The New York Credit Union Association weighed in this week with a letter to the NCUA largely supporting changes to the agency’s proposed field of membership rule, but offering specific recommendations for improving the proposal.

The proposed changes come after the U.S. Court of Appeals for the District of Columbia upheld large portions of a rule promulgated by NCUA in 2016 giving federal credit unions greater flexibility to expand into surrounding communities.  The ruling required the NCUA board to provide additional information to illustrate its decision to eliminate the requirement to serve the urban core will not result in racial gerrymandering.

Specifically, the proposal would:

• re-adopt the 2016 final rule provision allowing a Combined Statistical Area to be a presumptive well-defined local community.
• provide further explanation and support for NCUA’s elimination of the core service area requirement for CBSAs in the 2016 final rule; and
• add a new provision to the Chartering Manual to enhance service to low- and moderate-income individuals for community fields of membership based on Combined Statistical Areas and Core Based Statistical Areas.

In the letter, Association President/CEO William J. Mellin said the Association supports the agency’s plan to re-adopt the provision that would allow a combined statistical area, or CSA, to be a presumptive, well-defined local community. Mellin said he agreed with the agency’s assertion that CSAs are “sufficiently compact to promote interaction and common interests among its residents,” thus qualifying them as a “well-defined local community” for purposes of qualification as a community-chartered credit union.

Under the court’s ruling, the NCUA must demonstrate it has sufficient and effective procedures in place to systematically review community FOM applications to ensure they do not result in communities that exclude minority groups.

Mellin said he believed the proposed Chartering Manual amendments adequately address the court’s concerns and implements a framework for credit union charters that builds in preventative discriminatory protections. “These proposed amends should be highlighted in the proposal so as to clearly respond to the court’s challenge,” Mellin said.  He also noted credit unions are already subject to numerous anti-discrimination laws and the NCUA has the authority to oversee compliance.

Despite the court’s concerns that urban cores will not be served without implementation of a core service requirement “NCUA’s data show that a substantial majority of CBSAs, including their core areas, are currently served by community-based FCUs,” Mellin said. However, he called on the agency to clearly define and illustrate the “substantial majority” figure.

Mellin also explained that, due to shifting demographics, the requirement to serve an urban core does not ensure adequate financial services by federal credit unions to low- and moderate-income communities, or ethnically diverse individuals.