[Federal Register Volume 61, Number 189 (Friday, September 27, 1996)]
[Rules and Regulations]
[Pages 50694-50696]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24458]


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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: Final amendments.

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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 NCUA Board is issuing final 
amendments to 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. The NCUA Board is also issuing a technical amendment to 
another regulatory provision to conform it to the revised Program 
regulations.

EFFECTIVE DATE: October 1, 1996.

FOR FURTHER INFORMATION CONTACT: Joyce Jackson, Director, Office of 
Community Development Credit Unions, 1775 Duke Street, Alexandria, 
Virginia 22314-3428 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 proposed 
four amendments to improve and clarify certain aspects of the Program. 
The NCUA Board issued proposed amendments to the Program on January 25, 
1996. 61 FR 4239 (February 5, 1996). Four comment letters were 
received. Three commenters were state credit union leagues and one 
commenter was a national trade association. All of the commenters 
supported the proposed amendments.

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, eleven cities that were 
above the national average for the lower level standard of living 
numbers were provided differentials to be applied by the Regional 
Director. NCUA requested comment on updating the differentials. The 
commenters did not suggest any changes. The Board does not believe 
there is any compelling reason to change the differentials at this 
time. However, to clarify the term ``geographic area'' and to provide 
for consistent application of agency policy, the Board believes that 
the geographic area definition should be based on either the 
Consolidated Metropolitan Statistical Area (CSMA) or Metropolitan 
Statistical Area (MSA) classification, as appropriate, that are used by 
the Office of Management and Budget (OMB) or defined by the Census 
Bureau.
    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 proposed to 
amend Section 705.3(b) to clarify that student credit unions may not 
participate in the Program. All four commenters approved of this 
proposal. Accordingly, the Board is adopting this clarification in the 
final rule.

Section 705.5  Application for Participation

    Because NCUA does not regulate nonfederally insured state chartered 
credit unions, the Board proposed that a nonfederally insured credit 
union 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, so that NCUA may properly consider the application. This 
proposal would simply require documentation that is comparable to the 
information accessible to NCUA for federally insured credit unions. All 
four commenters supported this proposal. The Board is also changing the 
term ``delinquent loan list'' to ``schedule of delinquent loans'' so 
that the information submitted will be comparable to information NCUA 
obtains from federally insured credit unions. The Board is also 
streamlining this section so that the requirements found in proposed 
Section 705.5(b) (iii) through (v) are simply stated in Section

[[Page 50695]]

705.5(b)(iii). Otherwise, the Board is adopting the proposed amendment 
in final.

Section 705.7  Loans to Participating Credit Unions

    Section 705.7 currently 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 loan under the 
Program. The Board's proposal clarified that because of the Program's 
limited funds that the aggregate dollar amount of outstanding loans to 
one credit union is limited to $300,000. All four commenters supported 
this proposal. Accordingly, the Board is adopting the proposed 
amendment in final.

Section 705.10  Technical Assistance

    Under the current Section 705.10, technical assistance may not 
exceed $120,000 per year. The Board proposed to eliminate the dollar 
threshold on technical assistance in the anticipation that available 
earnings may exceed $120,000. Such a change would provide NCUA greater 
flexibility in providing technical assistance. All four commenters 
supported the proposed amendment. Accordingly, the Board is adopting 
the proposed amendment in final.

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 final 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 final 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 final amendments do not increase 
paperwork requirements under the Paperwork Reduction Act of 1995 and 
regulations of the Office of Management and Budget (OMB).

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 final amendments will permit more funds to be 
available for technical assistance to all credit unions, including 
state-chartered credit unions. The final 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 September 
18, 1996.
Becky Baker,
Secretary of the Board.

    Accordingly, NCUA amends 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 and 1798. 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 42 U.S.C. 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 definitions 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 (excluding student credit 
unions) 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 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(a)(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, an income and expense statement, and a 
schedule of

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delinquent loans, for the most recent month-end and each of the twelve 
months preceding that month-end.
* * * * *


Sec. 705.7  [Amended]

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


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. NCUA technical assistance 
will aid participating credit unions in providing services to their 
members and in the efficient operation of such credit unions.

[FR Doc. 96-24458 Filed 9-26-96; 8:45 am]
BILLING CODE 7535-01-P