[Federal Register Volume 71, Number 18 (Friday, January 27, 2006)]
[Proposed Rules]
[Pages 4530-4532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-908]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 71, No. 18 / Friday, January 27, 2006 /
Proposed Rules
[[Page 4530]]
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
Organization and Operations of Federal Credit Unions
AGENCY: National Credit Union Administration (NCUA).
ACTION: Notice of proposed rulemaking (NPR).
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SUMMARY: NCUA is issuing proposed amendments to its rules regarding
service to underserved areas. These amendments are being proposed
because of NCUA's experience addressing field of membership issues and
the uncertainty resulting from recent litigation challenging existing
chartering policy. This proposed rule will ensure continued reliable
and efficient service to federal credit union members located in
underserved areas.
DATES: Comments must be received on or before March 28, 2006.
ADDRESSES: You may submit comments by any of the following methods
(Please send comments by one method only):
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
NCUA Web site: http://www.ncua.gov/news/proposed_regs/proposed_regs.html. Follow the instructions for submitting comments.
E-mail: Address to [email protected]. Include ``[Your
name] Comments on Proposed Rule Part 701.1'' in the e-mail subject
line.
Fax: (703) 518-6319. Use the subject line described above
for e-mail.
Mail: Address to Mary Rupp, Secretary of the Board,
National Credit Union Administration, 1775 Duke Street, Alexandria,
Virginia 22314-3428.
Hand Delivery/Courier: Same as mail address.
FOR FURTHER INFORMATION CONTACT: Michael J. McKenna, Deputy General
Counsel, John K. Ianno, Senior Trial Attorney, or Regina Metz, Staff
Attorney, Office of General Counsel, 1775 Duke Street, Alexandria,
Virginia 22314 or telephone (703) 518-6540.
SUPPLEMENTARY INFORMATION
A. Background
NCUA's chartering and field of membership policy is set out in
NCUA's Chartering and Field of Membership Manual (Chartering Manual),
Interpretive Ruling and Policy Statement 03-1. 68 FR 18333, Apr. 15,
2003. The policy is incorporated by reference in NCUA's regulations at
12 CFR 701.1.
In establishing a federal credit union system Congress recognized
that a primary purpose was to make credit more available to persons of
modest means. This goal has been a long-standing priority of the NCUA
Board. From 1994 through 1998, NCUA rules permitted federal credit
unions, regardless of charter type, to include low-income communities
and associations in their field of membership.
In 1998 Congress passed the Credit Union Membership Access Act
(CUMAA) in order to codify the authority of NCUA to charter multiple
common-bond credit unions. Pub. L. 105-219, 112 Stat. 914 (1998). As
part of that legislation, Congress expressly recognized that multiple
common-bond credit unions would be authorized to serve persons or
organizations within an area that was underserved. CUMAA also provided
a definition of an ``underserved area.'' In response, NCUA changed its
field of membership regulations to utilize the term ``underserved
area'' and its definition, instead of the previous authority for all
charter types to serve low-income communities and associations. Since
then, service to underserved areas, as defined in Chapter 3 of the
Chartering Manual, has remained a priority of the NCUA Board.
Recently certain Utah banks and the American Bankers Association
(collectively the Bankers) have filed suit challenging NCUA's policy
related to adding underserved areas. The Bankers' complaint recognizes
that CUMAA expressly authorizes the chartering of multiple common-bond
credit unions but argues that the legislation permits only that type of
charter to serve underserved areas.
One of CUMAA's primary purposes was to codify in statute the
legality of multiple common-bond credit unions. NCUA believes that the
statutory language also reflects Congress' intent to make clear that
this new charter type was authorized to add underserved areas, not as
the Bankers argue, to prohibit the other two federal charter types from
doing so. This conclusion is supported by the legislative history and
the fact that at the time Congress enacted CUMAA it was aware of NCUA's
long-standing policy allowing all federal charters to serve communities
and groups in need of additional financial services.
NCUA is mindful of the ongoing litigation and recognizes that the
statutory language is susceptible to different interpretations. We
believe that these issues create a degree of uncertainty about the
continued authority of non-multiple common-bond credit unions to serve
underserved areas. We are concerned about the financial effect of
continuing to approve new requests to serve underserved areas by non-
multiple common-bond credit unions that then invest resources in
serving these areas. We also believe that it is unfair to provide
persons of limited means with needed financial services where the
possibility exists that they could suddenly be deprived of those
services.
Faced with this uncertainty, on December 29, 2005, the NCUA Board
issued a moratorium suspending that portion of its chartering policy
allowing non-multiple-common-bond credit unions to add new underserved
areas. That moratorium will remain in place until further notice.
Since establishing a moratorium the NCUA has conducted a
comprehensive review of its underserved area policy. As a result of
this review, the NCUA Board believes it prudent to propose two
amendments to its field of membership policy. Both changes will apply
only prospectively.
The first change will limit the addition of new underserved areas
to only multiple common-bond credit unions.
The second change is to the definition and location of the service
facility when adding underserved areas. The Board believes that a
physical presence in the underserved areas is likely to assure better
service to members in these locations. The definition of a service
facility and where it may be located has
[[Page 4531]]
been modified. This will assure a physical presence in the area and
further encourage a very active role by the credit union in the
underserved area. There has been no change to the requirement that the
service facility be established within two years.
B. Request for Comments
The NCUA Board welcomes all comments on its existing policy
regarding service to underserved areas. In addition we are particularly
interested in comments related to the following areas:
(1) NCUA's authority to permit expansions into underserved areas
for all three federal charter types;
(2) The impact of limiting expansions into underserved areas to
only multiple common-bond credit unions;
(3) Whether, if only multiple common-bond credit unions are
permitted to add underserved areas, they should be permitted to retain
these areas in the event they change charter type;
(4) The type and extent of existing investment by non-multiple
common-bond credit unions in underserved areas including for example;
capital investment, loans, share deposits, and other programs targeting
low income people; and
(5) The impact to members of underserved areas, and non-multiple
common-bond credit unions, of restrictions on the addition of new
members in underserved areas they are currently serving.
Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
to describe any significant economic impact a regulation may have on a
substantial number of small credit unions (primarily those under $10
million in assets). The proposed amendments will not have a significant
economic impact on a substantial number of small credit unions and
therefore, a regulatory flexibility analysis is not required.
Paperwork Reduction Act
The Office of Management and Budget control numbers assigned to
Section 701.1 are 3133-0133 and 3133-0116. NCUA has determined that the
proposed amendments will not increase paperwork requirements and a
paperwork reduction analysis is not required.
Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests. In
adherence to fundamental federalism principles, NCUA, an independent
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies
with the executive order. The proposed rule would not have substantial
direct effects on the states, on the connection between the national
government and the states, or on the distribution of power and
responsibilities among the various levels of government. NCUA has
determined that this proposed rule does not constitute a policy that
has federalism implications for purposes of the executive order.
The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
The NCUA has determined that this proposed rule would not affect
family well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act of 1999, Pub. L. 105-277, 112
Stat. 2681 (1998).
List of Subjects in 12 CFR Part 701
Credit, Credit unions, Reporting and recordkeeping requirements.
By the National Credit Union Administration Board on January 19,
2006.
Mary Rupp,
Secretary of the Board.
For the reasons stated in the preamble, the National Credit Union
Administration proposes to amend 12 CFR part 701 as follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
1. The authority citation for part 701 continues to read as
follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a,
1761b, 1766, 1767, 1782, 1784, 1787, 1789. Section 701.6 is also
authorized by 15 U.S.C. 3717. Section 701.31 is also authorized by
15 U.S.C. 1601, et seq., 42 U.S.C. 1981 and 3601-3610. Section
701.35 is also authorized by 12 U.S.C. 4311-4312.
2. Section 701.1 is revised to read as follows:
Sec. 701.1 Federal credit union chartering, field of membership
modifications, and conversions.
National Credit Union Administration policies concerning
chartering, field of membership modifications, and conversions are set
forth in Interpretive Ruling and Policy Statement 03-1, Chartering and
Field of Membership Manual, as amended by IRPS 06-1, Copies may be
obtained by contacting NCUA at the address found in Sec. 792.2(g)(1)
of this chapter.
(Approved by the Office of Management and Budget under control
number 3133-0015 and 3133-0116.)
Note: The text of the IRPS 03-1, as amended by the IRPS 06-1,
does not appear in the Code of Federal Regulations.
3. IRPS 03-1, Chapter 3, Section III.A is revised to read as
follows:
A multiple common-bond federal credit union may include in its
field of membership, without regard to location, communities satisfying
the definition of underserved areas in the Federal Credit Union Act.
Adding an underserved area will not change the charter type of the
multiple common-bond federal credit union. More than one multiple
common-bond federal credit union can serve the same underserved area.
The Federal Credit Union Act defines an underserved area as a local
community, neighborhood, or rural district that is an ``investment
area'' as defined in Section 103(16) of the Community Development
Banking and Financial Institutions Act of 1994.
For an underserved area, the well-defined local community,
neighborhood, or rural district requirement is met if:
The area to be served is in a recognized single political
jurisdiction, i.e., a city, county, or their political equivalent, or
any contiguous portion thereof;
The area to be served is in multiple contiguous political
jurisdictions, i.e., a city, county, or their political equivalent, or
any contiguous portion thereof and if the population of the requested
well-defined area does not exceed 500,000; or
The area to be served is a Metropolitan Statistical Area
(MSA) or its equivalent, or a portion thereof, where the population of
the MSA or its equivalent does not exceed 1,000,000.
If the area to be served does not meet the MSA or multiple
political jurisdiction requirements outlined above, the application
must include documentation to support that it is a well-defined local
community, neighborhood, or rural district.
For an underserved area, an investment area includes any of the
following (as reported in the most recently completed decennial census
or equivalent government data):
An area that wholly consists of or is wholly located
within an Empowerment Zone or Enterprise Community designated under
section 1391 of the Internal Revenue Code (26 U.S.C. 1391);
[[Page 4532]]
An area where the percentage of the population living in
poverty is at least 20 percent;
An area in a Metropolitan Area where the median family
income is at or below 80 percent of the Metropolitan Area median family
income or the national Metropolitan Area median family income,
whichever is greater;
An area outside of a Metropolitan Area, where the median
family income is at or below 80 percent of the statewide non-
Metropolitan Area median family income or the national non-Metropolitan
Area median family income, whichever is greater;
An area where the unemployment rate is at least 1.5 times
the national average;
An area meeting the criteria for economic distress that
may be established by the Community Development Financial Institutions
Fund (CDFI) of the United States Department of the Treasury.
In addition, the local community, neighborhood, or rural district
must be underserved, based on data considered by the NCUA Board and the
Federal banking agencies.
Once an underserved area has been added to a federal credit union's
field of membership, the credit union must establish and maintain an
office or service facility in the community within two years. A service
facility is defined as a place where shares are accepted for members'
accounts, loan applications are accepted and loans are disbursed. This
definition includes a credit union owned branch, a shared branch, a
mobile branch, or an office operated on a regularly scheduled weekly
basis. This definition does not include an ATM or the credit union's
Internet Web site.
The federal credit union adding the underserved community must
document that the community meets the definition for serving
underserved areas in the Federal Credit Union Act. The charter type of
a multiple common-bond federal credit union adding such a community
will not change. Therefore, the multiple common-bond federal credit
union will not be able to receive the benefits afforded to low-income
designated credit unions, such as expanded use of nonmember deposits
and access to the Community Development Revolving Loan Program for
Credit Unions.
A federal credit union that desires to include an underserved
community in its field of membership must first develop a business plan
specifying how it will serve the community. The business plan, at a
minimum, must identify the credit and depository needs of the community
and detail how the credit union plans to serve those needs. The credit
union will be expected to regularly review the business plan to
determine if the community is being adequately served. The regional
director may require periodic service status reports from a credit
union about the underserved area to ensure that the needs of the
community are being met as well as requiring such reports before NCUA
allows a multiple common-bond federal credit union to add an additional
underserved area.
[FR Doc. E6-908 Filed 1-26-06; 8:45 am]
BILLING CODE 7535-01-P