Jan 28 2016

The Network Credit Union: A Modern Alternative to a Traditional Merger

A network credit union can provide credit unions an alternative to the traditional merger option. The inspiration for this business model comes from a not-for-profit network hospital system based in Indiana. The NCUA Office of General Counsel deems the network credit union option currently permissible under the FCU Act, NCUA’s Charter and Field of Membership manual, NCUA’s existing letters to credit unions, and Office of General Counsel legal opinion letters. In 2014 the Indiana Credit Union League inquired to the NCUA on the legalities of multiple-group FCUs merging with each other with the following conditions present:

  • 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: “[Merged Credit Union], a division of Continuing Credit Union”
  • The continuing credit union would appoint an advisory committee composed of officials of the merged credit union to serve in an advisory role
  • The continuing credit union would reserve one seat on its nominating committee for a representative of the merged credit union
  • This is only a viable option for multi-SEG credit unions

This research explores the business structure of a network credit union as well as its benefits and challenges. The findings are especially encouraging for small credit unions looking to scale.

Click here to download NCUA's opinion letter on this matter.

Filene thanks its generous supporters for making this research possible.

Report Number 387