[Federal Register Volume 78, Number 40 (Thursday, February 28, 2013)]
[Rules and Regulations]
[Pages 13460-13463]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-04647]


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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: Final rule.

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SUMMARY: The NCUA Board (Board) is amending the definition of ``rural 
district'' in NCUA's Chartering and Field of Membership Manual. The 
amendment 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 250,000 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 people 
without regard to the population of the state containing the majority 
of the rural district.

[[Page 13461]]


DATES: This rule is effective April 1, 2013.

FOR FURTHER INFORMATION CONTACT: Frank Kressman, Associate General 
Counsel, or Elizabeth Wirick, Staff Attorney, Office of General 
Counsel, at (703) 518-6545, or Robert Leonard, Director, Division of 
Consumer Access, Office of Consumer Protection, at (703) 518-1140.

SUPPLEMENTARY INFORMATION: 

I. Background
II. Public Comments
III. Regulatory Procedures

I. Background

A. Statutory Framework and the Proposed Rule

    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 provides that a 
community credit union is one organized around a ``well-defined local 
community, neighborhood, or rural district.''\1\ In CUMAA, Congress 
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.\2\
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    \1\ 12 U.S.C. 1759(b)(3).
    \2\ 12 U.S.C. 1759(g).
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    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 analyzing and processing numerous applications for 
community charter conversions and expansions. With the benefit of this 
experience, the Board has determined that the current population limit 
of 200,000 people associated with establishing a rural district is too 
restrictive to fulfill the potential of that charter type and is 
limiting some FCUs' ability to serve members in rural areas. 
Accordingly, the Board issued a proposed rule in September 2012 to 
increase the population limit associated with rural districts.\3\ 
Specifically, the proposed rule permitted 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.
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    \3\ 77 FR 59137 (Sept. 26, 2012).
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B. Final Rule

    Among other criteria, the final rule permits an area to qualify as 
a rural district if its population does not exceed the greater of 
250,000 people or three percent of the population of the state in which 
the majority of the district is located. As revised by the final rule, 
NCUA's Chartering and Field of Membership Manual \4\ continues to 
include two alternative sets of criteria to establish a rural district. 
One set requires that the district have well-defined, contiguous 
boundaries and more than 50% of its population must reside in areas the 
U.S. Census Bureau designates as rural. The other set of criteria 
requires that the district have well-defined, contiguous boundaries and 
a population density of no more than 100 people per square mile. Under 
either set of criteria, the population of a rural district may not 
exceed the greater of 250,000 or three percent of the population of the 
state in which the majority of the district is located.
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    \4\ NCUA has implemented the Act's field of membership 
requirements in its Chartering and Field of Membership Manual, 
incorporated as Appendix B to part 701 of NCUA's regulations. 12 CFR 
part 701, Appendix B. NCUA also publishes the manual as an 
Interpretative Ruling and Policy Statement (IRPS). The current 
version of the manual is set forth as IRPS 08-2, as amended by IRPS 
10-1.
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    As with all community charters, FCUs serving rural districts must 
develop business and marketing plans that demonstrate how they will 
serve their entire community.
    The practical effect of the revised definition is that it allows 
rural districts of up to 250,000 persons in all states, and, in the 11 
most populous states, rural districts may exceed the 250,000 person 
limit.\5\ Despite the focus on the population aspect of the definition 
of rural district, the other criteria in the definition not related to 
population remain in place and help ensure the definition as a whole 
does not exceed appropriate boundaries.
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    \5\ With respect to the three percent of state population 
component, the amended definition will only affect FCUs seeking a 
rural district located in states with a population above 
approximately 8.83 million. This is because three percent of the 
population of states with fewer than 8.83 million people would 
already be less than the 250,000 person limit.
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    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 area. For example, if an FCU 
applies to serve a district with two geographically large counties and 
100,000 residents in state A, plus one geographically small county and 
200,000 residents in state B, the combined population of 300,000 could 
not exceed three percent of the population of state B.

C. How is the final rule different from the proposed rule?

    The proposal would have allowed rural districts of up to 200,000 
people or three percent of a state's population, whichever is greater. 
As discussed in more detail below, the final rule allows rural 
districts of up to 250,000 people or three percent of a state's 
population, whichever is greater.

II. Public Comments

    NCUA received 16 comments on the proposal: three from trade 
associations, nine from state credit union leagues, and four from FCUs. 
Fourteen commenters supported the proposed rule but urged NCUA to make 
other changes to the definition of rural district so more FCUs could 
benefit. One commenter supported the proposal without additional 
suggestions. Only a banking trade association opposed the proposal.
    The commenters who encouraged NCUA to make additional changes 
mostly expressed concern that the proposal would benefit only credit 
unions in the most populous states. Many commenters suggested that 
increasing the population limit for a rural district would enhance the 
availability of rural district-based community charters. Two commenters 
suggested using a population limit of 500,000 persons, and another two 
commenters suggested the population should be limited to the greater of 
500,000 or four percent of a state's population. Six commenters stated 
the definition of rural district should be contiguous areas in a state 
with a total district population of less than 500,000. As discussed in 
the preamble to the proposed rule, NCUA is seeking a balance that 
permits rural districts to include a sufficient number of potential 
credit union members to make this a realistic chartering option in more 
areas, without permitting rural districts to become overly large.
    The Board believes that many of the commenters have suggested 
population limits that would result in overly large rural districts. 
The Board's longstanding view is that a community charter should not 
encompass an entire state.\6\ For example, the 500,000 member limit 
suggested by many of the commenters constitutes the majority of the 
population in seven states \7\ and the

