NCUA Seeks CU Guidance On Proposed Underserved FOM Rule
In another concession to the bankers, the NCUA Board last week issued for comment a proposed new rule that would explicitly allow community chartered credit unions to add underserved communities to their fields of membership.
The action virtually concedes the American Bankers Association's suit claiming NCUA violated provisions of the Federal CU Act by allowing America First FCU and as many as 200 other community-chartered credit unions to add underserved communities to their FOMs over the past five years.
Earlier, NCUA indicated the strength of the bankers' case when it withdrew America First FCU's underserved field of membership and issued an immediate moratorium on all new underserved additions for community-chartered credit unions while the suit is pending.
John Ianno, senior trial attorney for NCUA, told the board they feel NCUA acted properly in granting underserved expansions to community charters. "But we believe the statutory language at question here is susceptible to multiple interpretations," said Ianno, who has represented NCUA in the numerous FOM lawsuits brought by the bankers over the years.
He was referring to provisions in HR 1151, the 1998 CU Membership Access Act which expressly allowed multiple common bond, federally chartered credit unions to add underserved communities to their FOMs, but is silent on underserved expansions for community or single common bond charters.
NCUA Chairman JoAnn Johnson said she believes that Congress, when it approved HR 1151, intended to allow all federally chartered credit unions to add underserved communities.
"We believe the statutory language also makes clear that Congress intended to allow all charter types to serve underserved areas," said Johnson.
Johnson said she believes the bankers, in challenging NCUA's underserved policy, are being hypocritical.
"On the one hand, they criticize credit unions for not adequately serving people of modest means; and on the other hand, they challenge the policy allowing credit unions to serve those same people," she said.
Ianno said the agency's moratorium and the proposed rule will allow NCUA to survey credit unions on how they want to proceed and allow those credit unions potentially affected by the bankers' current court challenge to make alternative plans.
At stake are numerous broad expansions-some encompassing entire U.S. cities-that NCUA has granted under its underserved policy.
The bankers have especially targeted America First FCU, claiming the $3-billion Utah credit union has used the underserved expansions to reenter several counties it was barred from by a 2004 federal court ruling finding that a six-county FOM granted by NCUA was too broad.
That controversial charter allowed the credit union giant and three other state charters in Utah to escape a proposed tax on state-chartered credit unions championed by the bankers.
In other action last week, the NCUA Board approved an expansion of the agency's Regulatory Flexibility, or Reg-Flex, program to lower the required threshold for participation from the current CAMEL 1 or 2 and at least 9% capital, to CAMEL 1 or 2 and just 7% capital.
That will add another 413 federal credit unions to the program, making a total of 3,750, or 65% of all federal credit unions now eligible for the program that eases regulatory restrictions.
The board also approved a new 5300 Call Report, which eliminates the so-called short form used by small credit unions under $10 million in assets for the first and third quarters, and requires all federally insured credit unions to use the long form for all quarters. The new format goes into effect for the second quarter this year.