organization and its subsidiaries and affiliates;
  4. Family members (as determined by the credit union) of any of the above-described natural persons;
  5. The spouse of any of the above-described natural persons who qualified for membership at the time of his or her death;
  6. The organization and its subsidiaries and affiliates;
  7. Organizations or enterprises more than half of whose owners, members or employees are eligible to be members of the credit union; and
  8. Other persons approved by the director.

Students of a school, college or university are deemed to be members of an organization that constitutes an associational group.  In regard to such an associational group within a credit union's FOM, the credit union may admit to membership the students of the school, college or university as well as the family members (as determined by the credit union) of the students.

  1. "CAMEL" means the CAMEL rating system used by the division, or a successor rating system used by the division.
  2. "Community" is a well-defined geographic area that is recognized by those who live or work there as a neighborhood, community, or rural district.

In regard to a community within a credit union's FOM, the credit union may admit to membership:

  1. Natural persons who live, work, worship or go to school in the community;
  2. Enterprises or organizations that have offices within the community;
  3. Directors, employees, volunteers and retirees of the above-described enterprises or organizations;
  4. Family members (as determined by the credit union) of any of the above-described natural persons;
  5. The spouse of any of the above-described natural persons who qualified for membership at the time of his or her death;
  6. Enterprises or organizations more than half of whose owners, members or employees are eligible to be members of the credit union; and
  7. Other persons approved by the director.
  1.  "Credit union" means a credit union organized (or chartered) and operating under chapter 31.12 RCW, and an out-of-state or foreign credit union operating in this state in accordance with RCW 31.12.471.
  2. "Director" means the director of ((the Washington state department of)) financial institutions.
  3. (("Number of potential members" means the sum of:
  1. The number of actual members of the applicant credit union; and
  2. The number of employees or members (as appropriate) of the group applied for.
  1. "Required number" means:
  1. If the number of employees or members (as appropriate) of the specified group is two thousand one or more, the required number is at least five percent of the number of these individuals (rounded up to the nearest whole number).
  2. If the number of employees or members (as appropriate) of the specified group is from three hundred thirty to two thousand, the required number is at least one hundred of these individuals.
  3. If the number of employees or members (as appropriate) of the specified group is three hundred twenty-nine or less, the required number is at least thirty percent of the number of these individuals (rounded up to the nearest whole number).)) "Division" means the division of credit unions of the Washington state department of financial institutions.
  1. "FOM" means field of membership.
  2. "FOM groups" includes occupational groups, associational groups and communities.
  3. A group is "included in the FOM bylaws" of a credit union if the underlying enterprise or organization is named expressly in the credit union's FOM bylaws.
  4. "Occupational group" is a group with a common bond of occupation related to employment by, or work for, an enterprise. The group must be primarily composed of natural persons.

In regard to an occupational group within a credit union's FOM, the credit union may admit to membership:

  1. Employees of the enterprise;
  2. Directors, employees, volunteers and retirees of the enterprise, and its subsidiaries and affiliates;
  3. Natural persons under contract to work for the enterprise and its subsidiaries and affiliates;
  4. Family members (as determined by the credit union) of any of the above-described natural persons;
  5. The spouse of any of the above-described natural persons who qualified for membership at the time of his or her death;
  6. The enterprise and its subsidiaries and affiliates;
  7. Enterprises and organizations more than half of whose owners, members or employees are eligible to be members of the credit union; and
  8. Other persons approved by the director.
  1. "Primarily" or "primary" means more than one-half.
  2. "Qualified associational group" means an associational group located wholly or partly within Washington state.  However, if the members of the organization exceed 6,299, the group will not be considered qualified unless the group is included in the FOM bylaws of another credit union or federal credit union.
    An associational group that does not satisfy this definition is considered to be a nonqualified associational group.
  3. "Qualified community" means a geographic area within Washington state that constitutes a:
  1. School district;
  2. City; or
  3. County with a population of no more than 75 people per square mile.

A community that does not satisfy this definition is considered to be a nonqualified community.

  1. "Qualified occupational group" means an occupational group located wholly or partly within Washington state.  However, if the members of the enterprise exceed 6,299, the group will not be considered qualified unless it is included in the FOM bylaws of another credit union or federal credit union.
    An occupational group that does not satisfy this definition is considered to be a nonqualified occupational group.
  2. "SOG" means a small occupational group added pursuant to a SOG enabling amendment.
  3. "SOG enabling amendment" means a SOG enabling amendment approved by the director pursuant to former WAC 208-472-041.

AMENDATORY SECTION (Amending WSR 96-17-071, filed 8/20/96, effective 9/20/96)

WAC 208-472-020  ((Inclusion of a group with a common bond of occupation.)) Addition of FOM groups.  ((Except as permitted by WAC 208-472-041, if a credit union wants to include a separate group with a common bond of occupation in its field of membership, it must make application to the director to amend its bylaws in accordance with RCW 31.12.115.  The application must be submitted to the director in duplicate and must include the information as required by WAC 208-472-025.))

