• Document: Federal Credit Union Handbook
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Federal Credit Union Handbook National Credit Union Administration National Credit Union Administration Federal Credit Union Handbook Prepared by the Office of Examination and Insurance NCUA-8055 (Rev 2006) M-4035 1 This page intentionally left blank Table of Contents Foreword 4 Preface 5 Part I Federal Credit Unions 7 Part II Organizational Structure and Control 13 Part III Member Services 21 Part IV Operational Requirements 27 Part V Management 31 Part VI NCUA Funds and Programs 45 Part VII Other Laws Affecting Federal Credit Unions 49 Part VIII Conflict of Interest 61 Part IX Other Procedures and Supplemental Information 65 3 Foreword The Federal Credit Union Handbook was created to assist the board of directors in conducting the credit union’s affairs. The Handbook covers a wide range of subjects and is intended as a general refer- ence. However, the contents should prove useful to credit union offi- cials and employees in carrying out their duties and responsibilities. We encourage credit union officials to become familiar with other Na- tional Credit Union Administration publications, laws, and regulations. 4 Preface In the early twentieth century, credit needs of the urban working classes in the United States were largely neglected by established financial institutions. For the most part, the average worker had no- where to turn except to the usurious money lenders of the day. This growing dependency complicated the economic life of the average consumer and gave rise to the development and formation of a coop- erative credit system in the United States, an idea originating in Eu- rope and imported to North America in 1900. In 1908, the first legally chartered cooperative credit society was established in Manchester, New Hampshire by a special act of the state’s legislature. The follow- ing year, the first complete credit union act, the Massachusetts Credit Union Act, became law in Massachusetts. By 1933, enactment of state laws permitting formation of credit unions had been largely ac- complished. In 1934, the Federal Credit Union Act was signed into law, giving further impetus to the movement. The post World War II era gave rise to an enormous appetite for consumer goods and an attendant need for consumer credit. Credit unions met this need to an increasing extent and expanded rapidly. The credit union system became a recognized social and economic force in the United States. By the end of 2003, over 82.4 million peo- ple were members of credit unions. Credit unions differ from other financial institutions in that they are cooperative associations organized to serve members with a com- mon bond of employment, association, or residence. Another char- acteristic that sets them apart is volunteerism. The founders of the movement believed volunteers should direct the organization and operation of credit unions. Credit unions are organized under a dual-chartering system of federal and state laws. Federal and state chartered credit unions purposes include promoting thrift among their members and creating a source of credit at reasonable interest rates. 5 This page intentionally left blank Part I Federal Credit Unions A federal credit union is a not- power: The power to accept share for-profit financial institution co- deposits, the power to make loans operative organized to provide to members, and the power to bor- its members with a place to save row funds. and a source of loans at reason- able rates. It is a corporation Section 107 of the Federal Credit chartered under the Federal Credit Union Act also grants indirect (in- Union Act to serve groups having cidental) powers to a federal credit a common bond of occupation union. These powers are necessary or association, or groups within a to enable a federal credit union to well-defined, local neighborhood, carry out the business for which it community, or rural district. More was chartered. Since the Federal information about federal credit Credit Union Act does not specifi- union organization and the charter- cally define incidental powers, the ing policies of the National Credit board of directors should ensure Union Administration (NCUA) may any activity not specifically au- be obtained from NCUA’s regional thorized by the Act or by Part 721 off

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