CUNA Regulatory Comment Call


May 31, 2007

NCUA PROPOSED CHANGES TO CHARTERING AND FIELD OF MEMBERSHIP MANUAL

EXECUTIVE SUMMARY

  • The NCUA Board is proposing to amend NCUA’s Chartering and Field of Membership Manual (Chartering Manual), for federal credit unions regarding the community chartering process.

  • Under the proposal, the current process that allows reduced documentation for single political jurisdictions would be retained.

  • The proposal would add a new process for community charter approvals for multiple jurisdictions using a standard statistical definition of a "well-defined local community".

  • The new statistical definition for a well-defined local community for areas involving multiple jurisdictions:
    • The area is a “Core Based Statistical Area” (CBSA), which is a statistical area defined by the Office of Management and Budget as having at least one urbanized area and a population of at least 10,000.
    • The CBSA does not include a Metropolitan Division.
    • The area contains a dominant city, county or equivalent with a majority of jobs in the CBSA.
    • The dominant city, county, or equivalent contains at least one-third of the CBSA’s population.

  • For those multiple political jurisdictions that do not meet the proposed statistical definition, applicants would be required to provide supporting documentation demonstrating how the requirements of a well-defined local community have been met.

  • NCUA would also publish a notice in the Federal Register for 30 days regarding any community application that does not meet the established definitions of a well-defined community and solicit comment.

  • NCUA is also proposing for multiple group jurisdictions a five-year limitation on the exemption from the requirement to submit a narrative summary or supporting documentation with an application when the geographic area has already been approved for another federal credit union.

  • In addition, NCUA is proposing a definition of "rural district" to reflect that such an area while they may lack traditional characteristics of interaction or shared common interests may nonetheless be the geographic for a field of membership application.

  • A clarification to the required marketing plan for community charter applicants is being proposed which would direct applicants to include the financial products, programs, and services that will be provided.

  • You may access a copy of NCUA’s proposed rule here. http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/E7-10398.pdf. Please submit your comments to CUNA by July 11, 2007. Please feel free to fax your responses to CUNA at 202-638-7052 or e-mail them to CUNA Deputy General Counsel Mary Dunn at mdunn@cuna.com. You may also contact her at 800-356-9655, ext. 6736.

BACKGROUND

  • In 1998 the Credit Union Membership Access Act (CUMAA) was passed and amended the Federal Credit Union Act (FCUA) specifically delegating to the NCUA Board the authority to define the meaning of a “well-defined local community” for federal credit union community charters. The FCUA defines a community credit union as consisting of “persons or organizations within a well-defined local community, neighborhood, or rural district.” 12 U.S.C. 1759 (b) (3).

  • NCUA’s Chartering Manual, Interpretive Ruling and Policy Statement (IRPS) 03-1 sets NCUA’s chartering and field of membership (FOM) policy and implements credit union FOM law. The last comprehensive rulemaking was issued in 2003, and amendments were issued to the provisions on underserved areas in 2006.

  • This proposal is a result of NCUA’s FOM Taskforce’s review which has monitored implementation of IRPS 03-1 for the last four years and identifying issues that need clarification.

  • There has also been uncertainty in the amount of evidence needed to demonstrate interaction and/or shared common interests in large multi-jurisdictional areas.

DISCUSSION

Single Political Jurisdictions

  • Under the proposal, the current process that allows reduced documentation for single political jurisdictions would be retained.

  • A recognized single political jurisdiction would be a well-defined local community that has a strong indicia common interests and interaction among residents.

  • A single political jurisdiction would include a city, county, or their political equivalent.

Multiple Jurisdictions

  • Currently, multiple political jurisdictions with populations up to 500,000 and Metropolitan Statistical Areas (MSAs) of up to one million may qualify as a local community based on a narrative description of the area. The narrative must describe how it meets the requirements for community interaction and/or common interests.

  • The Board is proposing to add a different process for community charter approvals for multiple jurisdictions if federal credit unions meet the proposed standard statistical definition of a "well-defined local community" they will be presumed to fulfill the definitional requirements and no further documentation will be necessary. Statistics are published by the Office of Management and Budget (OMB) that identify geographic areas that exhibit areas anchored by a dominant core trade area.

  • For those multiple political jurisdictions that do not meet the proposed statistical definition, applicants would be required to provide supporting documentation demonstrating how the requirements of a well-defined local community have been met. Applicants must also demonstrate the relevance of the documentation that is provided in support of the application.

  • NCUA would also publish a notice in the Federal Register for 30 days regarding any community application that does not meet the established definitions of a well-defined community and solicit comment. This would include areas that may contain two or more dominant hubs.

