During early financial system development, the common bond of association substituted for collateral. Today, the common bond is an important part of microfinance for poor people. The term commonly refers to the social connection among members. In addition, the common bond can be a legal entity such as a corporation. Applicants for a federal credit union charter must demonstrate sufficient membership support to establish a common bond.
The field of membership is defined in Section 5 of the charter. It defines the eligible members and eligible industries. Federal credit unions can serve a single industry or profession or they can limit their field of membership to a geographic area. Credit unions can serve subsidiaries after obtaining NCUA approval. They can also serve employees of a corporation or a subsidiary, provided they meet the criteria of a common bond TIP. Credit unions can serve U.S. military personnel, students, and employees of multi-industry companies. However, employees of an energy company or a manufacturing company are not eligible for membership in common bond TIPs.
Credit unions serving well-defined, rural districts are subject to the requirements of Section II.B of Occupational Common Bond Amendments. However, the boundaries of a well-defined rural district must not exceed the outer boundaries of the states immediately contiguous to the headquarters state. The boundaries may be used to set a benchmark concentration ratio. The credit union’s charter must also include a geographic limitation. Changing the geographic limitation will be processed as a housekeeping amendment.
Credit unions that serve a geographic area must notify members of the area affected by the conversion. The credit union may continue to serve the same area, or it may serve new areas. When a credit union converts from federal to state charter, it may continue to serve existing groups or communities obtained in an emergency merger. However, if the conversion is a multiple common bond credit union, the federal credit union will not serve new groups. In order to serve a new group, the federal credit union must amend its field of membership.
Federal credit unions may remove groups from the field of membership by agreement or by spin-off. They can also limit the field of membership to a single association or industry. Credit unions may also amend the field of membership when a select group undergoes a substantial restructuring. If the group is an occupational common bond, the credit union must demonstrate that the field of membership is narrowly defined. If the group is an associational common bond, it must show a commonality of interests. Credit unions may serve students or organizations promoting educational initiatives. However, if the group is a support group, it must show that the members are permanently committed to the group. It is not acceptable to serve honorary members.
The Office of Credit Union Resources and Expansion randomly selects groups for quality assurance reviews. Applicants for a single associational common bond credit union must provide a copy of the group’s charter and bylaws. Applicants for a multiple common bond credit union must provide the most recent charter and bylaws of the group. If the group has been a member of an existing credit union, the FCU can perform a membership survey. In addition, a credit union may perform a loan survey to determine if it serves members of a low-income group. If a group does not meet the criteria of a single associational common bond, the credit union may apply for a single occupational common bond charter.