After 5 charter applications and still not enough information, petitioner seeking to form a federal credit union loses on appeal

A petitioner who reportedly sought to form a federally chartered credit union to serve a community with a population exceeding 5 million failed to submit information that would show the institution to be viable and has been denied, according to the National Credit Union Administration.

The NCUA has published on its website a decision and order that showed the agency board upheld staff’s decision to deny the petition to form a federal credit union (FCU) in July. The petitioner had submitted application five times, in none of those providing more than about a couple pieces of information out of the 19 that the NCUA said it requires, according to the published information.

Neither the petitioner nor the specific proposed community for service are named in the online version of the board’s order.

“Irrespective of Petitioner’s persistence and palpable eagerness to charter XXXX to serve his community, Petitioner’s federal charter application was fundamentally deficient and failed to meet the requirements of the FCU Act, Part 701, and the Chartering Manual,” the board stated in its final order of July 25. “It appears evident that, at the very least, Petitioner’s application for a federal charter for XXXX was premature and more diligent research, planning, and preparation is necessary before this group may qualify for a federal credit union charter.’

The petitioner began sending information – their “proof of concept” for a new FCU – to the NCUA’s Office of Credit Union Resources and Expansion (CURE) in July 2022, according to the final order. It received approval of the proof of concept after three tries and proceeded to submit a charter application. CURE found the application to lack most of the pieces of information the agency requires for its review of viability and membership interest and sent it back for more information. The petitioner tried four more times and was finally denied by the CURE director this April.

Among the deficiencies noted in CURE’s denial letter were:

  • Inadequate survey information to demonstrate an ability to support the proposed community field of membership;
  • Insufficient market conditions analysis in the business plan;
  • Failure to address in the business plan terms and conditions, rates, use of third-party vendors, and other key details supporting the products and services the proposed credit union plans to offer;
  • Failure to provide goals for shares, loans, and the number of members for the proposed credit union;
  • Failure to provide names and resumes for the proposed credit union officials and employees;
  • Lack of information about a training plan for officials and staff, and the role/function of each official or staff, including their relative knowledge, skills, and abilities;
  • Lack of continuity and succession plans for directors, committee members, and staff;
  • Inadequate information about the physical location for the proposed credit union, and any associated expenses for operating and maintaining a credit union facility;
  • Insufficient information about the proposed credit union’s recordkeeping and data processing systems and the associated costs;
  • Lack of a formal estimate for required surety bond coverage;
  • Lack of pro forma financial projections to demonstrate how the credit union will operate independently, under any scenario or timeframe;
  • Lack of a detailed marketing plan for at least the first two years of operations;
  • Materially deficient and erroneous pro forma financial projections that are inconsistent with a credit union business model;
  • Incomplete and incorrect credit union bylaws;
  • Lack of written policies in the business plan; and
  • Insufficient information and support as to the identity or qualifications of credit union mentors and other supporters.

Decision and Order