ALEXANDRIA, Va. — NCUA staff has put together a proposal, approved for comment by the board at last week's meeting, to clarify the agency's expectations for a community charter application following the board's denial of an appeal for the same community charter for two credit unions in March.
In issuing the proposal, NCUA Deputy General Counsel Mike McKenna said the agency was trying to fulfill the task charged by the board for a more objective and clear explanation of what is needed for community charter approval. He said that under the proposed revised definitions for community charters, NCUA would retain the single political jurisdiction, such as county or smaller.
NCUA has also proposed a new Core Based Statistical Area requirement. NCUA Trial Attorney John Ianno explained that CBSA is defined by the Office of Management and Budget as a geographic area with at least one core or urbanized area or cluster of at least 10,000 in population plus adjacent counties with high levels of social and economic interaction. The two categories of CBSAs include Metropolitan Statistical areas and Micropolitan Statistical Areas, as defined in the proposal and by OMB.
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However Ianno explained that NCUA would further restrict this type of local community by requiring it to not include a Metropolitan Division–an area within a CBSA with a core population of at least 2.5 million–but requiring the core to hold the majority of the jobs in the area plus one-third of the population.
In response to a question from NCUA Chairman JoAnn Johnson on improved clarity and objectivity in the proposal, Ianno said he feels it meets those charges, particularly since the definitions are "very widely used," including by the banking regulators, and they are easy to access on OMB's Web site (www.whitehouse.gov/omb).
McKenna also described a new category for those community charter applications not meeting either of these definitions that would require a notice and comment period to be implemented through the Federal Register. The comment period in this situation would last 30 days under the proposal.
The banking trade associations have complained about some of the largest community charters NCUA has approved saying they have not had the benefit of notice and comment. "They're wanting to do everything to protect credit unions and the agency from further litigation," CUNA Deputy General Counsel Mary Dunn commented. Offering a public comment period will provide further legitimacy to the agency's decisions.
NAFCU Senior Counsel Carrie Hunt said of any potential burden, "If implemented, we'd have to see how it goes in practice."
NCUA Vice Chairman Rodney Hood also asked agency staff whether the notice and comment period might add extra regulatory burden. "I don't believe it does," Ianno responded. In fact, because of the proposed clarifications, he suggested it might even reduce burden.
The notice and comment procedure would also be expanded to adopting underserved areas. "However, while I support issuance of this [Interpretive Ruling and Policy Statement] for public comment, I do not fully agree with extending the new process to applications for underserved areas. As a matter of policy, this Board was forced last year to limit the availability of underserved areas to only multiple group federal credit unions," said NCUA Board Member Gigi Hyland. "We have subsequently made it a priority to seek legislative relief so that all federal credit union charter types would be able to obtain an underserved area. We also have strongly encouraged credit unions to reach out to the underserved in any way possible. I believe that requiring a credit union to first show that an area is a well-defined local community and then to also show that it is underserved is not fully consistent with previously stated Board policy."
Finally, NCUA is reaching into new territory with its proposed Rural District definition, as it was permitted to do under the Credit Union Membership Access Act, McKenna noted. "NCUA has never taken that option," he pointed out.
In the proposal, a Rural District would be one that does not cover an MSA or MicroSA and has fewer than 100 people per square mile with a total population under 100,000. As this is an entirely new area, McKenna said the agency is seeking comment on all aspects of it.
The proposal also seeks to reign in NCUA's current policy of permitting credit unions to assume a community exists based on previous approvals of applications for the same area by limiting the pre-approvals to five years. The agency reasoned that populations could change dramatically in certain areas if not limited.
In addition, NCUA is also seeking comment on voluntary mergers of community charters, as requested by NAFCU. Hunt recognized that there are provisions in the Credit Union Regulatory Improvements Act (H.R. 1537) to alleviate these problems, but NAFCU also feels NCUA has some "wiggle room" within the current statute.
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