ATMs can’t be ‘service facilities’ for underserved areas, federal credit union regulator decides

A final rule that eliminates the requirement that a multiple-common-bond federal credit union (FCU) have an ownership interest in a shared “service facility” for a new group or underserved area was approved unanimously Thursday by the governing board of credit unions’ federal regulator.

There is an exception, however: The National Credit Union Administration (NCUA) Board, voting 3-0 to adopt the final rule, retained the exclusion of ATMs from the definition of service facility for additions of underserved areas.

The definition of a service facility is important because the agency requires that a multiple-common-bond FCU, in order to add a group or underserved area to its field of membership (FOM), be within “reasonable proximity” to the group to be served, among other requirements.

Thursday’s final rule retains the December proposal to eliminate the ownership requirement for shared facilities. As outlined in the proposal, this means that facilities of any shared branch network in which an FCU participates, regardless of ownership interest, would qualify as a service facility for the addition of groups or underserved areas.

Proposed, but not reflected in the final rule, was a change to conform the definitions of service facility for group additions and underserved area additions. That would have resulted in ATMs, including shared ATMs, qualifying as service facilities for underserved area additions. The board also sought comments on whether the definition of service facility should, given the increasing role of technology in the provision of financial services, be revised to permit FCUs’ interactive websites and mobile banking applications to be considered service facilities.

Neither of those two potential alterations was made in the final rule. The final rule’s exclusion of an ATM from the definition of service facility for an underserved area remains because the board made no change in the three required services for such a facility: For an undeserved area in particular, a service facility must be a place where shares are accepted, loan applications are accepted, and loan proceeds are disbursed.

While an ATM doesn’t meet that requirement, the agency notes that under the final rule, certain electronic facilities offering the required services, including a video teller machine, still does.

The proposed rule drew more than 700 comment letters, with 680 of those being identical or “nearly identical” form letters opposing it. The agency said the 34 unique comments included 21 comments in favor and 13 opposed. It said all the positive comments came from credit unions and related groups, while all the negative ones were from banks and banking groups (including the form letters).

The NCUA doesn’t state so directly, but from this it appears that a scant 21 credit unions and related groups submitted comments.

When this proposal was issued, then-Board Member Todd Harper, who is now chairman, voted “no,” stating that he doubted the proposed rule, without changes, would facilitate increased service to underserved areas.

Regarding the retention of the three required services for facilities in underserved areas, the agency’s final rule notice states that this approach “will allow more FCUs to offer services to underserved areas while still ensuring that members added in underserved areas receive a high level of services.”

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

Notice of final rule (for Federal Register)