[Federal Register Volume 61, Number 24 (Monday, February 5, 1996)]
[Proposed Rules]
[Pages 4238-4240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-2019]



-----------------------------------------------------------------------


NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 701 and 705


Community Development Revolving Loan Program For Credit Unions

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed Amendments.

-----------------------------------------------------------------------

SUMMARY: The purpose of the Community Development Revolving Loan 
Program for Credit Unions is to make reduced rate loans and provide 
technical assistance to both federal and state-chartered credit unions 
serving low-income communities. The Board is proposing to modify this 
regulation to: eliminate the limits on technical assistance that may be 
provided per year to participating credit unions; clarify that student 
credit unions may not participate in the Program; clarify that credit 
unions may receive up to $300,000 in loans in the aggregate at any one 
time; and require additional documentation from nonfederally insured 
credit unions that may wish to participate in the Program. Finally, the 
Board is requesting comment on updating the percentage of the 
differentials used to calculate the low-income levels.

DATES: Comments must be received on or before April 5, 1996.

ADDRESSES: Comments should be directed to Becky Baker, Secretary of the 
Board. Mail or hand-deliver comments to: National Credit Union 
Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. Fax 
comments to (703) 518-6319. Post comments on NCUA's electronic bulletin 
board by dialing (703) 518-6480. Please send comments by one method 
only.

FOR FURTHER INFORMATION CONTACT: Joyce Jackson, Special Assistant, 
Office of Community Development Credit Unions, at the above address or 
telephone (703) 518-6610 or Michael J. McKenna, Staff Attorney, Office 
of General Counsel, at the above address or telephone (703) 518-6540.

SUPPLEMENTARY INFORMATION: The purpose of the Community Development 
Revolving Loan Program (``Program'') is to make reduced rate loans and 
provide technical assistance to federal and state-chartered credit 
unions serving low-income communities so that they may provide needed 
financial services and help to stimulate the economy in the community 
served.
    Although the Program has functioned well, the Board is proposing 
five amendments to improve and clarify certain aspects of the Program.

Section 705.3  Definitions

    This section, among other things, defines the term low-income 
members. In documenting its low-income membership, a credit union that 
serves a geographic area where a majority of residents fall at or below 
the annual income standard is presumed to be serving predominantly low-
income members. In applying the low-income standard the Regional 
Director must use specifically defined differentials for geographical 
areas with a higher cost of living. These differentials were originally 
obtained from a list maintained by the Bureau of Labor Statistics, as 
updated by the Employment and Training Administration. In order to 
recognize geographic economic differences, cities that were above the 
national average for the lower level standard of living numbers for the 
25 largest metropolitan areas were provided differentials to be applied 
by the Regional Director. Since the differentials were added to the 
regulation in April 1993, there have been changes in economic 
conditions in many cities. NCUA is studying how the differentials 
should be adjusted and invites comment on how they should be updated.
    Some in the credit union community have questioned whether student 
credit unions are eligible to participate in the Program. The preamble 
to the final 1993 amendments stated that although ``student federal 
credit unions are `low-income credit unions' for purposes of receiving 
nonmember deposits, they do not qualify for participation in the 
Program because they are not specifically involved in the stimulation 
of economic development activities and community revitalization 
efforts.'' 58 FR 21642, 21645 (April 23, 1993). The Board proposes to 
amend Section 705.3(b) to clarify that student credit unions may not 
participate in the Program.

Section 705.5  Application for Participation

    The Board is proposing that a nonfederally insured credit union 
that wishes to participate in the Program provide additional 
documentation during the application process. Because NCUA neither 
regulates nor insures nonfederally insured state chartered credit 
unions, additional information is required so that NCUA may properly 
consider the application. This change would provide documentation that 
is comparable to the information accessible to NCUA for federally 
insured credit unions. Accordingly, the Board is proposing that Section 
705.5(b)(1) be amended to require non federally insured credit union to 
provide in its application for Program participation a copy of its most 
recent outside audit report and proof of deposit and surety bond 
insurance which states the maximum insurance levels permitted by the 
policies.

Section 705.7  Loans to Participating Credit Unions

    Section 705.7 states that a participating credit union is eligible 
``to receive up to $300,000, as determined by the NCUA Board, in the 
form of a loan from the Community Development Revolving Loan Fund for 
Credit Unions.'' Some have questioned whether this means that a credit 
union may receive more than one $300,000 

