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<p>ALEXANDRIA, Va.-NAFCU recently submitted a letter to NCUA Field of Membership (FOM) Task Force Chairman and Senior Staff Attorney Mike McKenna recommending broad changes to NCUA’s FOM regulation. NCUA recently reconvened the task force to further review the agency’s reg, as it has done twice since the passage of the Credit Union Membership Access Act (CUMAA) in 1998. It has been 18 months since the NCUA Board approved IRPS 00-1, the most recent set of amendments, in October of 2000. Tangential to the issue was a lawsuit filed by the American Bankers Association (ABA) claiming that NCUA violated congressional intent in promulgating its FOM rules and regulations. NCUA won the case and the bankers were denied at the appellate level as well on November 1, 2001. McKenna said that, in his opinion, NCUA’s review of this regulation was not hindered by the ABA lawsuit and pointed out that IRPS 00-1 was approved while the lawsuit was pending. “We still made changes to streamline and update things,” he said. He added that there is no statutory demand to review the FOM Chartering Manual so often but that NCUA Chairman Dennis Dollar asked that it be done. However, NAFCU Director of Regulatory Affairs Gwen Baker said that NAFCU is anxious for the agency to get moving. “The question is not so much whether the ABA lawsuit has slowed NCUA’s efforts,” she said, “but that we are now 18 months out since IRPS 00-1 was approved and as Chairman Dollar has recognized in reconstituting the task force, it’s time for NCUA to consider improvements to the Chartering and FOM manual, especially in light of the court decisions upholding NCUA’s field of membership regs.” In the April 5 letter signed by NAFCU Senior Vice President and General Counsel Bill Donovan, the organization urged NCUA to loosen the definition of common bond to mean not just employees of one company, but also types of employment. “NCUA’s focus should be on the bonds that bring the employees together; this goal would still be served if NCUA were to charter credit unions to serve, for example, all healthcare workers, all public servants or all employees of the same franchise,” he wrote. It also recommended that instead of a group trying to join a multiple common bond credit union providing a letter explaining any additional pertinent information as to why the group should be able to join, the credit union should be permitted to include the additional information in its application. “NAFCU understands the need for this information but believes the credit union is in the best position to provide it. Most groups do not have the time, nor the expertise, to provide this level of information and look to the credit union for assistance in documenting this requirement,” Donovan wrote. Additionally, NAFCU recommended that the expedited process for adding groups of 500 or less should be expanded to groups of 3,000 members or less. Donovan cited the District Court’s ruling in the ABA challenge, which quoted an affidavit from NAFCU Economist Dr. Tun Wai: “In the NCUA’s considerable experience, it has found that the modern financial services market renders small credit unions particularly susceptible to insolvency. During 1998, for example, all eighteen credit unions that the NCUA either involuntarily liquidated or merged with other institutions had 3,000 or fewer members. See NAFCU Opp’n to Mot. for Prelim. Inj. at Ex. 4 (Decl. of Dr. Tun A. Wai 6). As of June 1998, over 65% of the federally insured credit unions that were suffering from severe financial difficulties had memberships under 3,000. See id. (Decl. of Wai 4). Moreover, every federal credit union that had been classified with the lowest financial-performance rating had 3,000 or fewer members.” He also noted NCUA, in IRPS 99-1 recognized that groups smaller than 3,000 forming their own credit union “may not be economically advisable.” NAFCU also asked that NCUA’s definition of `reasonable proximity’ be expanded with regard to multiple common bond credit unions. While CUMAA requires certain locations for adding underserved areas, Donovan emphasized that NCUA voluntarily applied these guidelines to the addition of other groups as well. Again, the court found that Congress intended to modernize the credit union law and that reasonable proximity could account for electronic means of service. Also, NAFCU requested the removal of the 5% interest requirement in a shared service facility for purposes of reasonable proximity. NAFCU also questioned the need for population count in determining a `local’ community. The group explained that other laws and regulators do not place a population limit on a community. NAFCU dedicated an additional document attached to the letter including other definitions of `local’ community from other sources. Credit unions should not have to amend their charters every time a sponsor or added group company reorganizes. The requirement, NAFCU contends, was included in IRPS 99-1 to monitor overlaps, but now that the agency no longer looks at those situations, the requirement needs to be removed. “As the subsidiaries served through a corporate restructuring share a common bond with the original groups, the credit union should not be required to add the subsidiaries separately to the charter. This would certainly simplify the process for both the agency and the credit union and allow the credit union to effectively serve its field of membership without interruption,” Donovan wrote. Broader voluntary merger authority also made NAFCU’s wish list for the next FOM changes. NCUA’s McKenna would not comment on whether NAFCU’s suggestions were viable, but said that all recommendations would be reviewed and considered. The task force met for the first time this year on March 25 by videoconference. The timing of the next meeting has not been determined. The task force plans to have a recommendation to the NCUA Board before the end of the year. In addition to streamlining, McKenna said, “there also might be better ways to five better guidance to credit unions.” The group will also consider alternative methods of accomplishing the same things, he said. The NCUA FOM Task Force has been charged with reporting to the NCUA Board on necessary updates to the Chartering Manual. [email protected]</p>

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