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Emergency Mergers and Hybrid Common Bonds "Credit News 24"

The Federal Credit Union Act recognizes three types of federal credit union charters — single common bond, multiple common bond, and community. The only exception is that a multiple common bond federal credit union may also serve an underserved area.

However, under National Credit Union Administration's emergency merger authority, two credit unions with dissimilar charter types may be merged.

An emergency merger occurs when the credit union to be merged is either insolvent or in danger of becoming insolvent.

The field of membership of the merging credit union may be transferred intact to the continuing federal credit union without regard to any common bond restrictions.

In addition, the National Credit Union Administration's Chartering and Field of Membership Manual maintains that the common bond characteristic of the continuing credit union in an emergency merger does not change.

According to a National Credit Union Administration spokesperson, there were 3 emergency mergers approved during 2015 and 5 during the first 11 months of 2017

Examples of emergency mergers with dissimilar field of membership include:

• Navy Federal Credit Union (single common bond) with United Services of America (USA) Federal Credit Union (multiple common bond);
• Bethpage Federal Credit Union (community common bond) with Montauk Credit Union (open field of membership); and
• Michigan State University Federal Credit Union (multiple common bond) with Clarkston Brandon Community Credit Union (community common bond).

Moreover, America First Federal Credit Union used its emergency merger with Intermountain Credit Union to switch charter type from a community to a multiple common bond and still retain Salt Lake County in its field of membership, as Salt Lake County was part of Intermountain's field of membership.

Hybrid charters are not permitted under the Federal Credit Union Act. Policymakers need to revisit National Credit Union Administration's emergency merger policy as it permits hybrid charter types.


Title : Emergency Mergers and Hybrid Common Bonds "Credit News 24"
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