[[Page 4239]]
loan under the Program. The Board does not believe it is appropriate to 
grant loans in excess of $300,000 to one credit union considering the 
Program's limited funds. Accordingly, the proposed amendment to Section 
705.7(a) clarifies that the aggregate dollar amount of outstanding 
loans to one credit union is limited to $300,000.
Section 705.10  Technical Assistance
    Under the current Section 705.10, technical assistance may not 
exceed $120,000 per year. The Board believes that technical assistance 
is a vital component of the Program and anticipates that available 
earnings may soon exceed $120,000. As a result, the Board is proposing 
to eliminate the dollar threshold on technical assistance. This change 
will provide NCUA greater flexibility in providing technical 
assistance.
Regulatory Procedures
Regulatory Flexibility Act
    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a proposed regulation may 
have on a substantial number of small credit unions (primarily those 
under $1 million in assets). The proposed amendments generally clarify 
operational issues. The one significant change regarding technical 
assistance is expected to benefit credit unions by increasing the 
available pool of funds for technical assistance. Accordingly, the 
Board determines and certifies that this proposed rule does not have a 
significant impact on a substantial number of small credit unions and 
that a Regulatory Flexibility Analysis is not required.
Paperwork Reduction Act
    NCUA has determined that the proposed amendments do not increase 
paperwork requirements under the Paperwork Reduction Act of 1995 and 
regulations of the Office of Management and Budget (OMB). 60 FR 44978 
(August 29, 1995).
Executive Order 12612
    Executive Order 12612 requires NCUA to consider the effect of its 
action on state interests. The Program is implemented in its entirety 
by the NCUA. The proposed rule will permit more funds to be available 
for technical assistance to all credit unions, including state-
chartered credit unions. The proposed amendments impose a minimal 
burden on nonfederally insured state chartered credit unions that wish 
to participate in the Program. The amendments will not have a 
substantial direct effect on the states, on the relationship between 
the national government and the states, or on the distribution of 
powers among the various levels of government.
List of Subjects
12 CFR Part 701
    Credit, Credit unions.
12 CFR Part 705
    Community development, Credit unions, Loans programs-housing and 
community development, Reporting and recordkeeping requirements, 
Technical assistance.

    By the National Credit Union Administration Board on January 25, 
1996.
Becky Baker,
Secretary of the Board.
    Accordingly, NCUA proposes to amend 12 CFR parts 701 and 705 as 
follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
    1. The authority citation for part 701 continues to read as 
follows:

    Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a, 
1761b, 1766, 1767, 1782, 1784, 1787, 1789. Section 701.6 is also 
authorized by 31 U.S.C. 3717. Section 701.31 is also authorized by 
15 U.S.C 1601 et seq.; 42 U.S.C. 1861 and 3601-3610. Section 701.35 
is also authorized by 42 U.S.C. 4311-4312.

    2. Section 701.34 is amended by revising paragraph (a)(1) to read 
as follows:
Sec. 701.34  Designation of Low-Income Status; Receipt of Secondary 
Capital Accounts by Low-Income Designated Credit Unions.

    (a) Designation of low-income status. (1) Section 107(6) of the 
Federal Credit Union Act (12 U.S.C. 1757(6)) authorizes federal credit 
unions serving predominantly low-income members to receive shares, 
share drafts and share certificates from nonmembers. In order to 
utilize this authority, a federal credit union must receive a low-
income designation from its Regional Director. The designation may be 
removed by the Regional Director upon notice to the federal credit 
union if the definition set forth in paragraphs (a)(2) and (3) of this 
section are no longer met. Removals may be appealed to the NCUA Board 
within 60 days. Appeals should be submitted through the Regional 
Director.
* * * * *
PART 705--COMMUNITY DEVELOPMENT REVOLVING LOAN PROGRAM FOR CREDIT 
UNIONS
    3. The authority citation for part 705 is revised to read as 
follows:

    Authority: 12 U.S.C. 1772c-1; 42 U.S.C 9822 and 9822 note.

    4. Section 705.3 is amended by revising paragraph (b) to read as 
follows:


Sec. 705.3  Definitions.

* * * * *
    (b) For purposes of this part, a participating credit union means a 
state- or federally chartered credit union that is specifically 
involved in the stimulation of economic development activities and 
community revitalization efforts aimed at benefiting the community it 
serves; whose membership consists of predominantly low-income members 
(excluding students) as defined in paragraph (a) of this section or 
applicable state standards as reflected by a current low-income 
designation pursuant to Sec. 701.34(d)(1) or Sec. 741.204 of this 
chapter or, in the case of a state-chartered nonfederally insured 
credit union, under applicable state standards; and has submitted an 
application for a loan and/or technical assistance and has been 
selected for participation in the Program in accordance with this Part.
    5. Section 705.5 is amended by revising paragraph (b)(1) to read as 
follows:


Sec. 705.5  Application for participation.-

* * * * *
    (b) * * *
    (1) Information demonstrating a sound financial position and the 
credit union's ability to manage its day-to-day business affairs, 
including the credit union's latest financial statement. Nonfederally 
insured credit unions must include the following:
    (i) A copy of its most recent outside audit report;
    (ii) Proof of deposit and surety bond insurance which states the 
maximum insurance levels permitted by the policies;
    (iii) A balance sheet for the most recent month-end and each of the 
twelve months preceding that month-end;
    (iv) An income and expense statement for the most recent month-end 
and each of the twelve months preceding the month-end;
    (v) A delinquent loan list for the most recent month-end and each 
of the twelve months preceding the month-end.
* * * * *


Sec. 705.7  [Amended]

    5. Section 705.7 is amended in paragraph (a) by adding ``in the 
aggregate'' after the number ``$300,000''.
    6. Section 705.10 is revised to read as follows: 
    
[[Page 4240]]



Sec. 705.10  Technical assistance.

    Based on available earnings, NCUA may contract with outside 
providers to render technical assistance to participating credit 
unions. Participating credit unions can be provided with technical 
assistance without obtaining a Program loan. Technical assistance 
provided will aid participating credit unions in providing services to 
their members and in the efficient operation of such credit unions.

[FR Doc. 96-2019 Filed 2-2-96; 8:45 am]
BILLING CODE 7535-01-P