Community Charters and Remote Access to a Community
As NAFCU noted last week, the House passed a bill that, among other things, would permit federal credit unions to add underserved areas to their field of membership. The bill also adds "banking deserts” to the definition of an underserved area. Under the bill, banking deserts are areas not within 10 miles of a branch of a financial institution. While this bill is not effective and must still pass the Senate, I thought I would take the time to discuss a topic that comes up quite a bit on the Compliance Helpline. Specifically, what is a community-chartered federal credit union’s field of membership and does remote appearance in a community or rural district qualify a person for membership.
According to NCUA’s field of membership manual there are two types of community-chartered FCUs. The first type is “based on a single, geographically well-defined local community or neighborhood.” The second type is a well-defined rural district. Depending on the FCU’s charter, there are four potential ways that a person can qualify for membership in a community-chartered FCU. These are:
· Persons who live in the community or rural district;
· Worship in the community or rural district;
· Attend school in the community or rural district; or
· Work in the community or rural district.
Businesses or other legal entities within the community or rural district may also qualify for membership. While the above may seem straightforward, questions do arise from time to time. For example, in this NCUA field of membership FAQ NCUA discusses whether a person who shops in a community would eligible for membership in a community chartered credit union:
“No. Our community field of membership rules do not permit those who shop in a community to qualify for credit union membership. However, if a federal credit union’s community wording contains “or regularly conduct business in” this language pertains to persons with regular ties to an area based on their employment and they therefore would be eligible for membership”
Finally, since the start of the pandemic and the increasing prevalence of remote everything, NAFCU Compliance has received multiple questions on whether a person who works, worships, or attends school remotely would qualify a person for membership. Unfortunately, I am unaware of explicit guidance form NCUA on the subject. However, in footnote 66 to the preamble of the 2016 final rule on chartering and field of membership manual, NCUA states:
“The revised definition would not permit an individual to qualify remotely for membership in a community credit union based on electronic access to it from outside its well-defined local community.”
Credit unions may want to note that the footnote is related to text regarding multiple common bond credit unions and not community-chartered credit unions. However, based on the text in the footnote it appears that remote work/worship/school may not qualify for membership.
Finally, NAFCU has heard from several sources who have reached out to NCUA on whether a remote presence within a community would qualify a person for membership. According to those sources, NCUA has said that a person must be physically in the community to qualify for membership. Please keep in mind that this is secondhand information that should not be relied on. However, if a federal credit union is planning on adding members based off of their remote appearance in a community, it may want to speak to its examiner or contact NCUA directly.
About the Author
Keith Schostag joined NAFCU as regulatory compliance counsel in February 2021. In this role, Keith assists credit unions with a variety of compliance issues.