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To: Federal Credit Union CEOs

From: Matt Beard - Regulatory Specialist

Date: February 7, 2006

RE: NCUA Chartering and FOM Manual Amendments Underserved Area Expansions and Service Facilities

Note: This new Comment Call format is designed to highlight the key issues associated with the proposed changes, with the option of going to the full description from CUNA. If the topic discussed is of interest, you may click on the link that will take you to the full explanation and questions associated with the changes. If you receive this information via fax or mail, and you do not have Internet access, please contact Angie Hall at 800-262-6285 to receive CUNA’s full proposal.

EXECUTIVE SUMMARY

The NCUA Board has issued a proposed Interpretive Ruling and Policy Statement (IRPS) that would amend its Chartering and Field of Membership Manual for Federal Credit Unions (Chartering Manual). This proposal follows the moratorium NCUA issued December 29, 2005 that suspends the addition of underserved areas for single common-bond and community federal credit unions; the moratorium will remain in effect while NCUA considers the comments filed in response to the proposal and whether the proposal should be adopted.

The proposal would basically make policy changes in two areas.

  • Underserved expansions outside the credit union’s field of membership would be limited to multiple common-bond credit unions only.
  • Underserved area service facility requirements would be revised in the following ways. The definition of a “service facility” would be modified as discussed below and once an underserved area has been added, the credit union would be required to establish and maintain an office or service facility in the underserved area within two years. Currently, a preexisting facility may be within reasonable proximity of the underserved area. As under the current policy, an ATM or the credit union’s Internet web site would not be considered a service facility.

The proposal would apply prospectively. This means that federal credit unions could continue serving underserved areas already approved and continue to bring in new members from those areas. However, a credit union that does not have a multiple group charter would not be able to add new undeserved areas. Comments on the proposal are due to NCUA by March 28, 2006. Please send your comments to MCUL by March 10, 2006. You may access a copy of the IRPS at: http://a257.g.akamaitech.net/7/257/2422/01jan20061800/
edocket.access.gpo.gov/2006/pdf/E6-908.pdf

A copy of the CUNA Comment Call can be found at: http://www.cuna.org/reg_advocacy/reg_call/rcc_012706.html (You will need your CUNA user name and password to access it.)

Potential Impact to Credit Unions

Note: Below is a list of issues the MCUL identified as potentially impacting credit union policies, procedures, or operations. Keep in mind that as each credit union is unique, this list may not be exhaustive.

As is currently proposed:

  • Underserved expansions outside the credit union’s field of membership would be limited to multiple common-bond credit unions only.
  • Credit unions that are approved for an underserved area would have to establish and maintain an office or service facility in the underserved area within two years. As under the current policy, an ATM or the credit union’s Internet web site would not be considered a service facility.
  • The changes would not impact credit unions who have already received underserved expansions.

Questions

  1. Does NCUA have authority to permit expansions into underserved areas for all three federal charter types (single common-bond, multiple common-bond, and community charter)? Please explain.
  2. Do you feel that NCUA should permit only multiple group credit unions to add underserved areas to their field of membership? What would be the impact of that limitation? Please explain.
  3. If only multiple common-bond credit unions are permitted to add underserved areas, should they be permitted to retain these areas in the event they change charter type? Please explain.
  4. To what extent do non-multiple common-bond credit unions have existing investments in underserved areas? What types of investments are they? (For example, capital investment, loans, share deposits, and other programs targeting low income people.) P lease explain.
  5. What would be the impact to members of underserved areas, and non-multiple common bond credit unions, of placing restrictions on the addition of new members in underserved areas they are currently serving? Please explain.
  6. Do you agree with the new provision requiring that a physical presence (service facility) be established in an added underserved area to ensure an active credit union role and better serve local residents? If not, what other method should NCUA employ to ensure that the service needs of the local residents in the underserved area are adequately met?

If you have any further questions, or to submit a response, please contact me at:

Matt Beard, Michigan Credit Union League, 112 East Allegan St., Suite 800, Lansing, MI 48933
E-mail: mob@mcul.org fax: (517) 482-3762

We Appreciate Your Response.

InfoSight - For further information on Field of Membership issues go to www.mcul.org, click on Regulatory Compliance and InfoSight, enter your user name and password, click on the InfoSight Link in the center of the page, click on the Field of Membership Channel. Or you may click on the following link: Field of Membership.

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