The U.S. Supreme Court recently struck down a policy of the National Credit Union Administration (NCUA) that had permitted multiple occupational groups within one credit union, so long as the members within each group had a common bond. In the case before the Court, commercial banks and an association of bankers successfully argued that the NCUA improperly approved a charter amendment allowing a group of tobacco company employees to become members in a credit union established for employees in an unrelated telephone company.

While the Court may have accurately interpreted the will of Congress as expressed in then‑existing law, sentiment on Capitol Hill was decidedly different by the time of the Court's decision. Within weeks of that ruling last winter, the legislative process began moving swiftly toward passage of amendments that were necessary to clarify that credit union membership requirements were to be opened up as they had been in the recently invalidated NCUA policy. A legislative reversal of the Supreme Court was signed into law.

The new legislation was enacted by wide margins in both Houses of Congress over the protests of banking groups. They maintained that the law sets up unfair competition by forcing banks to compete against larger credit unions that enjoy exemptions from taxes and community lending requirements. Supporters countered that the legislation was necessary to make credit unions available for the first time to millions of employees.

There are now three types of federal credit unions, based on categories of membership: (1) a single common‑bond credit union, comprised of one group having a common bond of occupation or association; (2) a multiple common‑bond credit union, with more than one group, each of which has a common bond and no more than 3,000 members; and (3) a community credit union, made up of persons within a well‑defined local community, neighborhood, or rural district. The multiple common‑bond credit union, in particular, is Congress's response to the Supreme Court ruling.

If certain conditions are met so as to establish that an area is underserved, the new law opens up membership in multiple common‑bond credit unions even more broadly to any person or organization in the local community. The locality must be an "investment area," as defined in another federal banking statute; it must be underserved by depository institutions; and the credit union must set up and maintain an office or facility in the area to be served.