Letter outlines requirements for using narrative in expanding CU memberships; guidance for doing so too

Federally chartered credit unions may use a written narrative to meet requirements for expanding their membership scope in a community, as long as the narrative demonstrates the institution’s ability for serve the community and intent to serve it an “all of its segments,” the federal credit union regulator said in a letter Tuesday.

In a “Letter to Federal Credit Unions” (LFCU), the National Credit Union Administration (NCUA) noted that, as of Sept. 1, its manual outlining FCU chartering and “field of membership” (the scope of a credit union’s membership) is amended to provide more flexibility on applications for community charter approvals, expansions or conversions.

“In addition to a presumptive community based on a single political jurisdiction or core based statistical area, the final rule provides federal credit unions with another option when submitting their community related applications,” the letter states. “The federal credit union can use a written narrative, with sufficient supporting documentation, to establish the existence of a well-defined local community.”

But, the letter also states, in using the narrative approach, the FCU’s application must include documentation. It must also provide specific details and “clearly demonstrate how the area’s residents interact or share common interests.”

The agency noted that independent third-party or statistical data to support how the area qualifies as a “well-defined local community” (WDLC) is the most persuasive.

The letter to FCUs also provides 14 pages of “guidance” to credit unions for preparing a narrative. “We encourage you to use the guidance when developing your narrative community-related applications,” the letter states.

The guidance, however, makes it clear that using the narrative approach may be a higher bar for an FCU to cross in seeking a membership expansion. In addition, the larger the area – both geographically and by population – the more difficult it will be to show an area is a WDLC, and the more support the federal credit union will need to provide to make that case.

Requests to Serve a Well-Defined Local Community Using the Narrative Approach