Can a North Carolina state-chartered credit union have members from several unrelated employer groups, each with its own internal common bond, or must all members of the credit union share one common bond?

Plain-English summary

NC's credit-union statute, N.C.G.S. § 54-109.26, requires that membership in a state-chartered credit union be limited to people sharing a "common bond." Subsection (b) defines the bond as one of four categories:

• Similar occupation;
• Associational interest;
• Residence within an identifiable neighborhood, community, or rural district; or
• Employees of a common employer (plus immediate family).

Representative Walter G. Church, Sr. asked about a real situation. The Piedmont Aviation Employees Credit Union, a NC state-chartered institution, was admitting members not just from Piedmont Aviation but also from other unrelated companies. The credit union's position was that this was fine, because each employer group internally had a common bond, even though the bond differed across groups.

The AG concluded that this multi-group model violates the NC statute as construed by the courts. All members of a NC state-chartered credit union must share the same common bond.

The NC authority. North Carolina Savings & Loan League v. North Carolina Credit Union Commission, 302 N.C. 458 (1981), is the controlling NC case. The Credit Union Commission had approved a bylaw amendment letting the State Employees Credit Union expand to include municipal and county employees whose retirement funds were administered by the State. The NC Supreme Court reversed.

The Court rejected the broad reading of "similar occupation" (i.e., that all public employees share a common bond by virtue of being publicly paid). Similarity in occupation means similarity in the actual work done, not similarity in who pays. The Court reasoned that the broader reading would let all private-sector employees form one giant credit union on the theory that "private industry" was their common bond, "render[ing] void and without meaning the legislative declaration."

The Court then articulated the principle directly: "The common bond must be a single one, shared by all persons eligible for membership." 302 N.C. at 471.

For "similar associational interests," the Court read the term narrowly as requiring substantial and vital shared interests, not just superficial commonality. The Court found the only link among state, county, and municipal employees was that they were public employees paid from public funds, which was not enough.

The federal authority. National Credit Union Administration v. First National Bank & Trust Company, 118 S.Ct. 927 (1998), reached the same conclusion for the parallel federal statute. The NCUA had interpreted the federal "common bond" requirement to allow a federal credit union to combine multiple unrelated employer groups, each with its own internal bond. The AT&T Family Credit Union under that interpretation had 110,000 members, only 35% of whom worked for AT&T or affiliates; the rest were from companies like Lee Apparel, Coca-Cola Bottling, Ceba-Giegy, Duke Power, and American Tobacco.

The U.S. Supreme Court held the NCUA's interpretation contrary to the unambiguously expressed congressional intent. The phrase "common bond" had to do real work. If employees of AT&T and employees of American Tobacco each already had their own "common bond" (their employer), combining them into one credit union required a different common bond uniting the combined membership. No such broader bond existed when unrelated employer groups were joined. The Court ruled the NCUA's multi-group approach unlawful.

Both decisions converge on one rule. A single common bond must run through the entire membership. Sub-bonds within sub-groups do not satisfy the requirement.

The legislative escape hatch. The AG noted that the General Assembly could amend N.C.G.S. § 54-109.26 to allow multi-group credit unions if it chose. Congress could do the same for federal credit unions. (In fact, Congress responded to the NCUA v. First National Bank decision later in 1998 by enacting the Credit Union Membership Access Act to expressly allow multi-group federal credit unions; this opinion was issued just before that federal legislative response.)

Practical implications for Piedmont Aviation Employees Credit Union. The credit union's expanded membership of employees from unrelated companies was not permissible under existing state law. The Credit Union Commission would have had to either narrow the membership back to a single common bond or seek legislative authorization to retain the broader pool.

Currency note

This opinion was issued in 1998. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Important post-1998 development: Congress passed the Credit Union Membership Access Act in August 1998 (Pub. L. 105-219), which amended the Federal Credit Union Act to expressly permit federal credit unions to serve multiple unrelated common-bond groups. That federal change does not directly amend NC's statute. NC's General Assembly subsequently amended its credit union laws as well. Anyone analyzing a current NC state-chartered credit union membership question should pull the current text of § 54-109.26, the NC Credit Union Division's rules, and any post-1998 case law applying NC's common bond rule.

Common questions

Q: What is a "common bond" in credit union law?
A: It is the requirement that all members of a credit union share some legally recognized relationship: same occupation, same employer, same association, or same neighborhood. The bond is what historically distinguishes credit unions from open-membership banks. Members are supposed to know each other or have a shared affiliation that justifies the tax-advantaged cooperative model.

Q: Why does the law care about the common bond?
A: The common bond is the historical reason credit unions enjoy tax exemption and other regulatory advantages. Limiting membership to a defined community reduces risk and ensures that the cooperative model serves real shared interests rather than open-market banking. Without a real common bond, a credit union looks indistinguishable from a bank.

