Redlining Minority and Low-Income Communities?

One provision in the National Credit Union Administration (NCUA) Board proposal to amend its field of membership rules could result in the redlining of low-income, minority, and underserved communities.

The NCUA Board is proposing to repeal the "core area" requirement when a federal credit union (FCU) applies for a community charter consisting of a portion of a Core Based Statistical Area.

A Core Based Statistical Area is either a metropolitan statistical area or a micropolitan statistical area.

As background, NCUA's FOM regulation since 20101 requires that when a FCU applies to serve a community consisting of a portion of a Core Based Statistical Area, that portion must include the Core Based Statistical Area’s “core area.” NCUA defines a "core area" as the most populated county or named municipality in the Core Based Statistical Area.

NCUA noted that the primary purpose of this requirement was to acknowledge the core area of a Core Based Statistical Area as the typical focal point for common interests and interaction among residents. An additional purpose was to extend FCU services to low-income persons and underserved areas, both typically located in the "core area" of a Core Based Statistical Area.

NCUA is proposing to repeal this "core area" requirement; because the agency's review of FCU’s business and marketing plans over the last five years show FCUs are adequately serving low-income persons and underserved areas. In place of the "core area" requirement, NCUA proposes to annually review for three years a FCU's progress in implementing its marketing and business plan.

Unfortunately, the repeal of the "core area" requirement could allow FCUs to design community charters that resemble donuts by serving wealthier suburban counties and excluding markets containing low-income and minority communities that reside in the core area.

NCUA should ensure that community charters do not redline low-income, minority, and underserved communities.