October 25, 2019

NCUA proposes rule to address FOM lawsuit concerns

NCUA boardThe NCUA Board Thursday proposed a rule to make the 2016 field of membership (FOM) rule consistent with the recent decision from the U.S. Court of Appeals for the D.C. Circuit in the lawsuit brought by the American Bankers Association (ABA). NAFCU stood by the NCUA throughout the lawsuit and has urged the NCUA to continue efforts to modernize FOM rules.

The August decision was largely in favor of the NCUA, but the appeals court asked for additional explanation of the NCUA's decision to eliminate the urban-core requirement for local communities based on core based statistical areas (CBSAs). Following the decision, NCUA Board Chair Rodney Hood said the agency would propose a rule to address these concerns.

The rule proposed Thursday would:

  • re-adopt a provision to allow an applicant to designate a combined statistical area (CSA), or an individual, contiguous portion CSA, as a well-defined local community, provided that the chosen area has a population of 2.5 million or less;
  • provide further explanation and support for eliminating the urban-core requirement for local communities based on CBSAs, as provided for in the 2016 FOM rule; and
  • provide express authority for the NCUA to reject a credit union application for CSAs and CBSAs if the agency determines that the FOM selection reflects discrimination (the ABA had argued that the 2016 rule would allow credit unions to engage in redlining; this addresses that concern).

In addition, the board indicated that credit unions may now submit for approval applications for rural districts and the agency will decide on them at the appropriate time. For CSA applications, the board will review them once the proposed rule is finalized.

The proposal will be open for a 30-day comment period once published in the Federal Register. NAFCU will provide credit unions with more information through a Regulatory Alert and submit comments to the NCUA.

Also at Thursday's NCUA Board meeting:

  • Public unit and nonmember shares: The board unanimously approved a final rule – adopted largely as proposed – that would amend the agency's regulations to permit credit unions to receive public unit and nonmember shares up to 50 percent of its net paid-in and unimpaired capital and surplus less than any public unit and nonmember shares. NAFCU will continue to advocate for ways to provide relief to credit unions that rely on a large volume of nonmember shares. The rule will go into effect 90 days after publication in the Federal Register.
  • Cybersecurity briefing: October is National Cybersecurity Awareness Month and the board was briefed on the agency's recent developments related to cybersecurity preparedness and the training and education of cybersecurity experts at the agency to establish resilience and reduce risk. In addition, the board shared its intent to have recently-released draft legislation revised to explicitly grant the NCUA third-party vendor authority. Commenting on the draft bill, NAFCU argued against granting the NCUA this authority as it would increase the agency's regulatory costs and burden.