[Federal Register Volume 81, Number 227 (Friday, November 25, 2016)]
[Rules and Regulations]
[Pages 85110-85113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28229]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 705

RIN 3133-AE58


Community Development Revolving Loan Fund

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: The NCUA Board (Board) is finalizing a rule to make several 
technical amendments to NCUA's rule governing the Community Development 
Revolving Loan Fund (CDRLF). The amendments will make the rule more 
succinct and improve its transparency, organization, and ease of use by 
credit unions.

DATES: This rule is effective December 27, 2016.

FOR FURTHER INFORMATION CONTACT: Geetha Valiyil, Manager, Grants and 
Loans, Office of Small Credit Union Initiatives, or Justin Anderson, 
Senior Staff Attorney, Office of General Counsel, at 1775 Duke Street, 
Alexandria, VA 22314 or telephone (703) 518-6645 (Ms. Valiyil) or (703) 
518-6540 (Mr. Anderson).

SUPPLEMENTARY INFORMATION: 

A. Background

    In June 2016, the Board issued a proposed rule to amend NCUA's 
CDRLF rule.\1\ The proposed amendments were largely technical in nature 
or clarified NCUA's practices with respect to disbursing money from the 
CDRLF.
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    \1\ 81 FR 40197 (June 21, 2016).
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B. Summary of Comments

    NCUA received three comments on the proposed rule, all of which 
were generally supportive of the rule. One commenter, however, did 
request additional changes and clarifications.

[[Page 85111]]

These comments are addressed in the section-by-section analysis below.

C. Section-by-Section Analysis

    As the Board did not receive any comments on the amendments to 
Sec. Sec.  705.1, 705.6, and 705.9, which relate to the authority and 
purpose of the part, terms for grants, and reporting, the Board is 
finalizing these amendments as proposed.
    Sec.  705.2 Definitions. This section provides definitions used 
throughout the rule. The proposed rule removed unnecessary and 
duplicative definitions. One commenter requested that the Board 
reconsider the removal of the definition of ``Fund.'' The commenter 
stated that this term is specifically relevant to the CDRLF rule and 
should remain. As noted in the preamble, this term is already defined 
in Sec.  705.1. The Board continues to believe a second definition of 
``Fund'' is unnecessary and is, therefore, finalizing the amendments to 
this section as proposed.
    Sec.  705.5. Terms and Conditions. This section outlines the terms 
and conditions for CDRLF loans. Currently, this section has an 
aggregate loan limit of $300,000, which prevents NCUA from making loans 
that exceed this amount. As noted in the proposal, the Board sought to 
remove this limit to allow NCUA to grant loans in excess of $300,000 
and to provide more flexibility for the agency to meet changing loan 
demands. One commenter believed that the proposed removal of the 
aggregate loan limit from the rule could lead to NCUA instituting lower 
aggregate limits, which could harm credit unions. This commenter 
suggested including language in the rule that explicitly instructs that 
there is no aggregate limit for loans or technical assistance grants.
    As noted in the preamble to the proposed rule, the Board proposed 
eliminating the aggregate loan limit to help credit unions. As the 
current aggregate loan limit is an upper limit, NCUA is currently free 
to set a lower amount for CDRLF loans but cannot offer a higher amount. 
The proposed removal of this limit will allow NCUA to offer higher loan 
amounts. As the proposed removal of the limit will help, rather than 
harm credit unions, the Board is adopting this change as proposed. 
Further, as there is currently no aggregate limit for technical 
assistance grants and the grant amounts vary each year, the Board does 
not believe it is necessary to add the additional language suggested by 
this commenter.
    This commenter also requested more substantive terms and conditions 
for technical assistance grants. While the commenter did not specify 
what additional terms and conditions the Board should add, the 
commenter did suggest that the terms and conditions for grants are 
``scarce in comparison'' to those for loans. The Board notes that as 
grants are not required to be repaid, unlike loans made under the CDRLF 
program, there is no need for more comprehensive terms and conditions. 
Further, the Board's goal in proposing amendments to the CDRLF rule was 
to make the rule more user friendly and simpler; adding additional 
terms and conditions where they are not needed would frustrate that 
purpose. Finally, as noted in the proposed rule, any additional terms 
and conditions for loans or grants will be specified in the Notice of 
Funding Opportunity and not in the regulatory text.
    Current Sec.  705.6. Application and award processes. This section 
specifies the procedures a credit union must follow to apply for a loan 
or grant from the CDRLF. The Board sought to make this section clearer 
and more accurate by proposing amendments that made this section easier 
to follow and more reflective of NCUA's current practices. One 
commenter requested clarification on whether a credit union is required 
to obtain approval from the applicable regional director before 
submitting an application. NCUA has never required such prior approval 
in the past, and the Board clarifies it is not doing so now.
    Sec.  705.10. Appeals. The Board proposed to add this new section 
to contain all applicable appeals language in one section, which would 
make the rule more user friendly. One commenter requested clarification 
on the appeal rights in proposed Sec.  705.10(a). Specifically, this 
commenter believes that this section could be interpreted as only 
applying to loans and not to grants. In relevant portion, proposed 
Sec.  705.10(a) reads as follows: ``Appeals of Non-Qualification. A 
Qualifying Credit Union whose application for a loan or technical 
assistance grant has been denied, under Sec.  705.7(f) of this part, 
for failure of a qualification may appeal that decision to the NCUA 
Board in accordance with the following . . .''
    The Board believes this section clearly applies to both loans and 
technical assistance grants. Conversely subsection (b) of this proposed 
section states that it only applies to technical assistance grants. The 
Board is adopting the amendments to this section as proposed.

Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires NCUA to prepare an 
analysis to describe any significant economic impact any proposed 
regulation may have on a substantial number of small entities. NCUA 
considers credit unions having less than $100 million in assets to be 
small for purposes of RFA. The revisions to part 705 are designed to 
update and streamline the rule, thereby reducing the burden for credit 
unions that are seeking financial awards, whether in the form of a 
technical assistance grant or a loan. NCUA has determined and certifies 
that this rule, if adopted, will not have a significant economic impact 
on a substantial number of small credit unions. Accordingly, the NCUA 
has determined that an RFA analysis is not required.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency by rule creates a new paperwork burden or increases an 
existing burden. For purposes of the PRA, a paperwork burden may take 
the form of a reporting or recordkeeping requirement, both referred to 
as information collections. The changes in this rule are technical in 
nature and will not create new paperwork burdens or modify any existing 
paperwork burdens.

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. This rulemaking will not have a substantial 
direct effect 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 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 rule will not affect family well-
being within the meaning of section 654 of the Treasury and General 
Government Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681 
(1998).

[[Page 85112]]

List of Subjects in 12 CFR Part 705

    Community programs, Credit unions, Grants, Loans, Low income, 
Revolving fund.

    By the National Credit Union Administration Board on November 
17, 2016.
Gerard Poliquin,
Secretary of the Board.

    For the reasons stated above, NCUA amends 12 CFR part 705 as 
follows:

PART 705--COMMUNITY DEVELOPMENT REVOLVING LOAN FUND FOR CREDIT 
UNIONS

0
1. The authority citation for part 705 continues to read as follows:

    Authority: 12 U.S.C. 1756, 1757(5)(D), and (7)(I), 1766, 1782, 
1784, 1785 and 1786.

0
2. Amend Sec.  705.1 by revising paragraphs (c) through (e) to read as 
follows:


Sec.  705.1  Authority, purpose, and scope.

* * * * *
    (c) NCUA's policy is to revolve the loan funds to credit unions as 
often as practical in order to achieve maximum economic impact on as 
many credit unions as possible.
    (d) The financial awards provided to credit unions through the Fund 
will better enable them to support the communities in which they 
operate; provide basic financial services to low-income residents of 
these communities, and result in more opportunities for the residents 
of those communities to improve their financial circumstances.
    (e) The Fund is intended to support the efforts of credit unions 
through loans and technical assistance grants needed for:
    (1) Providing basic financial and related services to residents in 
their communities;
    (2) Enhancing their capacity to better serve their members and the 
communities in which they operate; and
    (3) Responding to emergencies.

0
3. Revise Sec.  705.2 to read as follows:


Sec.  705.2   Definitions.

