ARLINGTON, Va. — NAFCU commended NCUA for looking through its field of membership chartering policy, particularly as it pertains to "local community."
The NCUA Board made the announcement that it would be reviewing its Field of Membership and Chartering Manual after turning down the appeals for community charter conversions for Cinfed Federal Credit Union and Emery Federal Credit Union covering an eight county area.
"The current somewhat vague requirements for the establishment of a community charter have unfortunately discouraged and inhibited many credit unions who have applied for a community charter, largely as a result of the vagaries of the application process," NAFCU President/CEO Fred Becker wrote in a letter to the agency. NAFCU noted that lack of clarity for the term "well-defined, local community" has led to lawsuits from the banking trade associations.
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NCUA regulation allows for three definitions, including a single city, county or smaller political jurisdiction; multiple political jurisdictions with populations under 500,000; and a metropolitan statistical area, in whole or part, with up to one million residents. There are also case-by-case considerations with additional documentation required.
"NAFCU has raised concerns on numerous previous occasions regarding the arduous process groups must endure to meet the local community requirement," Becker wrote. "NAFCU encourages NCUA to streamline the process for large and complex communities by establishing a straightforward, yet flexible standard. In previous communications with NCUA, NAFCU has stated that based on the lack of legislative history, court decisions and other legal definitions of 'local community,' NAFCU believes it is clear that a particular population and/or geographic size cannot dictate whether or not the local community requirement has been met, and the process in place for groups whose size exceeds the presumptive community standard should be eased."
Additionally, Becker pointed out that NCUA's current policy only permits voluntary mergers of community credit unions with other community charters, which "inhibits growth and impedes many federal credit unions from making reasonable business decisions to benefit their members."
NAFCU also pointed out that mergers between community charters may not be feasible, particularly for smaller credit unions in rural areas. "Absent insolvency (or likely insolvency), these community credit unions have very limited options and are often seeking to convert to state charters, which by regulation and application permit such community charters even under circumstances where the state law mirrors or closely mirrors that of the federal system. NAFCU believes that credit unions should not be pushed to the verge of insolvency before they are permitted to exercise their business judgment to merge, or to convert to state charter, and we strongly encourage NCUA to clarify its merger policy with regard to community credit unions," Becker wrote.
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