Written by Elizabeth M. Young LaBerge, Senior Regulatory Compliance Counsel
NCUA’s efforts to modernize the field of membership rules have finally started to come to fruition. On Wednesday, NCUA’s field of membership final rule was published in the Federal Register at 81 Fed. Reg. 88412. Based on this publication date, the effective date for the final rule is February 6, 2017.
Four Changes for Community Common Bond Charters
The final rule contains changes for community common bond charters in four areas: the “core area” service requirement, the population limitation, combined statistical areas and the addition of an area adjacent to the core-based statistical area. In the proposed rule, there was a fifth area, adding individual statewide congressional districts as a well-defined local community, but NCUA deferred action on this issue to a later time.
Currently, community charter applications for part of a core based statistical area (CBSA) are acceptable to NCUA provided 1) they include the dominant core city, county, or equivalent and 2) that the CBSA's population in its entirety is 2.5 million or less people.
“Core Area” Service Requirement
Under the new rules, the requirement that a portion of the CBSA include the dominant core area is being repealed. This requirement is not mandated by the Federal Credit Union Act. NCUA decided to repeal it stating that federal credit unions (FCUs) have been successful in providing services to low-income and underserved populations whether they are in a core area or not. See, 81 Fed. Reg. 88412, 88413.
The Population Limitation
The 2.5 million people population limitation currently applies to the entire CBSA, even when a credit union seeks only to serve a part of the CBSA. Under the new rule, the 2.5 million population cap will no longer apply to the CBSA’s population in the entirety. Instead, the cap will apply to the portion of the CBSA the credit union seeks to serve. See, 81 Fed. Reg. 88414. Also, NCUA issued a proposed rule that would increase this cap to 10 million. See, 81 Fed. Reg. 78748, 78751.
Combined Statistical Area
Under the current rule, there are two kinds of “presumptive communities” that automatically qualify as well-defined local communities: 1) a single political jurisdiction and 2) a core based statistical area (CBSA). The final rule adds a third presumptive community: a combined statistical area. A combined statistical area is two or more continuous CBSAs that have a substantial employment interchange. These are determined by the Office of Management and Budget. The same population limit would apply to these combined statistical areas (or portions thereof) as it would to CBSAs. See, 81 Fed. Reg. 88414.
Addition of Adjacent Areas
Currently, NCUA uses objective and statistical requirements to determine whether an area is a well-defined local community. Under the final rule, FCUs will be able to apply to serve an area outside of, but touching, their current CBSA or single political jurisdiction by providing narrative evidence. That written narrative should demonstrate interaction and common interests among the residence of the area and the existing community, to demonstrate the area, as a whole, is a well-defined local community.
NCUA will issue additional guidance on this process, but it will seek evidence on several factors regarding the proposed service area, including: presence of an economic hub and economic interdependence, population centers, isolated areas, quasi-governmental agencies, government designations, shared facilities and services and colleges and universities. See, 81 Fed. Reg. 88440.
It may not be the very model of a modern field of membership rule quite yet, but it is definitely a step in the right direction. For more information on the field of membership rules and proposals, have a look at NAFCU Compliance Blog post Thankful for Proposed FOM Rules? Let NCUA Know!, the NAFCU FOM Issues webpage, the NAFCU Regulatory Alert regarding the proposed rule (members only) and the NAFCU Final Regulation regarding the finalized rule (members only).