CUNA Comment Letter

Chartering and Field of Membership Manual for Federal Credit Unions

February 22, 2000

The Honorable Dennis Dollar
Board Member
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428

Dear Board Member Dollar:

We are in the process of reviewing the agency’s Chartering and Field of Membership Manual for Federal Credit Unions under the auspices of our new Federal Credit Union Subcommittee, chaired by Edwin Collins, CEO of Lockheed Georgia Employees Federal Credit Unions. In our comments to NCUA on the proposed manual over a year ago, we requested the agency agree to review implementation of its FOM policy under the Credit Union Membership Access Act. Indeed, we understand that the agency may soon be considering changes to the manual as part of its review process.

While we want to reiterate that the agency has made a concerted effort to implement the field of membership provisions of the Credit Union Membership Access Act in a fair manner, there are several areas of concern we urge the Board to address when it considers amendments to the FOM Manual. While we understand that there is appropriate concern about the pending FOM litigation, we do not believe that such consideration should deter NCUA from exercising its full authority under the law to allow FOM expansion as Congress intended.

Select Group Additions

A number of multiple-group federal credit unions have raised with CUNA serious concerns about the agency’s processing of select group applications. In fact, some of them have stated they feel the process is even more burdensome now than it was prior to the passage of the Credit Union Membership Access Act. These federal credit unions have asked CUNA to intervene with NCUA to improve the process on behalf of all federal credit unions.

A primary concern is that credit unions feel the agency has delayed a number of applications, particularly when larger groups are involved. Credit unions feel that some regions delay applications under the guise of requesting additional information, which they feel is redundant. Credit unions that have met NCUA’s documentation requirements as stated in the manual should not experience delays, and we urge the agency to review select group applications as quickly as possible.

Further, we believe NCUA should review its select group addition process to determine why delays have occurred; whether regions are handling group additions in a consistent manner; whether applications for groups under 3,000 are being handled in a more streamlined manner than larger groups and whether the entire process could be improved for the benefit of credit unions and NCUA.

Our Federal Credit Union Subcommittee wants to work with you to improve the select group addition process.

Service Areas

The agency’s field of membership manual defines the term, “service area-- as “The area that can reasonably be served by the service facilities accessible to the groups within the field of membership.-- The definition does not utilize a distance limitation. However, credit unions have told us that some regions are using a 25-mile radius as a short-hand mechanism to define service area. The Board could have reinserted the 25-mile limitation into the new manual but chose not to. We urge the Board to reinforce to field staff that a service area is not necessarily limited to a 25-mile area surrounding a credit union’s office or facilities and direct them not to use the 25-mile limitation as a template for the largest permissible service area.

Service Facility

It has come to our attention that the agency is considering developing a definition of “service facility-- to be included in the manual. We also understand that the agency is considering a definition that would require an expanding credit union to own and operate the service facility around which it is expanding. We are very concerned about the effect this change may have on credit unions’ use of shared service centers. Currently under the manual it is not required for a credit union to own or operate the shared service center in order to expand from the center. We do not think that the statute requires the Board to adopt a definition of service facility that could result in a negative impact on credit unions using shared service centers. Further, we do not think the agency should ignore the reality that the areas from which members access a credit union’s services are legitimately within its “service area.--

A related issue is the extent to which the manual should facilitate credit unions’ use of technology, such as the Internet, to serve members. We urge the Board to begin addressing this issue by seeking comments from credit unions on how the manual could be revised to accommodate the use of the Internet to add and serve members.

Community Charter Applications

Credit unions seeking to convert to community charter have raised a number of concerns about the process for reviewing their applications. They report delays in reviewing their documentation, repeated requests for additional documentation and high costs associated with providing the additional information to NCUA.

One credit union reported that it was asked to remove from its request, the number of individuals who worked in the community it was requesting to serve, even though the manual clearly states that individuals who work in a community, even if they do not live there, may be served by a community credit union. While many concerns refer to applications for communities over 300,000, credit unions seeking to serve smaller communities have encountered problems as well. We urge the agency to review these applications as expeditiously and to make every effort to limit requests for additional documentation whenever possible.

ETA Accounts

We continue to maintain that credit unions should be allowed to offer Electronic Transfer Accounts to individuals outside their fields of membership. Many of the individuals who might want an ETA undoubtedly would fit into the low-income or underserved designations. However, we do not think it is necessary to require credit unions to add these individuals under one of these categories before they can be offered an ETA at a credit union. We urge the Board to again consider how it could facilitate the use of ETAs at credit unions – a move that would be fully consistent with efforts to enhance service to low-income and underserved individuals.

Successor Groups

The manual prohibits a single association credit union from continuing to serve sold or spun-off groups unless such groups otherwise qualify for membership or the credit union converts to a multiple group charter. We do not believe the Act requires this result.

FOM Ombudsman

We continue to believe that credit unions and NCUA would be well-served if an FOM ombudsman were appointed who reported directly to the Board and monitored FOM issues at the agency. This could include an ongoing assessment of how quickly applications were processed, how consistent regions are in processing applications; and why additional documentation may be necessary or unneeded. The ombudsman should also follow-up with credit unions after the application process has concluded to identify ways to improve and streamline conversions, expansions and new charter requests.

We want to work with you to achieve these improvements and appreciate your consideration of our concerns regarding field of membership issues. Our Federal Credit Union Subcommittee will be following up with the agency on these matters, including recommendations to accommodate Internet use and for further improving the application process.

Sincerely,

Daniel A. Mica
President and CEO

cc: CUNA Board of Directors
Edwin Collins, Chairman, Federal Credit Union Subcommittee
Mike Mercer, AACUL Chairman and Georgia League President
Gary Wolter, Chairman, Examination and Supervision Subcommittee
Barry Jolette, Chairman, Governmental Affairs Committee
Mr. Len Skiles, NCUA Region V Director
Mike McKenna, NCUA Senior Attorney