CUNA Regulatory Comment Call
December 13, 2001
REPEAL OF CAP REQUIREMENTS FOR FEDERAL COMMUNITY CREDIT UNIONS
EXECUTIVE SUMMARY
- The National Credit Union Administration Board has voted 2-1 to repeal the community service requirements (CAP) for federal community credit unions.
- The repeal is part of an interim final rule that also includes an update of the Board’s definition of “investment area” in its Chartering and Field of Membership Manual for Federal Credit Unions. The update is the result of the new census data and revised Community Development Financial Institution Fund standards.
- The interim final rule, including the CAP repeal, is effective December 20, 2001.
- The board is seeking comments on the interim final rule. Comments are due to NCUA by February 19, 2002.
- Credit unions and leagues are encouraged to comment during this period, even if they have sent a letter to NCUA on this issue previously.
- Here is the link to the interim final rule.
- Comments to NCUA may be sent through CUNA’s OPERATION COMMENT on CUNA’s website, which facilitates the process for credit unions and leagues.
- Please let us have your comments by February 8, 2001. You can email them to Mary Dunn, CUNA Associate General Counsel, at mdunn@cuna.com or to Catherine Orr, Senior Regulatory Counsel, at corr@cuna.com.
HIGHLIGHTS OF THE INTERIM RULE
In October 2000, the NCUA Board adopted an amendment to its FOM policy and manual that required federal community credit unions to spell out in their marketing plan, business plan or other separate document, how they planned to serve the entire community. The plan must have included how a community credit union would market its services to the community and what procedures and services would be offered to underserved individuals in the community. The Board acknowledged at the time the amendment was approved that there is no tangible evidence that credit unions are not serving their entire communities.
The interim final rule eliminates the CAP requirements for existing federal community credit unions. However, the interim final rule retains the requirements that a proposed community federal credit union (new and converting) develop a detailed and practical business and marketing plan to serve its entire community for at least the first two years of operation. The rule also reiterates that community credit unions will be expected to regularly review and to follow to the fullest extent economically possible, the marketing and business plan submitted with their application.
The interim final rule notes that the CAP requirement only applied to one type of federal credit union charter – community federal credit unions. The Supplementary Information accompanying the rule states that a majority of the Board now feels that because there is “no evidence credit unions are not attempting to serve their entire communities, it is not a reasonable regulatory practice” to apply the CAP requirement only to certain existing credit unions.
CUNA opposed the CAP when it was adopted last year and has since then strongly advocated the agency remove it before it takes effect. Our opposition is based on the following concerns:
- Credit unions do not need a regulation from the federal government to force them to serve their members.
- As NCUA announced last month, credit unions are expanding service into underserved and low-income communities across the United States at a record-setting pace with an additional 12.5 million potential new credit union members added in 2001.
- The NCUA data confirms that during the first eleven months of 2001 (January, 2001-November 30, 2001), credit unions adopted 231 communities with a total population of 12.5 million.
- Credit unions were able to expand their services to low-income Americans in large part due to improvements the agency made in the field of membership expansion process.
- Continued improvements in NCUA’s membership application process are more appropriate than a CAP rule and will do more to ensure all individuals, including disadvantaged groups, are eligible for credit unions service.
- Congress declined to add such Community Reinvestment Act-type requirements for credit unions when it adopted the Credit Union Membership Access Act in 1998.
Throughout their history, credit unions have been steadfast in their service to members, including low-income individuals. This long- standing commitment was reaffirmed in the Vision Statement on the Mission of Credit Unions in CUNA’s Renaissance Commission Report, as approved by CUNA’s Board in October. That statement acknowledges the unique role credit unions play in helping to insure members, including those who are economically disadvantaged, have fair access to financial services. It states in part:
Credit unions include service to people of modest means in their business activities because of the inherent dedication of not-for- profit, cooperative financial institutions to such service, the traditions and values of credit unions, and the commitment of boards of directors to credit union values.
Another set of changes in the interim final rule is the updating of the definition of “investment area” in Chapter 3 of the FOM manual. Under the interim rule,
- An area located outside of a Metropolitan Area with a county net migration loss (out-migration minus in-migration) over the five year period preceding the most recent decennial census of at least 5 %; and
- An area meeting the criteria for economic distress that may be established by the Community Development Financial Institutions Fund (CDFI) of the United States Department of Treasury
A majority of the NCUA justified the adoption of the new rule as an interim final on the basis of the fact that the amendments further the public interest because of the recent and sudden increase in credit union asset growth and the current uncertainty in the economy; they also further the public interest by removing a potentially costly and unnecessary regulatory burden and promotes the efficient use of agency resources and staff. Regarding investment area, the interim final rule merely updates the definition of that term in the Manual.
QUESTIONS TO CONSIDER REGARDING THE INTERIM FINAL RULE
- Do you agree that the CAP requirements should be removed for existing federal community credit unions?
- What are the advantages of removing the CAP requirements? Are there any disadvantages?
- What does your credit union do to ensure outreach to all sectors of your field of membership?
- What data can you share to demonstrate your credit union will continue serving its entire communities or other field of membership absent such intervention from the federal government?
- Given the publicity surrounding the CAP repeal, what additional steps, if any, should credit unions take voluntarily to ensure that all portions of a community or field of membership are served?
- Has your credit union completed Project Differentiation? This is an excellent framework for credit unions to demonstrate their good service to all sectors of their membership. Check out the Project Differentiation site on CUNA’s web home page, www.cuna.org.
- Do you agree with NCUA’s additions to the definition of investment area for purposes of adding low-income areas?
- Are there other ways NCUA could expand this definition to facilitate service to low-income areas?
- Other comments?
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Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com |
