Transcript: NCUA Prepping to Increase the Size of Community Charters

The transcript from the September 2015 National Credit Union Administration (NCUA) Board meeting indicates that NCUA is preparing to allow federal credit unions to add larger geographic areas to their fields of membership (FOM).

The transcript makes it clear that NCUA is preparing to gut the requirement that a community be local, as well as well-defined.

As background, Congress in 1998 added the requirement that a well-defined community be local. The term local was meant to limit the size of a community charter.

However, Metsger believes that county or state boundaries are becoming increasingly irrelevant in defining communities.

In addition, a core-based statistical area may be a too limiting definition of a well-defined local community. A core-based statistical area is defined as a geographic area with an urban center of at least 10,000 people and adjacent areas that are socioeconomically tied to the urban center by commuting. A core-based statistical area can either be a metropolitan statistical area or micropolitan statistical area.

Below is the Q & A between Vice Chairman Metsger and NCUA employee Matt Biliouris from the September NCUA Board meeting.

Vice Chairman Metsger: Over time, as commuting patterns change and as consumers’ ability to obtain financial services online and through their mobile devices grows, their need to actually go to brick and mortar branches diminishes. Credit unions are able to serve larger geographic areas. In essence, their community naturally expands, just as many city borders grow through annexation of contiguous territory. Is that correct?

Matt Biliouris: Yes.

Vice Chairman Metsger: The conclusion I draw is that it's natural for people's sense of community to grow and that there is ample precedent that over time, community credit unions feel that memberships are likely to grow into counties that are adjacent to their existing field of membership and possibly even further than contiguous counties. Do you think that's a logical conclusion?

Matt Biliouris: I think you can make a compelling argument that there is interaction with residents outside of a core-based statistical area that would suffice looking at that and could credit unions make an argument that that is a viable well-defined local community in and of itself.

Vice Chairman Metsger: I also see a trend that county and state lines that were frequently drawn centuries ago are increasingly less relevant as delineators of communities. While 100 years ago, people rarely ventured from one county to another, today they regularly travel not only from one county to county, but also from state to state. I imagine if we did a show of hands in the audience, there are a lot of people that aren't living in this county that are here today. Am I correct that, as we get FOM expansion requests, we increasingly see FOMs that expand into adjacent counties and states such as this one?

Matt Biliouris: Subject to our requirements.

Vice Chairman Metsger: Yes.

Matt Biliouris: Right.

Vice Chairman Metsger: As we consider broader FOM changes, it is reasonable that we should incorporate this expanding definition of community. I know that your internal FOM working group has been reviewing a number of updates to FOM rules and policies, and I appreciate the update here at this Board meeting. I look forward to reviewing the recommendations and hope that one of them will be to recognize the change that has occurred in our country over the last several decades and allow community charters to serve their current communities and not just the ones that were created decades or centuries ago.

As the Chairman said and as Board Member McWatters said, these are really important, not only to credit unions, but what's really important, in my view, is not just what's important to credit unions; What's important is to the members of credit unions and the citizens who then form that credit union for their financial services. Again, I commend you for the work all of you have done, and as Board Member McWatters said, the sooner we get these recommendations, the better that will be for us. I know you're going full speed ahead.