As Prepared for Delivery on February 16, 2023
Thank you, Rita, Robert, and Ian for your presentation.
A lot of work went into this proposed rule, and I appreciate the efforts made by everyone who contributed to it. I’d also like to thank Board Member Hood for his leadership on the Advancing Communities through Credit, Education, Stability, and Support (ACCESS) initiative to increase the agency’s focus on enabling credit unions to serve underserved, unserved, or disadvantaged communities.
When Congress adopted the Credit Union Membership Access Act of 1998 (CUMAA) amending the Federal Credit Union Act, Congress reiterated its support for credit unions, emphasizing their “specific mission of meeting the credit and savings needs of consumers, especially persons of modest means.”
The Credit Union Membership Access Act of 1998 includes the express provision for the NCUA Board to establish regulations to encourage the chartering of community and multiple common-bond federal credit unions – including provisions for encouraging the formation of federal credit unions to provide financial services to underserved communities and people of modest means. And doing so in a safe and sound manner.
As CUMAA specifies, Congress directed the Board to consider multiple responsibilities, including encouraging access to financial services for people of modest means, encouraging competition among providers of financial services, and protecting taxpayers by enhancing the safety and soundness of the credit union system and protecting the National Credit Union Share Insurance Fund.
The Board’s goals in revising and modernizing the Chartering and Field of Membership Manual are the following: (1) increasing access for underserved communities; (2) providing objective criteria to potential applicants; (3) providing regulatory relief while balancing safety-and-soundness concerns; and (4) enhancing efficiency. The clarity sought by this proposed rule will allow credit unions and this agency to better fulfill Congress’s intent.
Clear regulation is better regulation. Understanding field of membership is not easy, so when we amend the rules, it is done to improve precision and simplicity. This NPR seeks to clarify existing chartering and FOM rules for multiple common-bond federal credit unions and for community federal credit unions.
The Federal Credit Union Act authorizes multiple common-bond federal credit unions to serve members residing in ‘underserved areas’ provided they have a physical facility there. The Federal Credit Union Act defines ‘underserved area’ as a local community, neighborhood, or rural district that meets the definition of an investment area under the Community Development Banking and Financial Institutions Act of 1994 (CDFI Act) and is ‘underserved by other depository institutions.’ The definition of ‘underserved by other depository institutions’ is based on data from NCUA’s statistical analysis and by federal banking agencies. The CDFI Fund’s supplemental guidance allows data showing a lack of financial institution branches in an investment area to help meet its significant unmet needs requirement. NCUA relies on the CDFI for determining if an area meets the investment area criteria, which is a key part of being underserved.
The proposed changes in this NPR do several things:
- Apply the CDFI Fund’s economic distress criteria as required by the Federal Credit Union Act;
- Clarify that the NCUA defers to the CDFI Fund and eliminates census block groups as a geographic unit for composing underserved areas;
- Clarify flexibility for multiple common-bond federal credit unions serving underserved areas based on rural districts;
- Streamline the existing required statement of unmet needs that accompanies a request to serve an underserved area.
The proposed rule simplifies application requirements for community-based federal credit unions by providing a standard form for business and marketing plans. In addition, the proposed rule would eliminate the business plan requirement for certain federally insured, state-chartered credit unions that seek to convert to a federal charter already serving the same community field of membership. This only applies to already-operating credit unions for whom NCUA already examines for insurance purposes. In such cases, the written business plan requirement is unnecessary work for both the credit union and NCUA. If the credit union’s business model didn’t work, we’d already know, and so would their state regulator. Moreover, the proposed rule recognizes the growth of telecommuting for companies headquartered in a geographic community.
The proposed rule would also allow all federal credit unions to better capture the ongoing bond between individuals within a field of membership and their immediate family members following the death of a member.
This NPR has a 90-day comment period, and I look forward to seeing the input by stakeholders. Whether you agree with the proposed changes or not, I think we all agree that serving the underserved is an important objective.
I should also note that anything that clarifies field of membership also clarifies things for groups seeking a de novo charter. The chartering process is one of my main three priorities, so I’m glad to see us move on policies that make it more likely that a community or group can charter a new, viable credit union. True financial inclusion means reducing unnecessary burdens on groups trying to bring a new financial institution to their community.
Thank you, Mr. Chairman. I do have some questions:
Will using more general references to CDFI’s requirements for investment areas make it easier or more difficult for a multiple common-bond credit union to add an underserved area?
Response: It should not change the level of difficulty in pursuing an underserved area. It will be helpful, though to have our rule have ongoing flexibility should CDFI elect to make changes to its requirements. Most of the changes stem from advances the Census Bureau has made with respect to the American Community Survey since underserved areas first became an option in 1999. As with other stakeholders, NCUA and CDFI have become more comfortable over time in using more current ACS data between decennial census periods.
The proposed rule has several changes affecting credit unions contemplating major adjustments to their fields of membership. Will any of the changes have an impact on federal credit unions which are strategically content with who they currently serve?
Response: The proposed new affinity of persons paid from companies headquartered within the community would give existing community charters an opportunity to serve potential members who are more apt to work remotely. In addition, the rule affecting members of the immediate family or household of decedents can help credit unions maintain relationships with people who may not have realized they were eligible for membership when their family or household member was still living.