    For purposes of this part, the following terms shall have the 
meanings assigned to them in this section.
    Application means a form supplied by the NCUA by which a Qualifying 
Credit Union may apply for a loan or a technical assistance grant from 
the Fund.
    Loan is an award in the form of an extension of credit from the 
Fund to a Participating Credit Union that must be repaid, with 
interest.
    Low-income Members are those members defined in Sec.  701.34 of 
this chapter.
    Notice of Funding Opportunity means the Notice NCUA publishes 
describing one or more loan or technical assistance grant programs or 
initiatives currently being supported by the Fund and inviting 
Qualifying Credit Unions to submit applications to participate in the 
program(s) or initiatives(s).
    Participating Credit Union refers to a Qualifying Credit Union that 
has submitted an application for a loan or a technical assistance grant 
from the Fund which has been approved by NCUA. A Participating Credit 
Union shall not be deemed to be an agency, department, or 
instrumentality of the United States because of its receipt of a 
financial award from the Fund.
    Program means the Community Development Revolving Loan Fund Program 
under which NCUA makes loans and technical assistance grants available 
to credit unions.
    Qualifying Credit Union means a credit union that may be, or has 
agreed to be, examined by NCUA, with a current low-income designation 
pursuant to Sec.  701.34(a)(1) or Sec.  741.204 of this chapter or, in 
the case of a non-federally insured, state-chartered credit union, a 
low-income designation from a state regulator, made under appropriate 
state standards with the concurrence of NCUA. Services to low-income 
members must include, at a minimum, offering share accounts and loans.
    Technical Assistance Grant means an award of money from the Fund to 
a Participating Credit Union that does not have to be repaid.

0
4. Amend Sec.  705.5 as follows:
0
a. Revise the section heading.
0
b. Revise paragraph (b).
0
c. Amend paragraph (h) by adding the words ``security agreements (if 
any),'' between the words ``repayment obligations,'' and ``and 
covenants,''.
    The revisions read as follows:


Sec.  705.5   Terms and conditions for loans.

* * * * *
    (b) Funding Limits. NCUA will publish any applicable loan funding 
limits in the applicable Notice of Funding Opportunity.
* * * * *


Sec.  705.8   [Removed]

0
5. Remove Sec.  705.8.


Sec. Sec.  705.6 and 705.7   [Redesignated as Sec. Sec.  705.7 and 
705.8]

0
6. Redesignate Sec. Sec.  705.6 and 705.7 as Sec. Sec.  705.7 and 
705.8, respectively;

0
7. Add new Sec.  705.6 to read as follows:


Sec.  705.6  Terms and conditions for technical assistance grants.

    (a) Participating Credit Unions must comply with the terms and 
conditions for technical assistance grants specified for each funding 
opportunity offered under a Notice of Funding Opportunity.
    (b) NCUA will establish applicable funding limits for technical 
assistance grants in the Notice of Funding Opportunity.

0
8. Amend redesignated Sec.  705.7 as follows:
0
a. Revise paragraph (a).
0
b. Revise paragraph (c)(4).
0
c. Revise paragraphs (f) and (g).
    The revisions read as follows:


Sec.  705.7   Application and award processes.

    (a) Notice of Funding Opportunity. NCUA will publish a Notice of 
Funding Opportunity in the Federal Register and on its Web site. The 
Notice of Funding Opportunity will describe the loan and technical 
assistance grant programs for the period in which funds are available. 
It also will announce special initiatives, the amount of funds 
available, funding priorities, permissible uses of funds, funding 
limits, deadlines, and other pertinent details. The Notice of Funding 
Opportunity will also advise potential applicants on how to obtain an 
Application and related materials. NCUA may supplement the information 
contained in the Notice of Funding Opportunity through such other media 
as it determines appropriate, including Letters to Credit Unions, press 
releases, direct notices to Qualifying Credit Unions, and announcements 
on its Web site.
* * * * *
    (c) * * *
    (4) Examination Information and Applicable Concurrence. In 
evaluating a Qualifying Credit Union, NCUA will consider all 
information provided by NCUA staff or state supervisory authority staff 
that performed the Qualifying Credit Union's most recent examination. 
In addition:
    (i) NCUA will only provide a loan to a qualifying federal credit 
union with the concurrence of that credit union's supervising Regional 
Director; and
    (ii) NCUA will only provide a loan to a qualifying state-charted 
credit union with the written concurrence of the applicable Regional 
Director and the credit union's state supervisory authority. A 
qualifying state-chartered credit union should notify its state 
supervisory authority that it is applying for a loan from the Fund 
before submitting its application to NCUA. However, a qualifying state-
chartered credit union is not required to obtain

