NCUA Proposes Significant Changes to Field of Membership Requirements
Written by Brandy Bruyere, Director of Regulatory Compliance
Yesterday, the NCUA Board approved a 160+ page proposal that, if finalized, would be a comprehensive modernization of the agency's chartering and field of membership rules. Since its Friday, we'll stick to some high-level points for today, but NAFCU will post future blogs that provide some more details about the proposal.
Community Common Bond
A community-based charter must have clearly defined boundaries and serve a well-defined local community or rural district. Chartering and Field of Membership Manual, Part V.A.1 NCUA's definitions of well-defined and local community have proven rather restrictive, requiring FCUs to serve either a single political jurisdiction or a Core Based Statistical Area (CBSA). However, the Manual limits FCUs to communities with a population of 2.5 million or less. This made it challenging to serve a CBSA whose population exceeded this limit. One positive aspect of the proposal would change this and instead allow a FCU to include only the portion of the CBSA the FCU seeks to serve when determining if the area exceeds the 2.5 million population limit, as opposed to the current practice of considering the whole CBSA population. The proposal would also allow Combined Statistical Areas (CSAs) designated by the Office of Management and Budget (OMB) to count as a well-defined, local community." However, CSAs would still be subject to the 2.5 million population limit. Here are a few other highlights of the changes to community common bond charters:
- Allow FCUs to include adjacent areas to a community consisting of a Single Political Jurisdiction, CBSA, CSA, or Rural District after showing, based on subjective evidence, that the residents interact or share common interests.
- Recognize congressional districts as a Single Political Jurisdiction.
- Increase the population limit for a Rural District from 250,000 to 1 million persons.
- Amend the definition of Underserved Areas definition to exclude non-depository institutions and non-community credit unions from the concentration of facilities ratio, as well explain that NCUA, when classifying an area as underserved, would consider two alternatives to the concentration of facilities ratio: (1) the CFPB's list of underserved counties, or (2) a metric of the credit union's own choosing based on data of the Board and the Federal banking agencies.
Multiple Common Bond Charters
Currently, a service facility for multiple common bond FCUs is defined as a place where shares are accepted for members accounts, loan applications are accepted or loans are disbursed. This can include certain shared branches, credit union owned ATMs and certain electronic facilities. One big change in this proposal is the consideration of what constitutes a service facility and therefore reasonable proximity to the FCUs services through Online Access to Services. Well blog more about this on Monday. Other proposed changes would:
- Permit the addition of persons who work regularly for an entity that is under contract to the sponsor of the Select Employee Group (SEG) listed in its charter, provided there is a strong dependency relationship with that sponsor.
- Allow inclusion of employees of an office/industrial park's tenants, such as a shopping mall, with certain conditions:
- Each tenant within the group has fewer than 3,000 employees, and
- Only employees who work regularly at the park during their employer's tenancy are eligible for FCU membership.
- Allow a credit union's common bond to include honorably discharged veterans of any branch of the United States Armed Forces listed in its charter, thereby continuing their eligibility for credit union membership beyond active duty.
Trade, Industry, or Profession (TIP) Charters
The proposal would expand the definition of TIP to include employees of entities that have a strong dependency relationship on, and whose employees work directly with employees of, other entities within the same industry. A credit union would need to demonstrate that an entity is: (1) strongly dependent on the others within a TIP, and (2) shares a narrow commonality.
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Palate Cleanser. I met some of you at Regulatory Compliance Seminar a couple of weeks ago, thanks for attending! Someone mentioned that it had been a while since I shared a Nolan/Lemmy update, so here are a couple of photos from Halloween a few weeks ago and a photo of Nolan in his "playpen" which he loves to push around the room now. Have a great weekend!