  • NCUA’s proposed statistical definition for a well-defined local community for areas involving multiple jurisdictions would have the following requirements:
    • The area is a CBSA that does not include a Metropolitan Division.
    • The area contains a dominant city, county or equivalent with a majority of jobs in the CBSA.
    • The dominant city, county, or equivalent contains at least one-third of the CBSA’s population.

  • A “Core Based Statistical Area” (CBSA) is a statistical geographic entity consisting of the county or counties associated with at least one core (urbanized area or urban cluster) of at least 10,000 population, plus adjacent counties having a high degree of social and economic integration with the core as measured through commuting ties with the counties containing the core. 65 Fed. Reg. 82238 (Dec. 27, 2000).

  • A CBSA containing a Metropolitan Division would not meet the automatic definition of a well-defined community. A Metropolitan Division is defined by OMB as a county or group of counties with a core population of at least 2.5 million.

  • Additionally, under the proposal, a CBSA must contain a dominant core city, county or equivalent that contains the majority of all jobs and one third of the total population contained in the CBSA before the definition would be met. This information can be found at the Bureau of the Census’ Internet site.

Five-year Limitation

  • Currently, a community charter applicant is exempted from submitting a narrative summary or documentation if NCUA has already approved the same geographic area for another federal credit union.

  • NCUA is proposing a five-year limitation on this exemption for multiple group jurisdictions. This would not apply to applications that meet the single political jurisdiction or statistical area definition of a local community.

Rural District

  • NCUA is also proposing a definition of "rural district" to reflect that such an area may lack the traditional characteristics of interaction or shared common interests still be the for a successful field of membership application.

  • An applicant would not be required to demonstrate interaction or shared common interests and still be the basis for a successful field of membership application.

  • Rural districts may be less densely populated and frequently lacking any centralized urban core or cluster but would have to show the characteristics of a will defined local community.

  • Under the proposal, a rural district is an area which:
    • Is not in a MSA or Micropolitan Statistical Area 1;
    • Has a population density that does not exceed 100 people per square mile; and
    • The total population of the district does not exceed 100,000 people.

    Business Plans

    • NCUA is proposing to clarify the requirements of the marketing plan that is required for community charter applicants. Under the current Chartering Manual, a community charter applicant must provide, “a marketing plan that addresses how the community will be served.”

    • This proposal would clarify that the marketing plan must include the financial products, programs, and services that will be provided to the entire community.

    1 Micropolitan Statistical Area is defined by OMB as “A Core Based Statistical Area associated with at least one urban cluster that has a population of at least 10,000, but less than 50,000. The Micropolitan Statistical Area comprises the central county or counties containing the core, plus adjacent outlying counties having a high degree of social and economic integration with the central county as measured through commuting.” 65 Fed. Reg. 82238 (Dec. 27, 2000).

    QUESTIONS REGARDING THE PROPOSAL

    1. Do you support the proposed definition of what constitutes a “well-defined local community” utilizing measurable standards?

      a. Yes _____
      b. N _____

      Please explain.











    2. NCUA is proposing to require additional evidence for multiple jurisdictional applications with more than one dominant hub to assure that all relevant evidence is considered. Do you agree with its approach?

      a. Yes _____
      b. N _____

      Please explain.











    3. Do you agree that publishing a notice in the Federal Register and soliciting comments for those community charter applications that do not meet the presumption that a well defined local community exists is appropriate? If yes, do you believe a 30 day comment period is reasonable?

      a. Yes _____
      b. N _____

      Please explain.











    4. Do you support NCUA’s proposal that would request an applicant to submit a narrative summary or supporting documentation for a geographic area previously approved by NCUA if approved five years ago?

      a. Yes _____
      b. N _____

      Please explain.











    5. Do you agree with the proposed definition of a rural district?

      a. Yes _____
      b. N _____

      Please explain.











    6. Do you agree that a rural district that consists of a non-metropolitan area should be subject to different analyses or documentation requirements than metropolitan or suburban areas.?

      a. Yes _____
      b. N _____

      Please explain.











    7. Are there additional characteristics of a rural area that NCUA did not include that may demonstrate the existence of a rural district sufficient to satisfy a “well-defined local community”?











    8. NCUA did not make any proposed changes to the rules involving community charter mergers but is soliciting comment in this area to determine if there are any concerns a need for any adjustments to the Chartering Manual. Please provide any comment you may have regarding community charter mergers.











    9. Please provide any additional comments you wish to regarding the proposed changes.











      Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
      Mary Mitchell Dunn • SVP & Deputy General Counsel • (202) 508-6736 • mdunn@cuna.com
      Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
      Lilly Thomas • Assistant General Counsel • (202) 508-6733 • lthomas@cuna.com
      Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com
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