Compliance Blog

Dec 14, 2015
Categories: Board and Governance

FOM: Calling All Credit Unions

Written by Alicia Nealon, Director of Regulatory Affairs

In case you didn’t see, NCUA’s FOM proposal was published in Federal Register last week, and the comment deadline has been set for February 8, 2016. With that in mind, we are launching a series of posts where NAFCU’s Compliance Blog will break down different portions of the proposal and highlight the key issues that we are looking for your feedback on.  Today’s topic is Community Charters. Specifically, a look at the 7 proposed changes to various aspects of community chartering.

To start off, below is an aggregated list of ways the proposal would modernize community federal charters:

  • Remove the “Core Area” Service requirement as an indicator of service to low-income persons and underserved areas in favor of annually reviewing the progress of business and marketing plans to assess service objectives within an original or expanded community.
  • Tailor application of population cap to the portion of the area that the credit union seeks to serve when determining if the area exceeds the 2.5 million population limit, as opposed to the current practice of considering the whole statistical area.
  • Allow Combined Statistical Area (CSAs) designated by the Office of Management and Budget (OMB) to count as a “well-defined, local community.” (Note: CSAs would still be subject to the 2.5 million population limit).
  • Permit addition of adjacent areas to a community consisting of a Single Political Jurisdiction, Core Based Statistical Area (CBSA), CSA, or Rural District would be permitted after showing, based on subjective evidence, that the residents interact or share common interests.
  • Recognize congressional districts as a Single Political Jurisdiction.
  • Increase the population limit for a rural district from 250,000 to 1 million persons.
  • Amend the definition of Underserved Areas to exclude non-depository institutions and non-community credit unions from the concentration of facilities ratio, as well explain that NCUA, when classifying an area as “underserved,” would consider two alternatives to the concentration of facilities ratio:
    1.  The Consumer Financial Protection Bureau’s (CFPB’s) list of “underserved counties,” or
    2. A metric of the credit union’s own choosing based on “data of the Board and the Federal banking agencies.”

For a comprehensive discussion of each of these amendments, be sure to check out NAFCU’s Regulatory Alert 15-EA-20. For today though, lets breakdown the application of the 2.5 million population cap and the addition of adjacent areas.

Population Limit of a Well-Defined Area 

Currently, NCUA applies the 2.5 million population cap to the whole population of the Core Based Statistical Area, regardless of whether the portion a credit union seeks to serve alone satisfies the population cap. To tailor the 2.5 million population limit strictly to the community a credit union seeks to serve, the proposal would modify the “statistical area” definition to specify that “a CBSA, Metropolitan Division, or well-defined portion of either one, must itself have a population of 2.5 million or fewer people.” This change will ensure that the portion to be served qualifies as a well-defined local community if it falls below the population limit, even if the CBSA’s population as a whole exceeds 2.5 million. The NCUA Board explains that a review of community charter requests revealed that many were denied because “the population of the whole [statistical area] exceeded the cap” even though the area requested was under the limit. The NCUA Board notes this trend as evidence that the current rule “is an unnecessarily broad application of the population cap, [which] produces unintended consequences.”

Adjacent Areas to a Well-Defined Local Community

The proposal would permit the addition of adjacent areas to a community consisting of a Single Political Jurisdiction, CBSA, CSA, or rural district, upon a showing by subjective evidence that residents on both sides of the perimeter interact or share common interests. However, the expanded community would be subject to the proposed population limits for community charters (2.5 million) and rural district charters (1 million).

The proposal would require a credit union seeking to add a bordering area to demonstrate to establish:

  1. A “sufficient totality of indicia of interaction or common interests among residents of the expanded community” based on subjective evidence, and
  2. An ability and commitment to serve the entire expanded community through the credit union’s business and marketing plan.

NCUA will base decisions on a number of factors with respect to the proposed service area in its entirety, including:

  • Economic Interconnectedness
  • Population Centers
  • The existence of Quasi-Governmental Agencies
  • Government Designations
  • Shared Public Services/Facilities
  • The presence of Colleges and Universities

What do the community charters think? Would these tweaks provide you all the relief that you need in this marketplace? How do you feel about the population caps—too high? too low? just right? Any other methodologies or data that your credit union thinks NCUA should consider for determining whether or not an area is “underserved”?

As you consider these questions, be sure to take a look at NAFCU’s Regulatory Alert 15-EA-20, our Field of Membership Issue Page, or reach out to me directly (, 703-842-2266) with your thoughts.  Also, you can view NAFCU's FOM webcast on demand.  For those that missed it, last Tuesday Matthew Biliouris, deputy director of the NCUA Office of Consumer Protection, along with other key agency staff, took webcast attendees through key parts of the proposed rule.  The webcast will remain available on demand for one year; registration is required, but there is no fee.


Addressing Member Complaints the Right Way

Live Webcast: Thursday, December 17 | 2:00 p.m. – 3:30 p.m. EST

No matter how impeccably your credit union runs, you’re going to get complaints. Knowing how to effectively respond to a complaint is essential to long-term member happiness and proper credit union compliance. A solid complaint process can help keep your credit union free of any regulatory burdens that may result when a complaint remains unresolved. Through this webcast you’ll learn how to identify high-risk complaints and what actions they require. You’ll also be able to prepare your departments for various types of complaints and ensure the appropriate party within your credit union responds.