[[Page 85113]]

concurrence before applying for a loan. NCUA will obtain the 
concurrence directly from the state supervisory authority rather than 
through the qualifying state-chartered credit union. Additionally, 
before NCUA will provide a loan to a qualifying state-charted credit 
union the credit union must make copies of its state examination 
reports available to NCUA and agree to examination by NCUA.
* * * * *
    (f) Notice of Award. NCUA will determine whether an application 
meets NCUA's standards established by this part and the related Notice 
of Funding Opportunity. NCUA will provide written notice to a 
Qualifying Credit Union as to whether or not it has qualified for a 
loan or technical assistance grant under this part. A Qualifying Credit 
Union whose application has been denied for failure of a qualification 
may appeal that decision in accordance with Sec.  705.10 of this part.
    (g) Disbursement--(1) Loans. Before NCUA will disburse a loan, the 
Participating Credit Union must sign the loan agreement, promissory 
note, and any other loan related documents. NCUA may, in its 
discretion, choose not to disburse the entire amount of the loan at 
once.
    (2) Technical Assistance Grants. NCUA will disburse technical 
assistance grants in such amounts, and in accordance with such terms 
and conditions, as NCUA may establish. In general, technical assistance 
grants are provided on a reimbursement basis, to cover expenditures 
approved in advance by NCUA and supported by receipts evidencing 
payment by the Participating Credit Union.

0
9. Revise Sec.  705.9(b) to read as follows:


Sec.  705.9   Reporting and monitoring.

* * * * *
    (b) Reporting--(1) Reporting to NCUA. A Participating Credit Union 
must complete and submit to NCUA all required reports, at such times 
and in such formats as NCUA will direct. Such reports must describe how 
the Participating Credit Union has used the loan or technical 
assistance grant proceeds and the results it has obtained, in relation 
to the programs, policies, or initiatives identified by the 
Participating Credit Union in its application. NCUA may request 
additional information as it determines appropriate.
    (2) Reporting to Members--(i) Loans. A Participating Credit Union 
that receives a loan under this part must report on the progress of 
providing needed community services to the Participating Credit Union's 
members once a year, either at the annual meeting or in a written 
report sent to all members. The Participating Credit Union must also 
submit to NCUA the written report or a summary of the report provided 
to members.
    (ii) Technical Assistance Grants. A Participating Credit Union that 
receives a technical assistance grant under this part should report on 
the progress of providing needed community services to the 
Participating Credit Union's members once a year, either at the annual 
meeting or in a written report sent to all members.
* * * * *

0
10. Revise Sec.  705.10 to read as follows:


Sec.  705.10   Appeals.

    (a) Appeals of non-qualification. A Qualifying Credit Union whose 
application for a loan or technical assistance grant has been denied, 
under Sec.  705.7(f), for failure of a qualification may appeal that 
decision to the NCUA Board in accordance with the following:
    (1) Within thirty days of its receipt of a notice of non-
qualification, a credit union may appeal the decision to the NCUA 
Board. The scope of the NCUA Board's review is limited to the threshold 
question of qualification and not the issue of whether, among qualified 
applicants, a particular loan or technical assistance grant is funded.
    (2) The foregoing procedure shall apply only with respect to 
Applications received by NCUA during an open period in which funds are 
available and NCUA has called for Applications. Any Application 
submitted by an applicant during a period in which NCUA has not called 
for Applications will be rejected, except for those Applications 
submitted under Sec.  705.8. Any such rejection shall not be subject to 
appeal or review by the NCUA Board.
    (b) Appeals of technical assistance grant reimbursement denials. 
Pursuant to NCUA Interpretative Ruling and Policy Statement 11-1, any 
Participating Credit Union may appeal a denial of a technical 
assistance grant reimbursement to NCUA's Supervisory Review Committee. 
All appeals of technical assistance grant reimbursements must be 
submitted to the Supervisory Review Committee within 30 days from the 
date of the denial. The decisions of the Supervisory Review Committee 
are final and may not be appealed to the NCUA Board.

[FR Doc. 2016-28229 Filed 11-23-16; 8:45 am]
 BILLING CODE 7535-01-P