On April 7, the NCUA announced a proposed rule to amend its chartering and field of membership regulations under Appendix B to 12 CFR 701, as part of its ongoing “Deregulation Project” (previously covered by InfoBytes here). The proposed rule would remove the automatic disqualification of associational groups that require the purchase of a product or service as a condition of membership. Under current rules, such a requirement can indicate a client-customer relationship, which automatically disqualifies the group from serving as a recognized association for field of membership purposes. The NCUA stated it does not believe such an automatic bar is required under the Federal Credit Union Act and that a client-customer relationship as a condition of membership may still be incidental in a manner that permits evaluation of the group’s activities and overall circumstances.

Under the proposal, the NCUA would instead apply a “totality-of-the-circumstances” standard. This approach would involve assessing various factors including the group’s structure, the scope and degree of its activities, and other operational factors to determine whether a client-customer relationship is “primarily or incidentally” related to the group’s common bond. Under this approach, groups would remain eligible so long as any such relationship is incidental to the association’s primary purpose and activities. The NPRM asserts that the amendments would provide relief to single associational groups and multiple common bond federal credit unions of all sizes seeking to include associations that may have some client-customer component. Comments on the proposal are due by June 8.