NCUA Board Amends FOM Rule and Provides Greater Transparency Regarding Voluntary Mergers

The National Credit Union Administration (NCUA) Board finalized on June 20th two rules amending the agency’s regulations governing its chartering and field-of-membership (FOM) rules with respect to applicants for a community charter and providing members of federally insured credit unions with greater transparency when those credit unions seek voluntary mergers.

The NCUA Board decided not raise the population limit for a presumptive community in its FOM rule. The Board had proposed raising the population threshold for a presumptive community charter from 2.5 million people to 10 million people.

The final FOM rule made the following changes:

• An applicant for an original community charter, conversion, or expansion has the option of submitting a narrative, with sufficient supporting documentation, to establish the existence of the required well-defined local community;
• The agency will hold a public hearing on narrative applications where the proposed community’s population exceeds 2.5 million; and
• For communities that are subdivided into metropolitan divisions, the Board will permit an applicant to designate a portion of the area as its community, regardless of division boundaries.

NCUA staff during the briefing stated that credit unions affected by the March 29 court order would not be allowed to use the narrative approach to regain communities that were invalidated.

The rule will become effective on September 1, 2018.

The Board also finalized a rule that would better inform members of a federally insured credit union seeking a voluntary merger and would give members more time to consider their votes.

Specifically, the final rule will:

• Increase the minimum required time for notice to members before a merger vote to 45 days;
• Require the merging credit unions to disclose merger-related compensation increases above $10,000 or 15 percent of compensation, whichever is greater, for certain employees and officials of the merging credit union;
• Clarify the contents and format of the members’ notice to provide better information; and
• Provide a method to communicate to the NCUA regarding the proposed merger.

The final rule goes into effect on October 1, 2018.

Read the press release.