Decision relative to the application of Workers Credit Union Fitchburg, Massachusetts to amend its bylaws governing associations which qualify persons for membership
By the Division of Banks
The Workers Credit Union (the "WCU" or the "Credit Union"), Fitchburg, Massachusetts has petitioned the Division of Banks (the "Division") to amend its bylaws governing the associations which qualify persons for membership in the Credit Union.
This application was submitted under General Laws chapter 171, section 10. That statute authorizes a state-chartered credit union, such as WCU, to amend its bylaws establishing the conditions of residence, occupation or association which qualify persons for membership. Under the law, amendments to a credit union's sphere of operation require the Commissioner of Banks' (the "Commissioner") approval before such amendment can become legally operative. (The statute also prescribes that approval by a three-fourths vote of all members present and entitled to vote be obtained at an annual or special meeting. At an April 8, 1998, WCU Membership Meeting, the required three-fourths vote approving the proposed membership bylaw amendment was obtained. WCU Application, Appendix A.) The Commissioner may subject this or any other application for approval to such notice and hearing as may be required.
The application was submitted to the Division on May 14, 1998. (WCU chose Option 1, the standard application procedure under the Division's Regulatory Bulletin Manual 4.1-104, which governs membership bylaw amendments. The Credit Union apparently rejected Option 2 and Option 3 which permit preliminary Division review of proposed bylaw language for compliance with credit union law. See Regulatory Bulletin Manual 4.1-104 (1998 ed.) at 94-100.) Notice of the application was posted and published in accordance with the Division's standard procedures. The comment period expired on July 8, 1998. One adverse comment was received from a bank trade association which requested that a public hearing on this matter be held by the Division. (A hearing was determined to be unnecessary since this application turns on questions of law rather than fact.) WCU's proposed membership bylaw amendment has been reviewed by the Division based upon the written application materials submitted by the Credit Union.
WCU was chartered on April 17, 1914, as the "Workers Credit Union." ( Annual Report of the Commissioner of Banks, (Pub. Doc. No. 8, 1914) at x-xi, 403; 2 Board of Bank Incorporation Minutes 73, 76 (1913-1915).) Its current membership bylaw is relatively unchanged from its original bylaw. ( By-laws of the Workers Credit Union, Article II, Section 1 (April 2, 1996). Bylaw amendments approved on October 30, 1926, inserted the word "principally.") The membership bylaw provision provides:
Membership in the corporation is limited principally to those who are members of labor organizations and co-operative associations.
WCU is now seeking the Commissioner's approval of what it characterizes as a "... a more accurate, contemporary definition of the Credit Union's field of membership... ." ( WCU Application, Question 1 at 2.) The response to Question 8 of the application further states that "... the proposed FOM [field of membership] change is not expected to affect its growth, since the proposed new member eligibility criteria in fact ratify its existing service area rather than expand it." ( WCU Application, Question 8 (This Decision does not address WCU's quoted assertions since this matter is being disposed of on other grounds.).) The Credit Union's proposed amendment of Article II Section 1 provides:
Membership in this Credit Union shall be limited to (i) persons residing or working in Worcester, Franklin or Middlesex counties in Massachusetts, or in Southern New Hampshire, (ii) organizations of any type, including without limitation corporations, partnerships, limited liability companies, trusts and associations, with an office or place of business in Worcester, Franklin or Middlesex counties in Massachusetts, or in Southern New Hampshire, or, in the case of trusts, any of the trustee(s) of which reside in any such county or area , (iii) any spouse, child, grandchild, sibling, parent or grandparent of a member, and any other relative of a member, whether related by blood, marriage or adoption, living under the same household of a member, and (iv) any organization of which at least a majority of the outstanding voting interests, including stock and partnership interests, is owned by a member. Once a member, a person or entity shall remain a member until such time, if any, as he, she or it shall be removed as such, or voluntarily withdraws. (Emphasis supplied.)
This bylaw amendment has been reviewed under General Laws chapter 171, section 10, other relevant provisions of chapter 171, Regulatory Bulletin Manual 4.1-104, and agency decisional precedent in this area. ( See generally, Decision Relative to the Application of Pittsfield G.E. Employees' Credit Union, Pittsfield, Massachusetts to Amend its By-laws Governing Associations which Qualify Persons for Membership, (August 13, 1992); Decision Relative to the Application of Pittsfield G.E. Employees' Credit Union, Pittsfield, Massachusetts to Amend its By-laws to Change both the Name of the Credit Union and the Associations which Qualify Persons for Membership, (February 25, 1994).) Based upon this review, the Division concludes that WCU's proposed bylaw amendment must be denied.
The grounds for the Division's decision include, but are not limited to, (a) the use of a vague geographical membership term and (b) the extension of credit union membership to organizations which are not eligible for membership under state law. Each of these deficiencies are discussed below.
A. Geographical References
Section B. 2 of Regulatory Bulletin Manual 4.1-104 governs geographical references in membership bylaw provisions. It expressly provides that vague or imprecise terms, including those referring to regions or areas rather than readily verifiable political boundaries will not be approved by the Division. The use of the term "Southern New Hampshire" in the first two clauses of the proposed bylaw falls into this category. (The Division does not address the substantive interstate aspects of this proposed bylaw provision.) The term clearly requires clarification and leads to questions as to whether a particular person or organization would be eligible for membership in the Credit Union.
The Division is not persuaded by the Credit Union's discussion of the suitability of this term in the bylaws. ( WCU Application, Question 3.) The Credit Union itself acknowledges that this term "... may be subject to differing interpretations..." and then proceeds to attempt to define the term beyond the text of the bylaw. The need to further define an operative bylaw term is the very problem the Regulatory Bulletin seeks to correct. The Division also fails to see the basis in credit union law for WCU's statement that "... the adequacy of the reference to its sphere of operation in New Hampshire is a matter for decision by the New Hampshire Banking Commissioner." ( Id.) The Division is unaware of any provision of law that requires it to defer to another state on the meaning of a corporate bylaw provision of a credit union chartered by the Commonwealth of Massachusetts.
B. Organization Membership
The second clause of the Credit Union's proposed membership bylaw which purports to extend membership to certain business organizations does not comply with Massachusetts Credit Union Law. The term "organizational member " is defined by statute. General Laws chapter 171, section 1 provides in relevant part:
"Organizational member ", any fraternal organization, voluntary association, partnership or corporation, having a usual place of business within the commonwealth and composed principally of individual members or stockholders who are themselves eligible to membership in a credit union..." (Emphasis supplied.)
The proposed bylaw extends potential membership to corporate entities that are not specifically mentioned in the statutory definition. Organizations that operate under more modern or recent corporate structures, such as limited liability companies, limited liability partnerships or business trusts, are not eligible for membership in any credit union absent an express statutory reference in General Laws chapter 171, section 1. Additionally, the statute includes a specific requirement that an organizational member have its usual place of business within the Commonwealth. Accordingly, an organization located outside the Commonwealth is not eligible for membership in the Credit Union as a matter of law.
Conclusion
Therefore, based upon the entire record before it, the Division hereby denies Workers Credit Union's application under General Laws chapter 171, section 10 to amend its bylaws governing the associations which qualify persons for membership in the Credit Union.
| July 13, 1998 Date | Thomas J. Curry Commissioner of Banks |