CUNA Comment Letter

CUNA letter on community CU chartering and FOM

February 21, 2008

The Honorable JoAnn Johnson
Chairman
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314

Dear Chairman Johnson:

As you know from our discussions last year, CUNA urges the agency to revisit the proposal published in the Federal Register June 5, 2007 to amend its chartering and field of membership policies regarding community chartered credit unions.

In general, CUNA strongly supported the proposal, although working with our Community Credit Union Committee, Federal Credit Union Subcommittee, and Examination and Supervision Subcommittee, we did recommend a number of amendments to improve the process for community credit unions. It is our understanding that the agency has not advanced the proposal due to concerns raised during the comment period.

In light of those concerns and in an effort to encourage the agency to proceed with consideration of additional flexibility for community credit unions, I would like to make further recommendations for changes to the current proposal which we have coordinated with a number of leagues, including the California League, and request that the Board take action on this matter.

CURRENT PROPOSAL

The agency’s proposal contained several basic proponents. It would have:

• Retained the current process for single political jurisdiction additions;

• Established that a core-based statistical area or part thereof that does not include a Metropolitan Division is a well- defined community, not requiring any additional documentation to support a showing of community;

• Determined that a rural district is well-defined and further documentation is unnecessary if the district has well-delineated boundaries; a total population of 100,000; a population density of 100 persons per square mile or less; and the district is not contained in a Metropolitan Statistical Area or Micro Statistical Area;

• Required credit unions that want to serve areas that do not meet the parameters for a single political jurisdiction, core- based statistical area or rural district to submit to a notice and comment period and provide documentation as required by NCUA;

• Permit credit unions to apply for the same community already approved for another credit union as long as the original approval was within five years.

CUNA’S RECOMMENDATIONS

Consistent with our comment letter, further review and consideration of credit union concerns, CUNA offers the following recommendations to revise the proposal. We would be glad to provide additional supporting information and analysis if that would be useful to you or your staff.

• NCUA should retain the single political jurisdiction provisions, as proposed.

• The Office of Management and Budget has determined that a CBSA is any “statistical geographical entity consisting of a county or counties associated with at least one core (urbanized area or urban clusters) of at least 10,000 population, plus adjacent counties having a higher degree of social economic integration with the core as measured through commuting ties with other counties contained in the core.” We think this definition provides the proper parameters for a well-defined without the further characteristics NCUA proposed for the CBSA, such as having a dominant city or county with a majority of jobs or one-third of the CBSA’s population in the core area.

• NCUA should not proceed with its current proposed treatment of “Rural District.”

• While we agree NCUA should delineate what a rural district entails for purposes of community credit unions, NCUA should utilize the U.S. Department of Agriculture’s definition of “rural” as found in 7 CFR 25.503:
  
  “What constitutes “rural.” A rural area may consist of any area that lies outside the boundaries of the Metropolitan Area, as designated by the Office of Management and Budget, or, is an area that has a population density less than or equal to 1,000 persons per square mile…”
• Consistent with this definition of rural area, we feel NCUA should permit a community charter application to be processed under the assumption that a rural district exists, consistent with the Federal Credit Union Act, when the area constitutes a county or smaller area, adjacent counties, Census-Designated Place or a Public Use Microdata Area, as those terms are defined by OMB or the U.S. Census Bureau. This approach can result in the inclusion of rural areas roughly equivalent to what would be permitted for credit unions seeking applications under the CBSA presumption for urban areas.

• NCUA should modify the notice and comment period it proposed for those credit unions seeking community expansions or charters that do not qualify for the community presumption.

• Rather than publishing the notice regarding a charter application in the Federal Register, we believe credit unions and the community would be better served if credit unions publicize the notice in a local paper with a reasonable distribution of the applicant credit union’s choosing.

• Regarding applications for areas already approved for another credit union, credit unions were concerned that the time frame for how long the original application had been approved seemed arbitrary. Instead the final rule should state that:

“NCUA will approve without further documentation a federal credit union’s application to serve a community it has already approved for another federal credit union. NCUA will permit such applications for a minimum of five years following the original credit union’s approval. This time frame may be extended for up to another five years, unless an intervening Census reflects material changes in the community that require documentation.”

This revised approach takes into account that communities change but would provide a longer period for applications to be approved without further documentation. However, if after the first five years of the original credit union’s application significant changes in growth patterns or community interaction have occurred, NCUA would retain the authority to determine if more documentation should be submitted.

CUNA shares your view that the community charter application process should facilitate greater credit union service to consumers. We would welcome the opportunity to work with you to address this matter and develop changes that will advance the current proposal as well as the interests of credit unions and the agency, consistent with the Act.

Thank you for your consideration of our recommendations.

Sincerely,

Dan Mica
President and CEO

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