Q: What is "similar occupation" under the NC statute?
A: Similarity in the actual work done, not similarity in who pays. Nurses can form a nurses' credit union; teachers can form a teachers' credit union; but state, county, and municipal employees do not share a similar occupation just because they are all paid from public funds.

Q: What is "similar associational interest"?
A: A substantial and vital shared interest beyond mere superficial commonality. The NC Supreme Court declined to give specific examples, treating it as a case-by-case inquiry, but emphasized that the interest must be on the same level of substantiality as the other listed bonds.

Q: Can a credit union add a new employer group through a bylaw amendment?
A: Only if the new group fits within the existing common bond. Adding an unrelated employer group breaks the single-common-bond rule. The credit union must either limit additions to compatible groups or pursue legislative change.

Q: Did Congress fix this for federal credit unions after 1998?
A: Yes. The Credit Union Membership Access Act of 1998 amended federal law to allow multi-group federal credit unions. But the NC statute remained subject to NC's narrower judicial reading until and unless the General Assembly chose to amend it.

Background and statutory framework

NC's credit union statute traces back to the early twentieth century cooperative finance movement. The "common bond" requirement was the cornerstone: it limited credit unions to defined communities and distinguished them from open-membership banks. NC's statute, like the federal Credit Union Act, listed four categories of common bond: similar occupation, associational interest, neighborhood, and common employer.

By the 1970s and 1980s, NC's larger credit unions were pressing to expand membership to keep up with growth and consolidation. The State Employees Credit Union's effort to add municipal and county employees in the late 1970s was a leading example. The NC Supreme Court's 1981 decision in NC Savings & Loan League drew a firm line: one common bond per credit union, shared by every member.

The federal NCUA, by contrast, had taken a more permissive view, allowing multi-group federal credit unions through agency interpretation. The U.S. Supreme Court's 1998 decision in NCUA v. First National Bank & Trust rejected that view, aligning federal law with the narrower reading NC had been applying since 1981.

The AG's 1998 opinion was issued shortly after the U.S. Supreme Court decision but before Congress responded with the Credit Union Membership Access Act. The opinion accurately reflected state law at the time. The federal legislative response did not alter the NC statute.

Citations

• N.C. Gen. Stat. § 54-109.26 (NC state-chartered credit union membership and common bond)
• N.C. Gen. Stat. § 54-109.26(a) (member eligibility limited to subscribers and persons within common bond)
• N.C. Gen. Stat. § 54-109.26(b) (four categories of common bond: occupation, associational interest, neighborhood, common employer)
• Federal Credit Union Act § 109 (12 U.S.C. § 1789) (parallel federal common bond requirement)
• North Carolina Savings & Loan League v. North Carolina Credit Union Commission, 302 N.C. 458, 276 S.E.2d 404 (1981) (one common bond shared by every member)
• National Credit Union Administration v. First National Bank & Trust Company, 118 S.Ct. 927 (1998) (multi-group federal credit unions not permitted under FCUA as then written)

Source

• Landing page: https://ncdoj.gov/opinions/multiple-group-memberships/

Original opinion text

April 9, 1998

The Honorable Walter G. Church, Sr.
Member of the North Carolina House of Representatives
Room 1311, Legislative Building
Raleigh, North Carolina 27601-1096

Re: Advisory Opinion, Multiple Group Memberships; North Carolina Credit Unions (N.C.G.S. § 54-109.26)

Dear Representative Church:

We respond to your request for our opinion on the question of whether or not North Carolina chartered credit unions may have multiple group memberships. By way of background, you indicate that Piedmont Aviation Employees Credit Union, a North Carolina chartered credit union, admits to its membership both employees of Piedmont Aviation and also employees of other unrelated companies. You also indicate that Piedmont Aviation believes that a credit union can be composed of multiple groups as long as each separate group is composed of persons within a common bond, even though the common bond of each separate group may be different.

The Issue

The precise issue of law is whether or not credit unions, organized under the laws of North Carolina, may be composed of separate employer groups with different common bonds, or must all members of the same credit union share the same common bond. For the reasons expressed below, in light of rulings by the North Carolina and United States Supreme Courts, we are of the opinion that all members of a state chartered credit union must share the same common bond. Of course, because these court decisions are based on interpretations of state and federal laws, the General Assembly and Congress do have the authority to amend the respective statutes.

Legal Analysis

Eligibility for membership in a credit union organized under North Carolina is found in N.C.G.S. § 54-109.26(a) and (b). Subsection (a) provides that membership

"…shall be limited to and consist of the subscribers to the articles of incorporation and such other persons within the common bond set forth in the bylaws as have been duly admitted members, have paid any required entrance fee or membership fee, or both, have subscribed for one or more shares, and have paid the initial installment thereon, and have complied with such other requirements as the articles of incorporation or bylaws specify."

