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NCUA Chairman J. Mark McWatters released a letter to federal credit unions Tuesday that provides guidance on how credit unions can use a written narrative to establish a well-defined local community. The narrative approach falls under the NCUA's second field-of-membership (FOM) rule, which became effective Sept. 1.

Under the FOM II rule, credit unions seeking to form, expand or convert to a community charter are given the option of submitting a narrative as to why a particular area meets their field of membership. In addition, for statistical areas that may exceed the 2.5 million population limit, narrative applications will be subject to a public hearing.

In the letter, McWatters said applications using the narrative approach "must include documentation and provide specific details and clearly demonstrate how the area's residents interact or share common interests." Credit unions must also demonstrate that they have the ability to serve the requested community, as well as the intent to serve the entire community and all of its segments.

The letter includes guidance on specific elements of the narrative approach, including types of evidence and the 13 criteria that are the most compelling indicators that demonstrate common interests or interaction.

On Oct. 24, the NCUA is also hosting a free webinar to help credit unions better understand the narrative approach and determine if it's the right approach for their institution.

NAFCU is supportive of the NCUA's efforts to modernize FOM rules in order to give credit unions the opportunity to grow and serve even more Americans. The association has stood by the agency as its original FOM rule is challenged by bankers; NAFCU believes these FOM reforms fall well within the agency's legal authority.