Starting Up a New Credit Union

First, know that this is not a casual undertaking. You are establishing a bona fide financial institution that exists to provide valuable financial services over an indefinite period to an ever-growing group of individuals.

Accordingly, the organizing and chartering process alone can take months --and even years-- so philosophical and financial commitment is essential on the part of all sponsoring groups.

Also, having a potential membership base of at least 3,000 individuals is strongly suggested.

If you are interested in organizing a credit union, please take the time to review the following:

• Facts About Credit Union Management
• Type of Charter - State or Federal
• NYS Banking Department Chartering Information
• NCUA Chartering and Field of Membership Manual
  (This file is in Portable Document Format (PDF) which can be read by Acrobat Reader.)

We also recommend that you contact the following credit union regulatory agencies explaining your desire to start a credit union. They will send you additional material regarding start-up procedures.

Mr. Mark Treichel
Region I Director
NCUA, Region 1
9 Washington Square
Albany, New York 12205
518-862-7400
region1@ncua.gov

Ms. Diana Taylor
Superintendent of Banks
New York State Banking Department
One State Street
New York, New York 10006-1894
diana.taylor@banking.state.ny.us

Facts About Credit Union Management

A credit union is a member-owned, not-for-profit, cooperative financial institution formed to permit those in a specified field of membership to pool their savings, lend them to one another, and own the organization where they save, borrow, and obtain related financial services. Members are united by a common bond and democratically operate the credit union under state or federal regulation.

A credit union may be organized by members of a particular group in any of the following categories:

• Single Common Bond: Occupational or associational
• Multiple Common Bond: More than one group, each with a common occupational or associational bond.
• Community: A single, geographically well-defined local community, neighborhood or rural district where individuals have common interests or interaction.

Management

A credit union is owned by its members. The credit union is a separate legal entity and a sponsoring company or organization has no jurisdiction or authority over the credit union. The sponsoring company or organization is simply the “pool” of consumers from which credit unions get members.

To operate, a credit union must have a board of directors, a credit committee (or loan officers) and a supervisory committee. The credit union members elect these officials at an annual meeting.

The board of directors consists of an odd number of at least five volunteers who manage the business affairs of the credit union and set policies for its operation. When a credit union is organized, board members are elected by the organizers to serve until the first annual meeting of the membership. At that time, those directors are either re-elected for specified terms or replaced with other members. The board is composed of a president, vice-president, secretary, treasurer and a minimum of one director or board member without an officer title.

The credit committee is composed of at least three people who meet as required to act on loan applications submitted by the members. Committee members are also elected at annual meetings. (In a federally chartered credit union, loan officers may be used instead of credit committee members.) The credit committee is made up of a chairman, secretary and a member without title.

The supervisory committee consists of at least three members. This committee is required to conduct periodic audits of the credit union books or to ensure that this is accomplished. The committee makes certain that the credit union operates within the applicable laws, regulations and established procedures. It has the power to suspend other officials for suspected or proven unauthorized acts. Committee members are appointed by the board of directors in a federal credit union and elected by the membership in a state-chartered credit union. The officers are the chairman, secretary and a member without title.

The treasurer is a key member of the board of directors. He or she has the responsibility for either managing the credit union or supervising the person that does (unless such authority is retained by the board). In federal credit unions, only one board officer (usually the treasurer) may be compensated and then only when the credit union is financially able to provide such compensation. State chartered credit unions may not compensate any officers.

The manager (President/CEO) is the person that carries on the day-to-day operation of the credit union. He or she must perform or supervise the employees in signing up new members, posting transactions to members accounts, processing payroll deductions, posting the journal and cash record and general ledger, accepting money for deposit and loan payments, processing loan applications, writing checks, preparing monthly financial statements, preparing tax forms and many other administrative duties.

Type of Charter - State or Federal

In New York State, credit unions have the advantage of a dual chartering system. That means that there are two charter types from which to choose: state or federal. Both types of charters have perceived advantages and disadvantages, depending on the group starting the credit union. Neither charter is “better” than the other.

State Charter

• Credit unions with a state charter are regulated by the New York State Banking Department.
• State-chartered credit unions must qualify for federal share insurance through the National Credit Union Share Insurance Fund that is administered by NCUA.

Federal Charter

• Federal credit unions are regulated by the NCUA, an agency of the federal government.
• Shares in federal credit unions are insured by the National Credit Union Share Insurance Fund that is administered by NCUA.