Listed below is a brief description of the steps necessary to charter a credit union.
Common Bond. Both the state and federal regulators will require a specific common bond (field of membership) as part of the charter application process. For instance, an employer group, a church affiliation, a defined geographic area or an associational link. This common bond is what identifies the credit union and provides its source of membership and strength. Without such a defined common bond, charter applications will be denied by the regulator.
State and federal regulators require that a potential credit union have between 750 and 1000 potential members prior to granting a charter. This is to insure that the credit union will be able to support itself.
Initial funding for the credit union must be located. Startup costs could be as high as $100,000 to $500,000. The regulators will want to see an initial capital investment prior to chartering. This funding may come from the credit union organizers, outside non-member investors (such as community organizations or associations) or potential credit union members.
Once you have considered the above items and believe that a credit union may still be organized, the following steps will need to be taken.
Survey of potential members. The survey will have to meet with the approval of the regulatory agencies involved. It needs to inquire of the potential membership whether there is sufficient interest in organizing a credit union, what services are needed, whether or not members will make consistent deposits in the credit union, etc. The survey should be sent to at least 300 potential members. The survey is required by the chartering regulatory agency.
A five-year business plan will need to be attached to the charter application. This plan must include such information as: a three-year budget, goals, location, overhead costs, staffing, financial services, data processing needs, five-year cost membership and asset projections. Much of this information should be developed from survey results.
Once a business plan has been developed and preliminary charter approval has been granted to proceed with the charter process, you will need to apply for either Federal or Private Share deposit insurance.
Either regulatory agency will require a guarantee of investment capital to ensure the operation of the credit union. That capital should be anywhere from $100,000 to $500,000.
Credit unions are highly regulated and fulltime, trained staff should be considered.
Even when all of the above items have been satisfactorily resolved and completed, it will be up to the appropriate regulatory agency to grant a charter. Be aware that even after all these requirements have been met, an application could still be denied for various reasons.
There are a great many issues that need to be resolved prior to completing the charter application. Organizing and operating a credit union is a complicated and expensive process. It can also be a very rewarding experience. The organizing process should include the use of attorneys, accountants, and Illinois Credit Union System consultants.
Further information regarding chartering a credit union:
- IDFPR website Starting an Illinois Credit Union (idfpr.com) for an Illinois State chartered credit union (IDFPR follows the same chartering process and requirements as the NCUA does for Federal Credit Unions)
- NCUA website Chartering | National Credit Union Administration (ncua.gov) for a federally chartered credit union
If after reviewing this information, you determine that you can meet the regulatory and operating requirements necessary, and are still interested in pursuing the chartering of a credit union, please fill out the form below.
In the event you no longer feel chartering is feasible or an option, but are still interested in providing credit union services to your group, we may be able to recommend an existing credit union as a partner.