NCUA Figures Show Community Charter Activity, Underserved Area Adoption Declines

ALEXANDRIA, Va.-According to data released last month by NCUA, the adoption of underserved areas and conversions to and expansions of community charters slowed significantly between the first quarter of 2005, and the same period this year. Thirty-six credit unions either converted to community charters or expanded their communities during the first quarter of 2005. In contrast, just 24 have done so in the first quarter of 2006. Additionally, the number of underserved areas adopted has dropped from 37 credit unions adopting 48 underserved areas for a total of 10.6 million potential members in the first quarter of 2005, to 23 credit unions adopting 27 underserved areas with an aggregate population of about four million people in 2006. “The moratorium is the first thing that comes to mind,” NCUA Director of Public and Congressional Affairs John McKechnie commented. Late last year, NCUA discontinued permitting non-multiple common bond credit unions to add underserved areas in response to a lawsuit brought in Utah by the American Bankers Association. “There are people on Capitol Hill who are discussing what needs to be done,” McKechnie said of a legislative solution. He pointed out that there are still plenty of members of Congress around from H.R. 1151 and they consider it a drafting error. However, everything on the legislative end is on hold for now until the judge rules on the case. Progress on the lawsuit has been halted until NCUA issues a final rule solidifying the moratorium. McKechnie said the agency is not yet sure when a final rule will come out at this point. After that, the plaintiffs have 20 days to respond to NCUA's motion to dismiss as moot, which is based on the moratorium and final rule. During the comment period, which closed in late March, the ABA stated the position that the notice of proposed rulemaking did not go far enough. CUNA Chief Economist Bill Hampel said that the moratorium is a factor, but also market saturation of the obvious underserved areas could also be at play. “There are a number of factors that have an impact on the number of new `underserved areas' that have been added by federal credit unions – and the recent moratorium by NCUA is one of those factors having an effect,” he said. “Another is that credit unions have already added many of the most likely underserved areas, and this slowdown is a reflection of that. Both factors are in play.” -

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