  1. General.  Each credit union will keep its FOM bylaws substantially in the form of the model FOM bylaws prescribed by the division.  Credit unions that have not converted to the model FOM bylaws prior to  . . . . . . . . (the effective date of the 2002 revisions to this chapter) will do so by June 30, 2002.  Each credit union must maintain accurate, up-to-date FOM bylaws and must restate its entire FOM bylaws after each FOM group is added, and indicate the date of restatement on each set of restated bylaws.
  2. CAMEL 1s and 2s.

A credit union rated a composite CAMEL 1 or 2 by the division:

  1. May add qualified occupational groups, qualified associational groups and qualified communities to its field of membership bylaws upon approval of its board of directors.  Before the board approves the amendment, the credit union must mail or otherwise provide notice of the addition to each credit union and federal credit union headquartered in the county in which the FOM group is primarily located.  The credit union must include in its bylaws the name of the specific enterprise, organization or community, and the date that the board approved the amendment.  Additions made in accordance with this subsection (2)(a) are deemed approved by the director; and
  2. May not add nonqualified occupational and associational groups and nonqualified communities to its field of membership bylaws without the prior approval of its board of directors and the prior written approval of the director under WAC 208-472-025.
  1. CAMEL 3s, 4s and 5s.  A credit union rated a composite CAMEL 3, 4 or 5 by the division may not add the following FOM groups to its field of membership bylaws without the prior approval of its board of directors and the prior written approval of the director under WAC 208-472-025:
  1. Occupational groups, except for SOGs;
  2. Associational groups; and
  3. Communities.

In general, the director will not approve:

  1. The addition of a community to a credit union's bylaws if the credit union is rated a composite CAMEL 3 by the division; or
  2. The addition of an occupational or associational group or a community to a credit union's bylaws if the credit union is rated a composite CAMEL 4 or 5 by the division.
  1. Other changes.  A credit union may, upon approval of its board of directors, amend its FOM bylaws to:
  2. Delete exclusionary clauses;
  3. Delete FOM groups that no longer exist;
  4. Delete its SOG enabling amendment;
  5. Revise its SOG enabling amendment to delete the five SOG requirements other than the limitation on the number of employees, which is now 500;
  6. Aggregate communities into a larger community.  For example, if a credit union has added each of the school districts within a county as communities, it may amend its FOM bylaws to designate the county as a community rather than listing each of the school districts as a community; and
  7. Make nonsubstantive changes.

The board may delegate the authority to delete FOM groups that no longer exist.

In amending its FOM bylaws under this subsection (4), other than deletions, the credit union must indicate in its bylaws the date that the board approved the amendment.

AMENDATORY SECTION (Amending WSR 96-17-071, filed 8/20/96, effective 9/20/96)

WAC 208-472-025  ((Application to include a separate occupational group.)) Addition of FOM groups‑-Approval of director.

  1. ((The application to include a separate group with a common bond of occupation must include at least the following information:
  1. The name of the applicant credit union;
  2. Evidence that the applicant's board of directors has complied with the notice and voting requirements of RCW 31.12.115;
  3. A description of the enterprise including its name, number of employees, and the geographic location of those employees.  The categories of persons specified in WAC 208-472-015(2) that are included in the group must be separately identified;
  4. A statement from an officer of the enterprise:
  1. That the enterprise desires membership for its employees in the applicant; and
  2. Whether its employees are currently eligible for membership, based upon such employment, in another state or federally chartered credit union.  If the employees of the enterprise are eligible for membership in another credit union based upon such employment, the applicant must make best efforts to provide a statement of non­ob­jec­tion from the other credit union.
  1. In addition, the application must also include the following information if applicable:
  1. If the number of potential members of the applicant exceeds one hundred twenty percent of the number of its actual members, then the following information must also be submitted:
  1. A copy of the applicant's most recent monthly financial statement;
  2. A copy of the applicant's plan or other document demonstrating its ability and intent to provide service to the new group and specific plans relating anticipated growth to capital levels.
  1. If the number of employees of the enterprise exceeds five hundred, then the following must also be submitted:
  1. An analysis whether the group has sufficient size and resources to form a credit union of its own;
  2. Documentation concerning compliance with plans on penetration and service submitted with previously approved applications for inclusion of a group in the applicant's field of membership;
  3. Documentation that the applicant has given written notice to all other credit unions headquartered in this state, both state and federally chartered, that have a staffed office in any county in which the offices of the enterprise are located.  Credit unions entitled to receive the notice will be given twenty days following receipt of the notice to submit to the department any comments on the application.
  1. If the applicant cannot obtain the letter of non­ob­jec­tion described in subsection (1)(d) of this section, after having made a best efforts attempt to do so, it must submit documentation that:
  1. The required number of employees of the enterprise desire membership in the applicant; or
  2. The other credit union has failed to adequately serve the group after a reasonable period of time, and how the applicant plans to improve this service.

The applicant must supply a copy of the information required in (a) and (b) of this subsection to the other credit union, which will be given sixty days following receipt of such information to submit to the department any comments on the overlap.