In Subsection (b), membership eligibility is further narrowed to "…groups having a common bond of similar occupation, associational interest, or groups who reside within an identifiable neighborhood, community, or rural district, or employees of a common employer, and members of the immediate family of such persons."

The question you raised regarding multiple group membership in a credit union was addressed by the North Carolina Supreme Court in North Carolina Savings & Loan League v. North Carolina Credit Union Commission, 302 N.C. 458, 276 S.E.2d 404 (1981). That decision considered whether or not the North Carolina Credit Union Commission was correct in construing the "common bond" requirement of N.C.G.S. § 54-109.26, when it approved a bylaw change to the North Carolina State Employees Credit Union which expanded membership eligibility to include municipal and county employees who were participants in various retirement plans administered by the state. The Court identified the legal issue as ". . . whether the membership of the State Employees Credit Union as enlarged by the [bylaw] amendment meets the 'common bond' requirement of N.C.G.S. § 54-109.26." Id. 302 N.C. at 464, 276 S.E.2d at 409.

The Court then examined at great length the credit union membership provisions at N.C.G.S. § 54-109.26, particularly subsection (b), which imposes a "common bond" requirement ". . . of similar occupation, associational interests, or groups who reside within an identifiable neighborhood, community, or rural district, or employees of a common employer, and members of the immediate family of such persons." In its deliberation the Court recognized that the interpretation of a statute by an agency created to administer that statute is traditionally accorded some deference by appellate courts; however, it also noted that those interpretations are not binding and an appellate court may freely substitute its judgment for that of the agency and employ de novo review. Id. 302 N.C. at 465, 276 S.E.2d at 410.

Because the Court's analysis of the "common bond" requirement of N.C.G.S. § 54-109.26(b) is, we think, dispositive of the question of whether or not Piedmont Aviation Employees Credit Union may have multiple group memberships, we have summarized the Court's findings and conclusions on this matter.

(a) Similarity of Occupation.

In N.C. Savings & Loan League, supra, the North Carolina Supreme Court expressly rejected the opinion of the North Carolina Court of Appeals which concluded:

. . . public employees are united by the common bond of similar occupation for the simple reason that they are all employed in the service of the community, whether that community be narrowly defined as is the case with local public employees, or broadly delineated as in the case of state public employees. They all occupy positions in public service. Moreover, such employees are paid from public funds generated by taxing the citizenry. They serve the public; the public pays their salaries. These two characteristics are common to the membership as emphasized by the amendment to the bylaw in question here. We hold that these factors in particular provide sufficient similarity of occupation, despite the individual place and position of the employee, to meet the 'common bond' requirement of N.C.G.S. § 54-109.26 . . . Id. 302 N.C. at 469, 276 S.E.2d at 412.

The Supreme Court said that it could not accept the Court of Appeals interpretation of occupation. It considered similarity in occupation to mean similarity in the actual work done, similarity in occupational duties and responsibilities. Id. 302 N.C. at 469, 276 S.E.2d at 412. The Court went on to reason that under the similar occupation category, groups such as nurses, law enforcement officers and textile workers could each band together to form their own separate credit union. The Court concluded, however, that similarity in occupation cannot be premised upon similarity in who is benefited and who pays. Id. 302 N.C. at 470, 276 S.E.2d at 412. Most importantly, the Supreme Court concluded:

"If we were to affirm the Court of Appeals and adopt its reasoning, all employees in the private sector could form a credit union; private industry would provide the common bond. Private industry benefits from their labor and pays their salaries. Such a broad interpretation would make a farce of the common bond requirement and would render void and without meaning the legislative declaration that 'credit union (membership) . . . be limited to . . . persons within the common bond . . . ." (Emphasis added) Id. 302 N.C. at 470, 276 S.E.2d at 470.

Finally with regards to its analysis of "similar occupation", the Supreme Court concluded that "[t]he common bond must be a single one, shared by all persons eligible for membership." Id. 302 N.C. at 471, 276 S.E.2d at 413.

(b) Similar Association or Interests.

The Court next examined whether the class of people eligible for credit union membership under the amended bylaw (which included local and county employees whose retirement funds were administered by the State) possess the common bond of "similar association" or "interests." Although the Court considered that these terms have several meanings and that they could construe the statutes to comport with their meaning in common usage, it concluded that ". . . we think the Legislature intended otherwise and used those words in a limited sense." Id. 302 N.C. at 471, 276 S.E.2d at 413. Additionally, the Court concluded that when these terms "association" and "interests" are read in the context of other categories of common bonds, ". . . it becomes obvious that shared and association interests must be both substantial and vital. Id. 302 N.C. at 471, 276 S.E.2d at 413.

