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Bankers give NCUA an earful over revamped membership proposal

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The National Credit Union Administration asked for public comment on its revised field of membership proposal and the agency got plenty of it from bankers and banking trade groups.

Following a federal court’s ruling, the agency in October unveiled a revamped plan allowing credit unions to use core-based statistical areas to define their fields of membership while still excluding urban cores. An appeals court had previously suggested that could border on redlining, and NCUA’s October proposal was an attempt to explain its thinking in greater detail.

Bank trade groups subsequently requested an en banc hearing, though the D.C. Circuit Court of Appeals has not yet indicated whether it will grant that request.

In lieu of that, over 50 banks and banking groups responded to the agency’s call for comments by Monday’s deadline, though most relied on a form letter.

“Urban cores deserve access to financial services,” they wrote, calling on NCUA to mirror the practices of other banking regulators.

“To limit potential redlining and other discriminatory actions, NCUA should adopt safeguards implemented by other federal banking agencies. Those agencies periodically assess how banks serve their assessment areas. Though this is not statutorily mandated, NCUA would be prudent to increase and measure an FCU's impact on their FOM, especially when considering that a geographically-based FOM is fundamentally the same legal construct as a bank's geographically-based assessment area.”

Todd Harper, the junior member of the NCUA board, has called on NCUA to find ways to better align itself with other federal banking regulators and has proposed a rule to increase oversight of large credit unions that would bring further parity with bank regulators.

Bankers commenting emphasized that excluding urban cores “creates a heightened risk of discriminatory activity, whether intentional or not” and said the agency should require additional documentation and explanation from institutions looking to make use of this growth strategy.

"The NCUA's flawed proposal allowing credit unions to discriminate against urban areas is the latest example of this captive regulator bowing to the growth-obsessed financial firms it is charged with regulating at the expense of local communities," Rebeca Romero Rainey, president and CEO of the Independent Community Bankers of America, said in a letter. "It is long past time for Washington and Americans nationwide to 'Wake Up' to the risky practices, costly tax subsidies, and irresponsibly lax oversight of these tax-exempt institutions."

The American Bankers Association also called on NCUA to rethink not just the urban core provision but the entire FOM rule.

“As a responsible federal agency, NCUA should not simply re-adopt, without change, a rule that four out of four federal judges have concluded is, or is likely to be, flawed in at least some of its applications,” wrote Justin Underwood, the ABA’s senior director of banking policy.

Not surprisingly, credit union groups also weighed in with the agency prior to the deadline, generally in favor of the measure.

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