The National Credit Union Administration has backed off a long-standing policy allowing senior citizens and retirees to establish associations solely for the purpose of joining or forming federal credit unions.

As of July 1, senior citizen and retiree groups must meet the same conditions as other associations when applying to join or charter a federal credit union.

Under the revised rule, published by the agency in the March 22 Federal Register, the regulator will consider whether members of these groups pay dues, have voting rights, hold offices, have meetings, and generally have a purpose other than to obtain credit union services.

The changes were prompted by a U.S. District Court ruling in Texas last year that an association formed simply to offer credit union services to senior citizens doesn't meet the statutory requirement of a common bond.

"We're agreeing with the court by saying these groups have to engage in activities other than just going to the credit union," said Bob Loftus, NCUA's DIRECTOR OF PUBLIC AND CONGRESSIONAL AFFAIRS. "If these groups exist to further legislation in their interest, or play volleyball once a week, they can join or form a credit union."

The common bond requirement is most often satisfied by groups of members who work for the same employer.

Until the change takes effect, the only requirement for adding senior citizens or retiree groups to a federal credit union charter is a written request from the institution to the agency.

Despite the fact that the rule would make it more difficult for federal credit unions to entice bank customers, banking industry representatives had mixed reactions to the new policy.

The rule contains a loophole, according to bankers. Members who would be banned from joining under the new policy could remain with their credit union if it has a so-called "once a member, always a member" bylaw - and the person joined before July 1.

"We recognize that the NCUA rule makes it a little more of a burden for these groups to join, but we're unhappy that most credit unions are not required to kick out existing members that joined under the original rule," said Kelly Rodgers, deputy general counsel for the Texas Bankers Association.

The lawsuit that spurred the revision was brought against Communicators Federal Credit Union of Houston by Ms. Rodgers' group, the Independent Bankers Association of Texas, and six Houston-area banks.

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