10 steps to starting your own credit union
By Robbie Woliver • Bankrate.com
If you and a group of people want to start your own credit union, don't be put off by thinking it's too hard to do.
Below are the Florida Credit Union League 's recommendations on how to organize a credit union.
How to start a credit union
1. Find something in common. Credit union members are a collective group having a common bond:
* Occupation -- Employees of the same company.
* Association -- Members of a professional and trade association, fraternal order, labor or church group.
* Community -- Residents of the same well-defined neighborhood, community or rural district.
* Income -- Low-income members can contact the National Federation of Community Development Credit Unions.
2. Get together. As a rule, a "yes" vote by 500 potential members warrants continuation of the process to form a credit union. The National Credit Union Administration requires that a credit union with fewer than 3,000 potential members provide more evidence of support, since only about one-third of potential members will join and credit unions with less than 3,000 members may not be economically justified. Survey your potential members to determine whether they have an interest in supporting a credit union.
3. Do the paperwork. You should order the Interpretive Ruling and Policy Statement 98-03, which redrafts the NCUA's Chartering and Field of Membership Manual. The NCUA also has material on how to start a credit union. You may obtain this document from the NCUA's Web site.
4. Meet the membership requirement. If you want to discuss your potential field of membership, you should contact state or federal regulators. You must ensure that your survey covers a defined membership group and meets the definitions as required by state and federal regulations. It is suggested that you get your proposed FOM in writing.
5. Find a financial expert. A CPA or a person with a strong financial background needs to be on your organizing committee. This person will be responsible for developing realistic pro forma financial statements based upon your survey responses and the degree of sponsor assistance you will receive.
6. Form a committee. Your organizing committee should be comprised of individuals with very good credit. Both the state and federal regulators will obtain a current credit bureau report on each organizer and will take a dim view of a bad credit bureau report. Furthermore, the state will not allow someone who has had a bankruptcy within the past seven years to participate on the organizing committee or in the future operation of the credit union.
7. Set up a board of directors. The board is responsible for the general direction of the entire credit union, and its members should be able to understand the general and social environment in which it operates.
8. Collect some money. To help the credit union offset the cost of enrollment forms, a membership fee (typically $5) is charged. Additionally, each member is required to purchase at least one share (usually at a cost of $5 to $25) to help provide a base from which loans can be made.
9. Get by with a little help from your friends. It is recommended you obtain assistance from a credit union consultant in your area. This service is provided free of charge and, by utilizing this service, it will make the chartering process simpler and less time-consuming, since the consultant will be familiar with the necessary paperwork that must be completed.
10. Apply for status. Petition your state's Comptroller's Office or the National Credit Union Administration for official status.
[SIZE="5"]Help available for starting a credit union in a low-income area[SIZE="5"]
By Robbie Woliver • Bankrate.comSM
For the little bankersIf your potential group of credit union members is considered to be low-income, the National Federation of Community Development Credit Unions was established to serve and represent financial cooperatives in low-income communities.
To secure the low-income designation, a credit union must be able to document that a majority of its member households earn less than 80 percent of the national median household income. That household standard was $26,457 during 1996; and $28,161 in 1997.
The NFCDCU has assisted many groups in organizing new credit unions in low-income communities in response to branch closings and "upscaling" by commercial banks. It can be reached at 1-212-809-1850 or by writing to 120 Wall Street, 10th Floor, New York, NY 10005-3902.
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The principal advantage of low-income designation is two-fold: A credit union can then accept deposits from nonmembers and may participate in National Credit Union Administration's revolving loan fund for community development credit unions.
The NCUA has established an Office of Community Development Credit Unions: call toll-free 1-800-827-6282 or write to 1775 Duke Street, Alexandria, VA 22314-3428.
Robbie Woliver is a freelance writer based in New York
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