Dear Boards of Directors and Chief Executive Officers:
The final rule (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) amending the definition of “service facility” for multiple common-bond federal credit unions became effective December 27, 2021.1 The final rule provides that shared locations are service facilities for purposes of multiple common-bond federal credit union additions of groups, regardless of whether the federal credit union has an ownership interest in the shared branching network providing the locations. Shared locations, including electronic facilities offering required services such as video teller machines, are also service facilities for purposes of multiple common-bond federal credit union additions of underserved areas, regardless of whether the federal credit union has an ownership interest.2
If your multiple common-bond federal credit unions plans to add groups or underserved areas, you should be aware that the final rule only changes the ownership requirement related to shared locations. All other requirements related to service facilities, eligibility of groups, and the qualification of underserved areas remain unchanged.
For multiple common-bond federal credit unions adding occupational or associational groups, a service facility must allow a member to deposit shares, submit loan applications, or receive loan proceeds. For multiple common-bond federal credit unions adding an underserved area, a service facility in the underserved area must allow a member to deposit shares, submit loan applications, and receive loan proceeds.3 While various types of facilities could meet these requirements, including some electronic facilities, all three services must be available through the facility for it to qualify as a service facility in an underserved area. Accordingly, automated teller machines are not service facilities for purposes of underserved area additions.
The NCUA also emphasizes that the process for establishing that an area qualifies as an underserved area remains the same. That is, multiple common-bond federal credit unions must demonstrate that the area is:
- A local community, neighborhood, or rural district under the Chartering Manual’s definition;4
- An investment area, which means either that the area is (1) an empowerment zone or enterprise community or (2) that it meets quantitative economic distress criteria and also has a significant unmet need for financial services;5 and
- Underserved by other depository institutions, based on objective data from the federal banking agencies.6
The Federal Credit Union Act requires that the federal credit union establish and maintain an office or facility in the underserved area.7 Accordingly, any multiple common-bond federal credit union with a shared facility in an underserved area should have contingency plans providing for the prompt creation of a replacement facility should the shared facility close or move out of the area. The NCUA will remove an underserved area from a federal credit union’s field of membership and reserves the right to take other supervisory action if it determines that a federal credit union has not maintained a service facility in the underserved area.
Multiple common-bond federal credit unions expanding around a shared facility must continue to comply with all applicable consumer financial protection and anti-discrimination laws.
Please contact the NCUA’s Office of Credit Union Resources and Expansion at firstname.lastname@example.org or 703.518.6610 if you have any questions about the requirements for service facilities.
Todd M. Harper
1 86 Fed. Reg. 66921 (Nov. 24, 2021).
2 12 C.F.R. part 701 App. B, §§ 2.IV.A.1, 3.III.F (hereafter “Chartering Manual”).
3 Chartering Manual, § 3.III.F.
4 12 U.S.C. § 1759(c)(2)(A); Chartering Manual, § 3.III.B.1.
5 12 U.S.C. § 1759(c)(2)(A)(i); Chartering Manual, § 3.III.B.2-3.
6 12 U.S.C. § 1759(c)(2)(A)(ii); Chartering Manual, § 3.III.B.3.
7 12 U.S.C. § 1759(c)(2)(B).