[Federal Register Volume 77, Number 187 (Wednesday, September 26, 2012)]
[Proposed Rules]
[Pages 59137-59139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-23643]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 77, No. 187 / Wednesday, September 26, 2012 / 
Proposed Rules  

[[Page 59137]]



NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701

RIN 3133-AE02


Chartering and Field of Membership Manual for Federal Credit 
Unions

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule with request for comments.

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SUMMARY: The NCUA Board (Board) proposes to amend the definition of 
``rural district'' in NCUA's Chartering and Field of Membership Manual. 
The proposed amendment to the definition of ``rural district'' permits 
a geographic area to qualify as a rural district if, among other 
criteria, it has a total population that does not exceed the greater of 
200,000 people or three percent of the population of the state in which 
the majority of the district is located. The current definition limits 
the rural district's population to 200,000, regardless of the 
population of the state containing the majority of the rural district.

DATES: Comments must be received on or before November 26, 2012.

ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web Site: http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx. Follow the instructions for submitting comments.
     Email: Address to [email protected]. Include ``[Your 
name]--Comments on Notice of Proposed Rulemaking for Chartering and 
Field of Membership Manual'' in the email subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for email.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public Inspection: You may view all public comments on NCUA's Web 
site at http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx as 
submitted, except for those we cannot post for technical reasons. NCUA 
will not edit or remove any identifying or contact information from the 
public comments submitted. You may inspect paper copies of comments in 
NCUA's law library at 1775 Duke Street, Alexandria, Virginia 22314, by 
appointment weekdays between 9 a.m. and 3 p.m. To make an appointment, 
call (703) 518-6546 or send an email to [email protected].

FOR FURTHER INFORMATION CONTACT: Frank Kressman, Associate General 
Counsel, or Elizabeth Wirick, Staff Attorney, Office of General 
Counsel, at the above address or by telephone (703) 518-6545, or Robert 
Leonard, Director, Division of Consumer Access, Office of Consumer 
Protection, at the above address or by telephone (703) 518-1150.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Federal Credit Union Act (Act), as amended by the Credit Union 
Membership Access Act of 1998 (CUMAA), establishes requirements for 
membership in federal credit unions (FCUs). The Act gives the Board 
broad rulemaking authority over FCUs. 12 U.S.C. 1766(a). NCUA has 
implemented the Act's field of membership requirements in its 
Chartering and Field of Membership Manual (Chartering Manual), 
incorporated as Appendix B to Part 701 of NCUA's regulations. 12 CFR 
Part 701, Appendix B. NCUA also publishes the Chartering Manual as an 
Interpretative Ruling and Policy Statement (IRPS). The current version 
of the Chartering Manual is set forth as IRPS 08-2, as amended by IRPS 
10-1.

Rural District

    The Act provides that a community credit union is one organized 
around a ``well-defined local community, neighborhood, or rural 
district.'' 12 U.S.C. 1759(b)(3). In CUMAA, Congress also specifically 
delegated to the Board the authority to define by regulation the 
meaning of ``well-defined local community'' (WDLC) and ``rural 
district'' for FCU charters. 12 U.S.C. 1759(g).
    Since CUMAA's enactment, the agency has gained significant 
experience in determining the criteria that establish an area as a WDLC 
or rural district by fully analyzing and processing numerous 
applications for community charter conversions and expansions. With the 
benefit of this extensive experience, the Board is concerned that the 
current population limit associated with establishing a rural district 
is too restrictive to fulfill the potential of that charter type and is 
limiting some FCUs' abilities to serve members in rural America.

II. Proposed Change to the Definition of Rural District

    The Chartering Manual currently includes two alternative sets of 
criteria to establish a rural district. One set of criteria is:
     The district has well-defined, contiguous boundaries;
     More than 50% of its population resides in areas the U.S. 
Census Bureau designates as rural; and
     The district's total population does not exceed 200,000.

The alternate criteria require:
     The district has well-defined, contiguous boundaries;
     It has a population density of no more than 100 people per 
square mile; and
     The district's total population does not exceed 200,000.

12 CFR part 701, Appendix B; Chartering Manual, Chapter 2.V.A.2. Thus, 
under either alternative, the upper limit on the population of a rural 
district is currently 200,000 persons.
    The Board believes that the limit of 200,000 persons may, in many 
instances, be too low to sustain a viable rural district FCU for 
several reasons. A rural area may often be anchored by a small hub city 
or town. A relatively high portion of individuals living in the rural 
area may periodically travel to that small hub for shopping, 
entertainment, medical care or financial services. That hub is 
important to the rural district for services, and it is important to be 
included in the rural district to enhance an FCU's economic potential. 
Unfortunately, when included in the rural district for chartering 
purposes, the hub could cause the area to exceed the 200,000 person 
population limit

