Combined statistical area with population up to 2.5 million once again deemed a ‘well-defined’ local community an FCU may serve

A federally chartered credit union will once again be able to seek to serve a combined statistical area (CSA) as a “well-defined” local community if that area has a population no greater than 2.5 million persons under a final rule adopted Thursday by the National Credit Union Administration (NCUA) Board.

The final rule revises the NCUA’s rules on field of membership (FOM). Adopted by the board on a vote of 3-0, the rule follows an August 2019 opinion and order issued by the District of Columbia Circuit Court of Appeals regarding, among other things, communities based on a core-based statistical area (CBSA) or portion of one.

Last August, the appeals court overturned a district court ruling from the previous year that vacated two provisions of the agency’s chartering and field-of-membership (FOM) rule that had been in effect since February 2017 (and adopted in 2016). Those provisions qualified a CSA with fewer than 2.5 million people as a “local community” that can be served by a credit union; the other raised to 1 million people the population limit for rural districts that may be served.

The court ruled in its August decision that the NCUA holds “vast discretion to define terms because Congress expressly has given it such power.” However, the court also stated that the authority is not boundless. “The agency must craft a reasonable definition consistent with the Act’s text and purposes,” the court stated.

In addition to re-adopting the agency’s earlier CSA language, Thursday’s final rule provides further explanation and support for the board’s 2016 elimination of the requirement to serve the CBSA’s core area. Additionally, it clarifies existing requirements and adds an explicit provision to the FOM rules to address concerns about potential discrimination in the FOM selection process for CSAs and CBSAs (briefly, to ensure that the credit union is not engaging in redlining activity by seeking to exclude low- and moderate-income and underserved people or to otherwise discriminate.)

The final rule takes effect 30 days after its publication in the Federal Register.

Notice for Federal Register