WASHINGTON—Both major credit union trade associations are panning an NCUA plan to dramatically alter the current federal regulatory process for approving multiple group credit unions' applications to serve underserved areas. At the same time, the American Bankers Association indicated it supports NCUA’s plan.
In a comment letter, CUNA, questioning the very basis for the plan, said it has a “fundamental disagreement with the basic rationale for the proposal and the analysis of the Federal Credit Union Act's provisions regarding underserved areas that underlie the proposal.”
"While we appreciate efforts to clarify and update rules, we are not aware of problems with the current process that indicate that the (field of membership) FOM Manual provisions on underserved applications are not clear and which would justify a broad new regulation on underserved areas and the application process,” CUNA said in its letter.
Beyond the fundamental opposition, CUNA said that under the FCU Act, a federal credit union must have a field of membership that is a single common bond, multiple common bond, or which encompasses a community FOM. The Act provides an exception for "In our view, Congress intended that NCUA would implement the provisions of the Act carefully but in a manner that would facilitate service to undeserved eras. The proposal undermines both these objectives," said CUNA.
CUNA urged NCUA to retain the current process, not to proceed with the proposal, and said the agency should "be mindful" that the Credit Union, Bank, and Thrift Regulatory Relief Act, HR 6312, remains pending in Congress and that that legislation would change the definition of "undeserved area."
NAFCU, meanwhile, called the proposal “overly complicated” and said it would deter many credit unions from applying to serve underserved areas. NAFCU said it objects to the plan to incorporate the definition of “well defined local community” that currently applies in the community chartering context and does not believe that a supporting letter to prove “local community” should be required.
“Instead of making the process to add underserved areas more difficult by requiring additional documentation, the NCUA should ease the burden by streamlining the application process and adopting objective methods,” said NAFCU’s comment letter.
NAFCU added that one aspect of NCUA’s proposal would require credit unions to prove that a proposed area meets at least one of the five economic distress requirements set forth in the Community Development Financial Institution Fund regulations, which it said is “too complicated.” NAFCU called on NCUA to grandfather underserved areas currently designated as such and others for which the designation is applied before the finalization of the proposed rule.
The American Bankers Association, meanwhile, said it supports the proposal, including limiting underserved designations to census tracts. It said it further recommends that if a branch of any financial institution is located in a proposed area, "this would indicate with high probability that the area is not undeserved."