[[Page 59138]]

under the current definition. Additionally, the Board is aware that it 
is difficult for an FCU to reach and attract members living in large 
rural areas with widely dispersed populations. FCUs often incur greater 
expenses to locate, join, and serve these members than members in a 
smaller geographic area with a higher population density. Accordingly, 
a higher potential population is often necessary to ensure the economic 
viability of many rural district charters.
    Since first defining the term rural district in 2010, NCUA has seen 
only modest usage of the rural district charter. In fact, currently 
there are fewer than 50 FCUs operating as a rural district charter. For 
the reasons noted above, the Board believes a higher population limit 
for an area to be considered a rural district is appropriate. Rather 
than simply imposing a larger numerical limit to attempt to fit all 
circumstances, the Board proposes to permit an area to qualify as a 
rural district if its population does not exceed the greater of (1) 
200,000; or (2) three percent of the total population of the state in 
which the majority of the district is located.
    The Board believes the addition of the three percent of state 
population component is broad enough to enhance an FCU's ability to 
serve individuals living in rural America, who often suffer from a lack 
of affordable financial services. The Board also believes that this 
component is sufficiently limited to permit the designation of a rural 
district only in geographic areas that are truly rural. Specifically, 
the enhanced definition will only affect FCUs seeking a rural district 
located in states with a population above approximately 6.67 million. 
This is because three percent of the population of states with fewer 
than 6.67 million people would already be less than the current 200,000 
person limit. There are 13 states of this size. This will protect 
against having a rural district that is unreasonably large in relation 
to the size and population of a state. The Board has considered using a 
higher limit but is concerned that a higher limit could result in 
overly large rural districts. For example, if the limit were set at 
four percent, then that would affect FCUs seeking rural districts 
located in states with populations greater than approximately 5 
million. This is because four percent of the population of states with 
fewer than 5 million people would already be less than the current 
200,000 person limit. There are 22 states of this size. NCUA believes 
this higher limit could result in rural districts disproportionately 
large in relation to states of this size. Nonetheless, NCUA would 
appreciate receiving comments on this aspect of the proposal. 
Additionally, even with the proposed amendment to the definition, the 
other criteria in the definition not related to total population remain 
in place and help ensure the definition as a whole does not exceed 
appropriate boundaries. Although NCUA is not proposing changes to the 
other criteria in the definition of rural district at this time, NCUA 
welcomes comments on these aspects of the definition as well.
    For FCUs seeking a rural district that includes portions of two or 
more states, the three percent state population component will be based 
on the population of the state containing the majority of the proposed 
rural district. The majority of a multi-state rural district will be 
based on population rather than geographic areas. For example, if an 
FCU applies to serve a district with two counties and 100,000 residents 
in one state, plus one county and 200,000 residents in a second state, 
the combined population of 300,000 could not exceed three percent of 
the population of the second state.
    FCUs with current rural district charters are grandfathered, but 
they would also be able to apply to amend their charters based on the 
proposed criteria. As with all community charters, FCUs serving more 
populated rural districts must develop business and marketing plans 
that demonstrate how they will serve their entire community.

III. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a rule may have on a 
substantial number of small credit unions (primarily those under $10 
million in assets). This proposed rule does not impose any requirements 
on small credit unions. NCUA has determined that this proposed rule 
will not have a significant economic impact on a substantial number of 
small credit unions.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency by rule creates a new paperwork burden on regulated 
entities or increases an existing burden. 44 U.S.C. 3507(d); 5 CFR part 
1320. For purposes of the PRA, a paperwork burden may take the form of 
either a reporting or a recordkeeping requirement, both referred to as 
information collections. NCUA has determined that this proposed rule 
does not impose a new information collection requirement or increase an 
existing burden.

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. 
NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the executive order to adhere to fundamental 
federalism principles. This proposed rule will not have substantial 
direct effects on the states, on the relationship between the national 
government and the states or on the distribution of power and 
responsibilities among the various levels of government. NCUA has 
determined that this proposed rule does not constitute a policy that 
has federalism implications for purposes of the executive order.

Treasury and General Government Appropriations Act, 1999

    NCUA has determined that this proposed rule will not affect family 
well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, 1999, Public Law 105-277, 112 
Stat. 2681 (1998).

List of Subjects

12 CFR Part 701

    Credit, Credit unions, Reporting and recordkeeping requirements.

    By the National Credit Union Administration Board on September 
20, 2012.
Mary Rupp,
Secretary of the Board.

    For the reasons set forth above, NCUA proposes to amend Appendix B 
of 12 CFR part 701 as follows:

PART 701--ORGANIZATION AND OPERATIONS 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, 1758, 1759, 
1761a, 1761b, 1766, 1767, 1782, 1784, 1786, 1787, 1789. Section 
701.31 is also authorized by 15 U.S.C. 1601, et seq., 42 U.S.C. 1981 
and 3601-3610. Section 701.35 is also authorized by 12 U.S.C. 4311-
4312.

Appendix B [Amended]

    2. Revise the fifth paragraph of Section V.A.2 of Chapter 2 of 
Appendix B to part 701 to read as follows:


[[Page 59139]]



Chapter 2

V.A.2--Definition of Well-Defined Local Community and Rural District

* * * * *
    The rural district requirement is met if:
     Rural District--
     The district has well-defined, contiguous geographic 
boundaries;
     More than 50% of the district's population resides in 
census blocks or other geographic areas that are designated as rural 
by the United State Census Bureau; and
     The total population of the district does not exceed 
the greater of 200,000 people or three percent of the population of 
the state in which the majority of the district is located; or
     The district has well-defined, contiguous geographic 
boundaries;
     The district does not have a population density in 
excess of 100 people per square mile; and
     The total population of the district does not exceed 
the greater of 200,000 people or three percent of the population of 
the state in which the majority of the district is located.
* * * * *
[FR Doc. 2012-23643 Filed 9-25-12; 8:45 am]
BILLING CODE 7535-01-P