Delaware FCU Underserving the Underserved (Update 1)

I received an anonymous tip about Delaware FCU, also known as Del-One FCU, not serving the city of Newark, Delaware, which the credit union added as an underserved community.

NCUA, according to its September 2005 Insurance Activity Report approved Delaware FCU's application to add persons who live, work, worship, or go to school in, and businesses and other legal entities in the city of Newark, Delaware to its field of membership.

In June 2006, NCUA amended its chartering manual requiring that "once an underserved area is added to a federal credit union's field of membership, the credit union must establish and maintain an office or service facility in the community within two years." NCUA defined a service facility as "a credit union owned branch, a shared branch, a mobile branch, an office operated on a regularly scheduled weekly basis, or a credit union owned facility that meets, at a minimum, these requirements. This definition does not include an ATM or the credit union’s Internet web site."

At the time NCUA finalized the rule, the agency decided that the service facility requirement would only apply to credit unions adding an underserved area going forward.

We know that Delaware FCU opposed the requirement of establishing and maintaining a physical presence in the underserved community. Duke Strosser, the CEO of Delaware FCU, wrote on March 29, 2006:

"If it can be proven that low-cost, public transportation is afforded to members of the underserved communities, allowing them to reach remote credit union locations easily and safely, then consideration should be given to longer timeframes for establishing a facility in the underserved area. Consideration should also be given to expanding the “acceptable” distance between the underserved area and the nearest service facility."

Based upon information on NCUA's website, more than 5 years after adding Newark as an underserved community to its field of membership Delaware FCU does not have a physical presence in Newark. The credit union is also not part of a shared branching network.

I know that Delaware FCU is not required to have a physical presence in Newark, because Newark was added before the physical presence requirement became effective.

However, it seems to me that the credit union should comply with the spirit of the chartering manual and establish a branch in Newark.

If it does not do so, then it should divest itself of Newark.

Additionally, NCUA should examine all credit unions that have been granted an underserved community to see whether a credit union has established a physical presence in the underserved area -- not just those granted after the physical presence requirement became effective.

Update: I received a call from another anonymous tipster stating that the management tried to open a branch in Newark, but the Board of the credit union opposed these efforts.