Moratorium Imposed on Adoption of Underserved Areas for Non-Multiple Group CUs

SALT LAKE CITY-NCUA announced Dec. 30 that it has imposed a moratorium on America First Federal Credit Union’s service to its previously approved underserved areas, as well as all non-multiple group credit unions adopting underserved areas. America First can continue to serve any current members from those areas but not add any new members from those areas for the time being. NCUA has obtained a 30-day extension in the case from the original Dec. 30 filing date, according to NCUA Director of External Affairs Nicholas Owens, and is reviewing its field of membership rules. The agency emphasized that multiple common bond credit unions may continue to add underserved areas during the moratorium. Interestingly, Judge Dale Kimball of the U.S. District Court for the District of Utah Central Division, who is reviewing this case, is the same judge who remanded America First’s community charter back to NCUA in late 2004 when the ABA challenged whether the six-county area met the definition of a local, well-defined community. America First then pursued much of the same area by adopting the NCUA-approved underserved areas currently in question. “Providing financial services to people of modest means has always been an essential mission of credit unions. The NCUA Board continues to believe that a credit union’s ability to provide service to underserved areas and to persons without access to financial services is critical to accomplishing this mission. “Nevertheless, under the existing circumstances, the NCUA Board believes it prudent to withdraw these areas from America First’s field of membership and to impose a moratorium on the addition of underserved areas to all non-multiple common bond federal credit unions,” NCUA said in a statement. (for mor on NCUA’s comments see related news brief, page 32.) While clearly not happy about the constant barrage of banker attacks, which are particularly constant in Utah, America First has said it will cooperate with NCUA’s moratorium. Harris Simmons, president of Utah’s Zions Bank and credit union archenemy, is the current chairman of the ABA. America First has vowed to continue to advocate for credit union service in underserved areas. “For many years NCUA has encouraged credit unions to provide service in underserved areas,” America First Executive Vice President John Lund said. “In fact, over the past six years alone over 200 community and single sponsor credit unions have been given approval authority to add underserved areas to their fields of membership. America First Credit Union followed all rules and regulations with regard to providing service in underserved areas. By discontinuing the pursuit of new members in areas designated as underserved, America First seeks to cooperate fully with the National Credit Union Administration, and allow the agency time to further analyze and evaluate credit union service to this important segment of our communities. This decision in no way affects the services offered to our existing membership.” Lund added, “While America First has agreed to cooperate with NCUA at this time, we want to underscore the importance of credit unions providing financial services to residents of areas defined as underserved, and will continue to advocate for those residents. “It is important to call attention to the banks’ hypocrisy in continually calling for credit unions to `serve more people of modest means,’ and then filing endless lawsuits to – as in this case – keep credit unions from doing that very thing. All this while exploiting these same underserved areas to reap tax and regulatory credits for themselves.” The two major national trade associations have said they understand NCUA’s move, but will continue to fight for the right of all federal credit union charter types to be able to adopt underserved areas. “CUNA believes it is essential that those of modest means have access to credit union services, and we find it outrageous that bankers would try to curb or block that access,” CUNA General Counsel Eric Richard stated. “We understand what has motivated NCUA to take these steps. However, we also realize that – because of the bankers’ lawsuits against the agency – that low-income people could be deprived of affordable financial services through credit unions. We will work to do everything we can to defend the rights of all segments of the population to turn to credit unions for their financial services.” The attorney declined to comment on the impact of drawing Judge Kimball again for this suit. NAFCU President and CEO Fred Becker took his anger out on the ABA as well. “The banks are suing NCUA to prevent credit unions from serving those in underserved areas while at the same time publicly accusing credit unions of failing to serve the underserved – they cannot have it both ways,” he said. “Such attacks as the banks are making in this instance deprive credit unions of the ability to serve those who are most in need of the financial services that credit unions are striving to provide.” Becker promised on behalf of NAFCU, “We will, however, make every effort to ensure that those single sponsor and community-based credit unions that have acted in good faith to add underserved areas are not unduly harmed. In addition, we will work to ensure that those credit unions that are either single sponsor or are community based are able to adopt underserved areas in the future.” But, if the credit union trades were understanding of NCUA’s moratorium decision, the ABA felt it justified their challenge. “With its action Friday, the agency essentially admitted its rule allowing community based credit unions to extend their common bond by adding so-called underserved areas is fundamentally flawed,” ABA President and CEO Edward L. Yingling stated. “This moratorium is simply postponing the inevitable. NCUA has been an enabler, allowing large community-based credit unions to skirt congressionally mandated membership restrictions under the guise of reaching out to `underserved’ areas. It is clear that the law does not allow the NCUA to combine community and so-called underserved bonds.” He continued, “While the agency has expressed a desire to revisit the rule under which it has approved `underserved expansions,’ we are very skeptical of its motives. NCUA’s history suggests the agency may be looking for other ways to justify expansions like America First’s. The fact is, NCUA lacks the authority to approve the broad expansions that are at the heart of this case, and no amount of internal review or rulemaking by the NCUA will fix that. “We also remain concerned that scores of expansions have already been approved under the NCUA’s misbegotten rule. A moratorium on future expansions offers no relief for community banks facing illegal credit union competition in their communities today.” [email protected]