This subsection (3) does not apply to overlaps arising out of merger-type transactions between enterprises.)) In order to request the approval of the director to add an FOM group to its bylaws under WAC 208-472-020 (2)(b) or (3), a credit union must submit a written application in duplicate to the director.  The application must include the following items, and other information and materials requested by the director:

  1. The name of the FOM group that the applicant desires to add to its bylaws;
  2. A copy of the resolution of its board of directors approving the bylaws amendment, certified by the board chairperson or secretary;
  3. A detailed description of the FOM group, including location and number of employees, members or residents, as appropriate, with supporting documentation;
  4. An explanation how the FOM group satisfies the definition of such a group in WAC 208-472-015;
  5. If the applicant is applying to add an associational group, an explanation of the qualifications for membership in the organization, and a copy of the organization's organizational documents;
  6. An explanation how the addition of the FOM group will affect the financial condition of the applicant.  In addition, if the applicant is applying for a community, three year pro forma income statements and balance sheets and key ratios (including ROAA, net worth, asset growth and share growth);
  7. If the applicant is applying to add a nonqualified occupational or associational group in excess of 6,299 employees or members, as applicable, a reasoned justification why the group does not have sufficient size or resources, including individual and sponsor support, and financial, physical and human resources, to support a viable credit union of its own; and
  8. A statement that the applicant has provided notice of the application by mail or otherwise to each credit union and federal credit union headquartered in the county in which the FOM group is primarily located.

The director may waive any of the items in this subsection as the director deems appropriate, such as in the case of the addition of FOM groups located wholly out-of-state.

  1. An application filed pursuant to subsection (1) of this section is deemed complete when the director has received all of the information required by subsection (1) of this section.  If an incomplete application is received, the director will give written notice to the applicant no more than thirty days from the date the original application was received that additional information is necessary.  The applicant will be allowed thirty days after receipt of the notice to provide the requested information, or the director will return the application and it will be deemed withdrawn.
  2. The director shall give the applicant written notice of approval or denial within thirty days after the application is deemed complete.  The director's determination whether to approve an application will be based on consideration of the safety and soundness of the applicant and the applicant's compliance with this chapter.
  3. To add a separate FOM group located wholly out-of-state to its field of membership bylaws, a credit union should first contact the director to determine how to proceed with the application to the director and whether the credit union is required to file an application or notice with the credit union supervisory authority in the other state

NEW SECTION

WAC 208-472-030  Direct marketing.  A credit union may not conduct direct marketing targeted primarily at the persons in an occupational or associational group unless:

  1. The group was included in the FOM bylaws of the credit union prior to  . . . . . . . . (the effective date of the 2002 revisions to this chapter); or
  2. A management official of the underlying enterprise or organization has provided the credit union with a written statement, signed by the official, that the group desires service by the credit union.

NEW SECTION

WAC 208-472-035Application.  

  1. This chapter also applies to the conversion of an out-of-state, foreign or federal credit union to a credit union chartered and operating under chapter 31.12 RCW.
  2. This chapter does not apply to mergers where the continuing credit union is organized (or chartered) and operating under chapter 31.12 RCW.  The continuing credit union may amend its FOM bylaws to add the FOM groups of the merging credit union.
  3. This chapter does not restrict FOM groups added to a credit union's bylaws prior to  . . . . . . . . (the effective date of the 2002 revisions to this chapter).

REPEALER

The following sections of the Washington Administrative Code are repealed:

WAC 208-472-012      General requirement.

WAC 208-472-041      Streamlined procedure for small occupational groups.

WAC 208-472-045      Inclusion of a group with a common bond of association.

WAC 208-472-050      Application to include a separate associational group.

WAC 208-472-060      Inclusion of a community group.

WAC 208-472-065      Application to include a separate community group.

WAC 208-472-070      Application deemed complete.

WAC 208-472-075      Approval of application.

WAC 208-472-080      Special circumstances.


DCU Bulletin

Division of Credit Unions
Washington State Department of Financial Institutions
Phone:  (360) 902-8701  FAX:  (360) 704-6901

December 26, 2001
No. B-01-24

Correction to Bulletin Concerning Hearing Time on
Proposed Revisions to Field of Membership Rules

The Division recently mailed out Bulletin No. B-01-22.  In part, the Bulletin addressed the Division’s hearing on the proposed revisions to its field of membership (FOM) rules.

Hearing time and location

The hearing time was incorrectly stated in the Bulletin.  The hearing on the proposed rule will be held on January 23, 2002, beginning at 11:30 a.m., at the WestCoast Olympia Hotel located at 2300 Evergreen Park Dr. S.W, Olympia, WA.

Information on the proposed rule

Please refer to Bulletin No. B-01-22 for further information and attachments pertinent to the proposed FOM rule revisions.  If you have any questions regarding Bulletin No. B-01-22 or this Bulletin, please contact Tina Philippsen at (360) 902-8718 or e-mail at tphilippsen@dfi.wa.gov.


 

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