[[Page 13462]]

District of Columbia. Accordingly, this suggested limit violates in 
principle the Board's position of restricting community charters to 
appropriate sizes. The 500,000 person limit also exceeds the balance 
the Board seeks between permitting rural districts to be large enough 
to be economically viable but not unreasonably or unnecessarily large 
taking into account the purpose of the rural district. Although the 
Board believes a 500,000 person population limit is too large, the 
Board agrees with commenters that an increase from the current 200,000 
person limit is warranted. Accordingly, the Board has determined to 
increase the population limit for rural districts to the greater of 
250,000 or three percent of the population of the state containing the 
rural district. Increasing the population limit to 250,000 will 
potentially benefit FCUs in all geographic locations, not only the 11 
most populous states, but is not so drastic an increase to dilute the 
integrity of the purpose of rural districts. In other words, the Board 
believes this incremental increase to 250,000 reaches the balance 
discussed above.
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    \6\ 75 FR 36257 (June 25, 2010).
    \7\ These states are Montana, Delaware, South Dakota, Alaska, 
North Dakota, Vermont, and Wyoming.
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    The Board took into account similar considerations and applied a 
similar analysis in establishing the ``three percent of state 
population'' component in the definition. As noted in the preamble to 
the proposed rule, the Board is concerned that many rural districts are 
centered around a small hub city or town. When the population of the 
hub is included in the rural district's total population, it often can 
cause the total population to exceed the 250,000 person limit.\8\ This 
is problematic because the inclusion of such hub cities or towns is 
often necessary for some rural districts to be economically viable. The 
addition of the three percent of state population component to the 
definition, as introduced in the proposed rule, potentially increases 
the size of a rural district.
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    \8\ 77 FR 59137, 59138 (Sept. 26, 2012).
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    In the discussion of the proposed rule, the Board also noted that 
FCUs in rural areas often have greater expenses to locate, join and 
serve members than FCUs whose membership is less geographically 
dispersed.\9\ As a result, a higher potential population is required to 
ensure the economic viability of many rural district charters. The 
proposal would have offered the higher potential population limit only 
to FCUs in the most populous states. The final rule increases the 
population limit for all FCUs.
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    \9\ Id.
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    Commenters also offered a variety of suggested changes to other 
components of the definition of rural district. The current definition 
of rural district also requires that either: (1) more than 50% of the 
district's population resides in areas designated as rural by the U.S. 
Census Bureau; or (2) the proposed district has a population density of 
no more than 100 people per square mile. Five commenters queried 
whether the definition of rural district requires any component based 
on census tract data, and one commenter suggested the 100 person per 
square mile limit is too low. Several commenters also proposed 
alternatives for these criteria. The Board has carefully considered 
these suggestions but is not making any changes to the other, existing 
components of the definition.
    Six commenters requested that existing rural district-based FCU 
charters be grandfathered, but also allowed to apply for an expanded 
area under any new definition adopted. The Board reiterates that FCUs 
with current rural district charters are grandfathered, and they are 
able to apply to amend their charters based on the adopted definition.

III. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
of any significant economic impact a regulation may have on a 
substantial number of small entities (primarily those under $50 million 
in assets).\10\ This rule does not impose any requirements on small 
credit unions. NCUA has determined that this final rule will not have a 
significant economic impact on a substantial number of small credit 
unions.
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    \10\ 5 U.S.C. 603(a).
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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.\11\ 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 rule does not impose a new information 
collection requirement or increase an existing burden.
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    \11\ 44 U.S.C. 3507(d); 5 CFR part 1320.
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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 rule only applies to FCUs and 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 rule does not constitute a policy that has 
federalism implications for purposes of the executive order.

Treasury and General Government Appropriations Act, 1999--Assessment of 
Federal Regulations and Policies on Families

    NCUA has determined that this rule will not affect family well-
being within the meaning of section 654 of the Treasury and General 
Government Appropriations Act, 1999.\12\
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    \12\ Public Law 105-277, 112 Stat. 2681 (1998).
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Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 \13\ 
(SBREFA) provides generally for congressional review of agency rules. A 
reporting requirement is triggered in instances where NCUA issues a 
final rule as defined by Section 551 of the Administrative Procedure 
Act.\14\ NCUA expects that the Office of Management and Budget will 
determine that the final rule is not a ``major rule'' for purposes of 
SBREFA.
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    \13\ Public Law 104-121, 110 Stat. 857 (1996).
    \14\ 5 U.S.C. 551.
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List of Subjects in 12 CFR Part 701

    Credit, Credit unions, Reporting and recordkeeping requirements.

    By the National Credit Union Administration Board on February 
21, 2013.
Mary Rupp,
Secretary of the Board.

    For the reasons set forth above, the National Credit Union 
Administration amends 12 CFR part 701 as follows:

PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

0
1. The authority citation for part 701 continues to read as follows:


[[Page 13463]]


    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.


0
2. Revise the fifth paragraph of Section V.A.2 of Chapter 2 of Appendix 
B to part 701 to read as follows:

Appendix B to Part 701--Chartering and Field of Membership Manual

* * * * *

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 250,000 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 250,000 people or three percent of the population of 
the state in which the majority of the district is located.
* * * * *
[FR Doc. 2013-04647 Filed 2-27-13; 8:45 am]
BILLING CODE 7535-01-P