Par for the Course

Par for the course. The phrase can be defined to mean that something is not good, but it is as you would expect.  Ever have one of those days? For me, it was one recent Saturday, and it started with coffee.  I walked into the kitchen only to find that my old drip coffee maker didn’t “drip” into the carafe. The coffee basket was clogged because I used too many filters and/or had overfilled the basket with coffee causing my “liquid gold” to overflow onto the counter, down the dishwasher and onto the kitchen floor. Yay!  Later, I headed out to run errands and arrived at the store only to find that I left the house with keys, shopping list, and cell phone but didn’t have the purse/wallet.  So, I turned around and headed home, got the wallet and headed back to the store. Once inside, I didn’t have the shopping list anymore, but I knew I had it when I got out of the car and headed through the parking lot toward the store...hmm. Yay! 

Based on how the day had gone so far, it was par for the course. 

You’re probably wondering where this is leading, well, nowhere really except that we are going back to the basics with a refresher on par value, as in the par value share.  

Credit unions are cooperative institutions and are owned, operated, and controlled by their members.  As you know, one of the requirements of credit union membership, set by the Federal Credit Union Act, is to purchase at least one share of the credit union:

“Federal credit union membership shall consist of the incorporators and such other persons and incorporated and unincorporated organizations, to the extent permitted by rules and regulations prescribed by the Board, as may be elected to membership and as such shall each, subscribe to at least one share of its stock and pay the initial installment thereon and a uniform entrance fee if required by the board of directors.”  12 USC 1759(a)

The purchase of the par value share provides the member owner with the opportunity to run in credit union elections, to become a volunteer official of the credit union, but most importantly, it gives members the opportunity to vote for credit union officials and other matters that are brought to the attention of the credit union’s membership. 

Under the Federal Credit Union Act, all members of a federal credit union have two basic rights, the right to maintain a share account and the right to vote in credit union elections. So, the par value share can be considered as the member’s ownership share in the credit union. 

Credit unions set the value of the par value share in its bylaws as required by the Federal Credit Union Bylaws:

“Article 2, Section 3. Maintenance of membership share required. A member who withdraws all shareholdings or fails to comply with the time requirements for restoring his or her account balance to par value in Article III, section 3, ceases to be a member. By resolution, the board may require persons readmitted to membership to pay another entrance fee.”

A credit union’s bylaws will also establish the time frame for a member to restore its par value share if it is reduced either by the member - or for other reasons such as fees.

“Article 3, Section 3. Time periods for payment and maintenance of membership share. The credit union will terminate from membership a member who:

• Fails to complete payment of one share within __________ of admission to membership, or

• Fails to complete payment of one share within ________ from the increase in the par value of shares, or

• Reduces the share balance below the par value of one share and does not increase the balance to at least the par value of one share within ________ of the reduction.” (Federal Credit Union Bylaws).

Federal credit unions must follow the time stated in their bylaws to allow the member to bring their ownership share back up to the par value stated amount. 

A common question we receive is if a federal credit union can automatically close the member’s account and end the member’s membership in the credit union if the credit union takes the member’s shares because a loan is in default.   The short answer – No.  Why? By not giving the member the time to bring their ownership share back up to par value within the allotted time frame, a credit union is in violation of the Federal Credit Union Act, the credit union’s bylaws, and likely the credit union’s agreement with the member.

Don’t forget that as a good member service and business practice, if an account falls below the par value the credit union should try to notify its member and remind them of the consequences of not maintaining the par value share and of course, the value of credit union membership. 

In other news (and in case you’re not already aware) please see the two links below that may provide some helpful insight into the potential changes to the CFPB under the new Trump administration:

•    What Lies Ahead for the CFPB as Trump 2.0 Takes Shape?
•    Trump 2.0: Potential CFPB Changes in 2025 | McGlinchey Stafford PLLC