Field of Screams: CUs Are Not Happy with FOM Plan

ALEXANDRIA, Va.-NCUA's proposal on community chartering and field of membership is too restrictive and limits credit unions' ability to grow, contend a number of CU executives and NAFCU, who oppose components of the proposed rules.

In comment letters submitted to the NCUA, most leaders' concerns center around definitions of a community charter.

"We are concerned that the proposed definition is too restrictive, fails to take into account the individual characteristics of a proposed community and will result in a one-size-fits-all regulation," wrote Kirk Kordeleski, CEO of the $3.7-billion Bethpage Federal Credit Union in Bethpage, N.Y.

The proposed rules state that to be considered a well-defined local community (WDLC) the area's population may not exceed 2.5-million, the majority of the jobs must reside in the hub of the core-based statistical area (CBSA); the area must contain a dominant city or equivalent, and one-third of the population must also reside within the CBSA. According to Barry Jolette, CEO of the $585-million San Mateo CU in Redwood City, Calif., that will make it "extremely challenging for federal credit unions to qualify for a multiple community charter."

Jolette recommended that NCUA "conduct additional research to determine how many cities and counties would meet the proposed requirements."

While finding some areas of agreement, NAFCU, in its comment letter from EVP-Government Affairs Dan Berger, stated that it cannot support the rule as proposed, calling the WDLC 2.5-million population cap "arbitrary and capricious," disagreeing with the size limit for a rural district, and noting that proposed options for proving that a local community exists are too narrow.

Strenuous Objections to Proposed Changes

Pennsylvania CU Association President Jim McCormack simply stated that the proposal is a "gigantic step backwards for Pennsylvania credit unions. Accordingly, we must strenuously object to the unnecessary limitations NCUA proposes to place on the definition of a community charter for federally chartered credit unions."

Gary Easterling, CEO of the $1.1-billion United FCU in St. Joseph, Mich., is most concerned with the proposal's inability to allow exceptions to FOM expansion guidelines. "There is no appeal route or opportunity to make a narrative case for any community that falls outside of this regulatory prescribed definition. ...This would be akin to our credit union telling members with a 790 FICO score and three years of work history that their loan applications would be automatically approved upon submission. However, if a member has less than 790 or has been on the job less than three years, he or she need not apply."

CEOs and NAFCU are also worried about the rules requiring a marketing plan for each FOM expansion and the NCUA needing to follow up on that plan for three years. CEOs shared angst about this stipulation not allowing flexibility to adjust to changes in market conditions. NAFCU's Berger stated that the requirement imposes an unnecessary burden on credit unions with new or expanded charters and creates "the potential unintended consequence of hamstringing the credit union's ability to serve its members as well as it could."

There is also consensus among a small group of CEOs that the new rules represent NCUA's own bid to enact a Community Reinvestment Act-like rule for large community charters. The provision to closely monitor a community charter convert for adherence to plans to market to low-income communities, suggested Jolette, "appears more as a Community Reinvestment Act type requirement of the banking industry."

In its letter, the American Bankers Association's VP and Senior Economist Keith Leggett stated "ABA strongly objects to the modifications to the Chartering Manual that would treat Statistical Areas and Rural Districts as presumptive local well-defined communities. The proposed definitions would extend fields of membership far beyond those allowed by law or envisioned by Congress in the creation of credit unions as special purpose cooperatives united by a genuine common bond."