ABA Comment Letter on the National Credit Union Administration’s Proposal on Chartering and Field of Membership

Mr. Gerard Poliquin
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428

Re: Chartering and Field of Membership, Proposed Rule and Supplemental Statement, 84 Federal Register 59,989 (Nov. 7, 2019)

Dear Mr. Poliquin:

The National Credit Union Administration (NCUA) has published a Notice of Proposed Rulemaking and Supplemental Statement (NPRM) proposing to adopt two amendments to the chartering and field of membership rules with respect to federal community credit unions. First, NCUA proposes to re-adopt a recently repealed provision of its rules that defines any “Combined Statistical Area” (CSA), or contiguous portion of such an area, as a single local community so long as the chosen area has a population of 2.5 million or less. Second, NCUA proposes to provide a further explanation of its decision to eliminate the requirement that community credit unions serving a “Core-Based Statistical Area” (CBSA), or a portion of such an area, must serve residents of the urban core of the community, and to modify its rules to address concerns about the provision of financial services to low-income and minority residents in urban areas. The American Bankers Association (ABA) believes that both these proposals are seriously flawed and urges that they be withdrawn, unless significant modifications resolve the problems with the proposals.

NCUA’s proposed amendments depart from core concepts requiring credit union members to share a “common bond.” By proposing to re-adopt measures to define CSAs as single local communities (SLCs), ABA believes that the NCUA makes an inferential leap that is unreasonable and unlawful. Furthermore, NCUA’s proposal concerning service to core urban areas suggests that credit unions do not have the same obligation as tax-paying banks to meet the needs of low-income and minority neighborhoods because credit unions are not being expressly covered under statutes like the Community Reinvestment Act (CRA). But Congress granted tax-exempt status to credit unions in view of their special mission to serve those of modest means. It is the responsibility of the Board to ensure that credit unions deliver on this mission, including to those that might call a low-income neighborhood home.

The proposal raises several concerns, which have significant consequences. Specifically, as to re- adoption of the provision defining CSAs as SLCs, the D.C. Circuit has not issued its mandate, and therefore the district court’s decision remains in effect. It would be inappropriate for the Board to re-issue a rule that the district court held unlawful in a decision that has not been vacated. Concerning the proposal that credit unions not be required to serve the urban core of a “local community” defined as a CBSA, we believe the NCUA should expressly state in plain language that credit unions have a special mission of serving persons of modest means and that it is the Board’s responsibility to see that credit unions carry out this mission.

We further describe ABA’s concerns below, with recommendations on how these concerns can be readily addressed. For the reasons set forth below and in its briefs to the district court and the court of appeals, which are attached and incorporated into these comments, ABA reiterates its position that the NCUA should withdraw its proposals unless significant modifications resolve the problems with them.

NCUA Should Not Adopt an Irrebuttable Presumption that Every CSA, and Every Contiguous Portion of a CSA With Population of Up to 2.5 Million, Is a “Local Community.”

NCUA proposes to re-adopt a recently repealed provision of its rules defining any CSA, or contiguous portion of a CSA, as a single local community, so long as the population of the chosen area is 2.5 million or less. For several reasons, NCUA should not re-adopt this proposal.