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Alexandria, VA 22314-3428
Phone: (703) 518-6330
Web Address: http://www.ncua.gov/


NCUA News Release

FOR IMMEDIATE RELEASE

NCUA Adopts Updated Chartering & Membership Amendments

NCUA updates and streamlines its chartering and field of membership rules in accordance with four years history under 1998 Credit Union Membership Access Act

March 27, 2003, Alexandria, Va. – The NCUA Board today issued a comprehensive revision to federal credit union chartering and field of membership rules that standardizes what constitutes a local community after years of experience reviewing charter applications; offers a new trade, industry and profession option for single common bond credit unions; and makes other improvements to the field of membership rules to ensure the federal charter remains a viable, safe and sound option within the dual credit union chartering system. The rule changes addressed will be issued as Interpretive Ruling & Policy Statement (IRPS) 03-1.

“This final rule builds upon the already established foundation of safety and soundness of America’s credit unions, enhances the risk diversification of those credit unions, protects broader consumer choice, and will ensure a stronger federal charter option necessary for an effective dual chartering system,” said NCUA Chairman Dennis Dollar. “Most importantly, it does so very clearly within the original intent of CUMAA.”

“The courts have ruled decisively in upholding our earlier field of membership rules passed under the authority of CUMAA that visionary credit unions must have the ability
to adapt to a changing financial marketplace,” said Dollar. “If not, long-term safety and soundness ramifications could develop. We see this final rule today as consistent with both this statutory intent and the overriding principles of safety and soundness, but it is also an opportunity for credit unions to be positioned to have managed growth and enhanced service opportunities without having to abandon the federal credit union charter to do so.”

“The charter decision is the most basic of business decisions. It should be driven by business considerations, not by the lack of sufficient growth opportunities for a visionary credit union,” stated Chairman Dollar in emphasizing the value of the field of membership update in enhancing the federal credit union charter. “To make our credit union dual chartering system a more effective one, both charters must be able to offer visionary credit unions the opportunity to have planned and managed growth.”

Vice Chair Johnson stated, “I believe this final rule utilizes NCUA’s four years of experience in implementing the Credit Union Membership Access Act, has taken into consideration the findings of the court decisions, and has considered the marketplace changes that have taken place since passage of the law. I believe the rule we are finalizing today complies with the letter of the law and accomplishes the result of extending credit union services to more Americans.”

Board Member Matz said, “I have given a great deal of thought to the concept of ‘local community’ and what that really means in the year 2003. I have concluded that times have changed and so has the concept of local community. Years ago this might have been the neighborhood in which one lived and worked – perhaps a few city blocks or a town. In this age of advanced communications, accessible public transportation and highway systems and regional shopping malls and business centers, the larger community charters permitted in this regulation are not, in my opinion, inconsistent with the statutory requirements.”

“Further,” Board Member Matz continued, “I have concluded that size, in and of itself, should not be a factor in determining the validity of a field of membership. It is a commitment to the credit union philosophy of people helping people. Under this rule, the size of a community is no longer the primary focus. Our attention would shift to the real issue – how the credit union would serve everyone in its field of membership.”

The results of the updated rule will be that “lower cost financial options will be available to more Americans from all walks of life and the American consumer and, yes, the American economy will be the beneficiary,” Dollar said.

Based on experience gained addressing chartering and field of membership policy issues over many years, final rule changes include –

  • Eliminating outdated overlap protection requirements which have proven unworkable and unenforceable.
  • Clarifying the process of how to remove existing exclusionary clauses.
  • Clarifying that “service facilities” include wholly-owned ATMs and shared service facilities, if there is an ownership interest, for multiple-group credit union expansions.
  • Clarify qualification requirements for associational charters.
  • Clarify that national associations qualify for credit union service when the headquarters is within reasonable proximity to the credit union.
  • Add a trade, industry or profession (TIP) designation to the type of groups eligible for a single common bond, occupational-based credit union. A TIP occupational charter would be based on employment in a narrowly defined, close nexus trade, industry or professional group within the credit union’s geographic service area.
  • Streamline additions to multiple group credit unions for employers with less than 3,000 potential members.
  • Standardize the agency’s criteria for determining a community as follows:
    • - A single political jurisdiction (township, city, or county) would meet the definition of a local community.
    • --A metropolitan statistical area (MSA), or its equivalent, with less than 1 million residents, may qualify as a local community with a narrative description of community interaction from the credit union.
    • --Multiple political jurisdictions, with less than 500,000 residents, may also qualify as a local community with a community interaction description from the credit union.
  • Eliminate time-in-place restrictions on occupational, associational or multiple-group credit unions that wish to convert to another type of charter.
  • Allow state-chartered credit unions converting to federal charter to retain groups added through emergency FOM provisions.

The new rule is effective 30 days after publication in the Federal Register.

The National Credit Union Administration, governed by a three-member board appointed by the President and confirmed by the Senate, is the independent federal agency that regulates, charters and supervises federal credit unions. NCUA, with the backing of the full faith and credit of the U.S. government, operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of more than 80 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions.