Network Credit Unions

Dear Mr. McNichols:

You have asked if it is legally permissible for multiple-group federal credit unions (FCUs) to merge with each other with the following conditions present:

1. The “merged” (non-surviving) credit union would become part of and subsumed by the “continuing” (surviving) credit union, but the merged credit union would continue to operate and serve its former members under the name of “merged credit union’s name, a division of continuing credit union”;
2. The continuing credit union would appoint an advisory committee comprised of officials of the merged credit union to serve in an advisory role; and
3. The continuing credit union would reserve one seat on its nominating committee for a representative of the merged credit union. 

We believe the above proposed structure is permissible under the Federal Credit Union Act (“Act”), NCUA’s Chartering and Field of Membership Manual, NCUA’s Letters to Credit Unions, and Office of General Counsel Legal Opinion Letters. 

Discussion

1. Use of merged FCU’s name.  NCUA permits credit unions to operate using more than one name, and explicitly allows identifying a portion of a credit union as a “branch, unit, or division” of the same credit union.¹  A credit union operating under more than one name must ensure its members understand they are dealing with one credit union rather than different credit unions.²  
    
2. Merged FCU officials as advisory committee.  The Act permits an FCU’s board to appoint committees as necessary to perform specific functions.³  Accordingly, the board of the continuing FCU could appoint officials of the merged FCU as an advisory committee.  
    
3. Merged FCU representative on nominating committee.  Nothing in the Act, NCUA’s regulations, or the FCU Bylaws prohibits an FCU’s board from adopting a policy related to the composition of the nominating committee.  Previous OGC legal opinions affirm an FCU’s right to establish policies and criteria for the nominating committee.⁴   It is our view that this right also includes the right to adopt a policy regarding the composition of the nominating committee.  

Please contact Associate General Counsel Frank Kressman if you have any further questions.