Underserved Expansions Barred ForCommunity Charters

ALEXANDRIA, Va. - (06/23/06) -- Backed into a corner by the bankers,the NCUA Board voted Thursday to restrict its underservedexpansions program to federally chartered multiple group creditunions. But the new rule, prompted by a legal challenge brought bythe American Bankers Association, will grandfather more than 200underserved expansions granted to community charters, allowing themto continuing serving an estimated 1.6 million members signed up indisputed underserved areas. The Board voted two-to-one for the newrule, with Rodney Hood opposing it because it will limit creditunion service to the underserved. "This proposal as presentedbenefits the trade groups and the lawyers but not the underservedcommunities," said Hood. The NCUA Board was forced to adopt the newrestrictions because of a suit in Utah where the ABA charged anunderserved expansion granted to America First FCU violatedprovisions of HR 1151, the 1998 CU Membership Access Act, whichexpressly allows multiple group charters--and only multiple groupcharters--to add underserved communities to their fields ofmembership. NCUA Board Chairman JoAnn Johnson said she thoughtCongress intended to allow all credit unions to serve underservedcommunities but the language of the 1998 law did not make it clear.As a result, NCUA will ask Congress to amend the law to allow allcredit unions to add underserved communities, Johnson said. TheNCUA Chairman chided the bankers as being "particularlyhypocritical" for criticizing credit unions for not doing more toserve the underserved, while asking the courts to bar thousands ofcredit unions from expanding into underserved communities. The newrule will also require a credit union converting to communitycharter to forfeit any underserved communities they may haveobtained under the old rule. ABA President Edward Yingling saidafter the NCUA action the bankers were pleased with the new bar onunderserved expansions but was disappointed NCUA will allow theexisting underserved expansions granted community charters tostand.