Finally, the Supreme Court reasoned that

"Whether a common trait constitutes a similar associational interest can be determined only upon a case-by-case basis; we do not pretend in this opinion to delineate or even attempt to give examples of what traits constitute this type of common bond. But, whatever 'traits' those terms include, they must rise to at least the same level of substantiality and be just as vital as the other types of common bonds enumerated by the Legislature."

Id. 302 N.C. at 472, 276 S.E.2d 413.

The only common link found between employees of a municipality, county, and the state was the fact that they were public employees and paid from public funds. This was not, however, enough of a common bond for local and county employees to be admitted to membership in the State Employees Credit Union. The Court therefore held ". . . that state, county and municipal employees included within the Credit Union's membership by the amended bylaw do not possess a common bond of similar associational interests. We conclude that the class of persons set forth in the amended bylaw possess no common bond of any type." Id. 302 N.C. at 473, 276 S.E.2d at 414. Therefore, the North Carolina Credit Union Commission was found to have been in error to permit the bylaw provision which admitted local and county employees to the State Employees Credit Union.

The United States Supreme Court has very recently addressed the issue you raise in your letter to us. In the matter of the National Credit Union Administration v. First National Bank & Trust Company, U.S. , 118 S.Ct. 927 (1998), the Court was called upon to examine an interpretation by the National Credit Union Administration ("NCUA") of § 109 of the Federal Credit Union Act, 12 U.S.C. § 1789. This section provides the basis for membership in a federal credit union. It is substantially the same language found in N.C.G.S. § 54-109.26(b), with regard to common bond. In pertinent part, § 109 of the Federal Act provides that ". . . federal credit union membership shall be limited to groups having a common bond of occupation or association, or to groups within a well-defined neighborhood, community, or rural district."

The NCUA had, however, concluded that a common bond of occupation must unite only the members of each unrelated employer group. As a result of the NCUA interpretation, the AT&T Family Credit Union had approximately one hundred ten thousand members nationwide, only 35% of whom were employed with AT&T and its affiliates. The remaining members were employees of such diverse companies as Lee Apparel Company, the Coca-Cola Bottling Company, the Ceba-Giegy Corporation, the Duke Power Company, and the American Tobacco Company. 118 S.Ct. at 930.

After a searching analysis of the issue, the United States Supreme Court determined that this interpretation was contrary to the unambiguously expressed intent of Congress and that the same common bond of occupation must unite each member of an occupationally defined federal credit union.

"…the NCUA's current interpretation makes the phrase 'common bond' surplusage when applied to a federal credit union made up of multiple unrelated employer groups, because each single 'group' in such a credit union already had its own 'common bond.' (citations omitted). To use the facts of this case, the employees of AT&T and the employees of the American Tobacco Company each already had a 'common bond' before being joined together as members of [AT&T Family Credit Union]. The former were bonded because they worked for AT&T and the latter were bonded because they worked for the American Tobacco Company. If the phrase 'common bond' is to be given any meaning when these employees are joined together, a different 'common bond' — one extending to each and every employee considered together — must be found to unite them. Such a 'common bond' exists when employees of different subsidiaries of the same company are joined together in a federal credit union; it does not exist, however, when employees of unrelated groups are so joined. (citations omitted). Put another way, in the multiple employer group context, the NCUA has read the statute as though it merely stated that single '[f]ederal credit union membership shall be limited to occupational groups,' but that is simply not what the statute provides." Id. at 939.

CONCLUSION

In view of the foregoing authority we conclude that a credit union chartered under North Carolina law may not be composed of separate groups with different common bonds. According to the courts, each member of a credit union must share the same common bond.

Although the N.C. Savings and Loan League decision addressed whether or not local and county employees could join the State Employees Credit Union, which raised the issue of a common bond among public employees, the facts of that case present a far stronger argument for a common bond than the matter at hand, which raises the question of a common bond among unrelated employee groups of private employers. In fact, in the N.C. Savings & Loan League decision, the North Carolina Supreme Court suggested that to allow a private employer credit union to be composed of unrelated employer groups "…would make a farce of the common bond requirement and would render void and without meaning the legislative declaration that single 'credit union (membership)… be limited to …persons within the common bond…." N.C. Savings & Loan League, supra, 302 N.C. at 470, 276 S.E.2d at 412. However, as noted at the outset of this opinion, the General Assembly could, should it choose to, amend the state law.

We trust that this provides you the guidance you seek on the issues raised. If we may be of further assistance, please let us know.

Signed by:

Andrew A. Vanore, Jr.
Chief Deputy Attorney General

Ann Reed
Senior Deputy Attorney General