NCUA Should Not Rubber Stamp Narrative Model for Community Charter

The National Credit Union Administration (NCUA) Board is proposing to resurrect the narrative model to demonstrate that a community that a federal credit union (FCU) wishes to serve is a well-defined, local community (WDLC).

Until 2010, NCUA required that an FCU applying a community charter submit a narrative for NCUA approval demonstrating that the residents of the proposed community had common interests and interaction. The Board abandoned the narrative requirement in favor of an objective model that gave credit unions the choice between two presumptive WDLC models -- a single political jurisdiction or a statistical area.

The Board is now proposing to allow an FCU to submit a narrative to demonstrate that the community it proposes to serve qualifies as a WDLC based upon common interests and interaction among the area’s residents.

NCUA noted that its pre-2010 experience with community charter applications has identified 13 criteria that were most useful and compelling to demonstrate common interests and interaction.

The thirteen criteria are:

• Presence of a Central Economic Hub;
• Community-wide Quasi-Government Agency Services;
• Governmental Designations with Community;
• Shared Public Services and Facilities;
• Hospitals and Major Medical Facility Services;
• College and University Enrollment;
• Multi-Jurisdictional Mutual Aid Agreements;
• Organizations’ and Clubs’ Membership and Services;
• Newspaper Subscriptions;
• Attendance at Entertainment and Sporting Events;
• Local Television and Radio Audiences;
• Community-wide Shopping Patterns; and
• Geographic Isolation.

According to the proposed rule, “[a]n area need not meet all of the narrative criteria to qualify as a local community; rather, the totality of circumstances within the criteria a credit union elects to address must indicate a sufficient presence of common interests and interaction among the area’s residents.”

However, NCUA has an obligation to examine not only those factors that support the presence of common interests and interaction in the proposed community; but also, those factors that do not support the presence of common interests and interaction. To exclude factors that would rule against the presence of common interests and interaction would bias the agency’s analysis. As a federal judge opined: “NCUA must critically analyze the facts provided in the application to ensure that incomplete and erroneous information does not lead to an improper conclusion.”

In conclusion, NCUA should not “rubber stamp” information provided by an FCU showing interaction and common interests of residents. To augment its analysis, the NCUA Board should seek comment from the public on whether the proposed community is a WDLC.

Read the proposed rule.