NCUA OKs Major Changes To Field Of Membership Rules

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In its first major changes to field of membership (FOM) rules since the landmark 1998 law, HR 1151, the NCUA board voted last week to ease FOM standards in several major ways.

One of the most significant changes is the creation of a new occupational charter allowing federally chartered credit unions to serve an entire trade, industry or profession within a defined geographic area. So credit unions adopting the new charter, known by its acronym TIP, would be able to serve all hospital workers in Washington, D.C., or all airline employees in greater Chicago, or all lawyers in Miami. Upon conversion to the new charter a credit union would be required to give up its select groups but could retain all existing members.

The new rules, the first since NCUA drafted implementing standards for the CU Membership Access Act, will also expand the concept of 'reasonable proximity' by allowing federal credit unions to add select groups to their FOMs that are within reasonable proximity to electronic service facilities, as well as physical branches allowed under the current rules. That means wholly owned ATMs, or shared branches at least partially owned by the credit union.

NCUA also adopted several measures aimed at making it easier to obtain the coveted community charter, adopted by more than 500 federal charters over the past five years.

Among the changes are the automatic approval as a well-defined community of any city, county or smaller political jurisdiction, regardless of population. Also, any area under one million in population already recognized as a Metropolitan Statistical Area (MSA) may meet the definition of a local community. In addition, NCUA raised the threshold for considering multiple jurisdictions as a single community from the current 200,000 population to 500,000.

The rules will also eliminate, for all intents and purposes, the traditional FOM overlap protection, commonly known as exclusionary clauses which exclude credit unions from serving groups already served by another credit union. Credit unions may still enter into exclusionary agreements voluntarily.

The new rules will also allow state-chartered credit unions converting to a federal charter to retain any select groups in their FOMs they acquired through an emergency merger.

The board also issued for a 60-day comment period several proposals aimed at making it easier for federal credit unions to make business loans. Among them are separate provisions to allow CUSOs for the first time to originate member business loans; to lower to 25% the requirement that construction and development borrowers have a minimum equity interest in any construction or land development from the current 35% minimum.

The proposals would also: exclude acquired business loan participation interests from the congressionally mandated MBL cap; exempt MBL vehicle loans from the 80% loan-to-value requirement, thereby allowing 100% financing; and extend the prompt corrective action (PCA) risk-based net worth component on MBLs.

The board also approved three conversions to community charters: for Paragon FCU, Washington Township, N.J. ($340 million) to serve 900,000 residents of Bergen County, N.J.; Edward FCU, Edwards, Calif. ($95 million) to serve 400,000 residents of the Antelope Valley Region of southern California; and South Carolina FCU, Columbia, S.C. ($800 million) to serve 600,000 residents in Berkeley, Charleston and Dorchester counties, S.C.

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