CUNA Regulatory Comment Call

June 12, 2008

NCUA Proposes to Change Eligibility Requirements for Underserved Areas (May 2008)


Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Senior Vice President and Deputy General Counsel Mary Dunn at; or mail them to Mary in c/o CUNA's Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6732, if you have questions or would like a copy of the proposed rule. You may also access a copy of the proposed rule here.


Since the adoption of the Credit Union Membership Access Act in 1998, NCUA has revised the FOM provisions on underserved areas three times( in 1999 to implement CUMAA; in 2002 to include underserved area criteria from the CDFI Fund; and in 2006 to prohibit community and single group credit unions from adding new underserved areas, as a result of the bankers' challenge).

The agency is again seeking to change the underserved provisions, this time to conform more closely to the requirements of the CDFI Fund and make other changes. As discussed below, while the agency has attempted to facilitate compliance through the use of information on the CDFI Fund's website for determining underserved areas, the proposal is more complicated than the current FOM policy and will require additional steps on the part of federal credit unions seeking to add underserved areas that the agency has not already approved.

FCU Act Requirements to Be an Underserved Area

The proposal would clarify that in order to be underserved, an area must: (1) be a local community, neighborhood or rural district; (2) meet the definition of an investment area under the CDFI Act; and (3) be underserved by other depository institutions based on data of NCUA and the federal banking regulators.

Local Community

The proposal would clarify that a proposed area must be a well-defined local community, neighborhood or rural district as defined in Chapter 2 of the FOM Manual. Currently, the underserved provisions rely on a somewhat different definition of this term than is used elsewhere in the manual.

Investment Area - Empowerment Zone

To be approved as underserved, the proposal would clarify that if the area is designated as an Empowerment Zone or Enterprise Community, it is automatically an investment area and no further criteria need be met. However, as the supplementary information notes, these designations, which were made by the U.S. Department of Housing and Urban Development and the U.S. Department of Agriculture between 1993 and 1996, have mostly expired and most proposed areas will not be able to qualify under these designations.

Investment Area - Distress Criteria

For all areas that are not Empowerment Zones or Enterprise Communities, the supplementary information to the proposal maps out the steps that must be taken to determine if an area qualifies as underserved. These include:


  1. Is this process overly cumbersome?

  2. When an area other than an underserved area qualifies as a "presumptive community," a credit union must submit a letter describing how the area meets the qualifications for a community. NCUA is asking whether such a letter should be required for undeserved areas.

  3. Do you support the way NCUA would apply the economic distress criteria, including whether a proposed area should be required to conform to county or census tract boundaries so that census tracts apply to areas within a metro area and counties apply to areas outside of a metro area?

  4. Do you support the way NCUA is proposing to address "significant unmet needs," including the Narrative Statement?

  5. Are you aware of available statistical data that would assist credit unions in demonstrating the unmet needs for loans and services in a proposed area?

  6. Do you agree with the criteria used to address whether an area is underserved by other depository institutions?

  7. Should facilities to serve underserved areas include ATMs?

  8. Are there other approaches to determine whether an area is underserved by other institutions that would be better than those proposed by NCUA?

  9. Are there other issues you would like to comment on regarding this proposal?

Eric Richard • General Counsel • (202) 508-6742 •
Mary Mitchell Dunn • SVP & Deputy General Counsel • (202) 508-6736 •
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 •
Lilly Thomas • Assistant General Counsel • (202) 508-6733 •
Luke Martone • Senior Regulatory Counsel • (202) 508-6743 •