[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