[Federal Register Volume 81, Number 217 (Wednesday, November 9, 2016)]
[Proposed Rules]
[Pages 78748-78756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26921]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701

RIN 3133-AE31


Chartering and Field of Membership Manual

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule with request for comments.

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SUMMARY: The NCUA Board proposes to amend its chartering and field of 
membership rules to give applicants for community charter approval, 
expansion or conversion the option, in lieu of a presumptive community, 
to submit a narrative to establish common interests or interaction 
among residents of the area it proposes to serve, thus qualifying the 
area as a well-defined local community. The Board also proposes to 
increase up to 10 million the population limit on a community 
consisting of a statistical area or a portion thereof. Finally, when 
such an area is subdivided into metropolitan divisions, the Board will 
permit a credit union to designate a portion of the area as its 
community without regard to division boundaries.

DATES: Comments must be received on or before December 9, 2016.

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/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the 
instructions for submitting comments.
     Email: Address to [email protected]. Include ``[Your 
name] Comments on Notice of Proposed Rulemaking re Community Common 
Bond'' in the email subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for email.
     Mail: Address to Gerard S. Poliquin, 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: Matthew Biliouris, Deputy Director, or 
Robert Leonard, Director, Division of Consumer Access, or Rita Woods, 
Director, Division of Consumer Access South, Office of Consumer 
Financial Protection and Access, at the above address or telephone 
(703) 518-1140; or Senior Staff Attorney Steven Widerman or Staff 
Attorney Marvin Shaw, Office of General Counsel, at the above address 
or telephone (703) 518-6540.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Overview

    NCUA's Chartering and Field of Membership Manual, incorporated as 
Appendix B to part 701 of its regulations (``Chartering Manual''),\1\ 
implements the field of membership (``FOM'') requirements established 
by the Federal Credit Union Act (``the Act'') for federal credit unions 
(each an ``FCU'').\2\ An FOM consists of those persons and entities 
eligible for membership according to an FCU's type of charter.
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    \1\ Appendix B to 12 CFR part 701 (``Appendix B'').
    \2\ 12 U.S.C. 1759.
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    In adopting the Credit Union Membership Access Act of 1998 
(``CUMAA''), Congress reiterated its longstanding support for credit 
unions, noting their ``specif[ic] mission of meeting the credit and 
savings needs of consumers, especially persons of modest means.'' \3\ 
As amended by CUMAA, the FCU Act provides a choice among three charter 
types: A single group sharing a single occupational or associational 
common bond; \4\ a multiple common bond of groups that each have a 
distinct occupational or associational common bond among group members; 
\5\ and a community common bond among ``persons or organizations within 
a well-defined local community, neighborhood, or rural district.'' \6\
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    \3\ Public Law 105-219, Sec.  2, 112 Sta. 913 (Aug 7, 1998).
    \4\ 12 U.S.C. 1759(b)(1).
    \5\ Id. Sec.  1759(b)(2)(A).
    \6\ Id. Sec.  1759(b)(3).
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    As amended in 1998, the FCU Act directs the Board to define what 
constitutes a well-defined local

[[Page 78749]]

community (``WDLC''), neighborhood, or rural district for purposes of 
``making any determination'' regarding a community credit union,\7\ and 
to establish applicable criteria for any such determination.\8\ To 
qualify as a WDLC, neighborhood, or rural district, the Board requires 
the proposed area to have ``specific geographic boundaries,'' such as 
those of ``a city, township, county (single or multiple portions of a 
county) or their political equivalent, school districts or a clearly 
identifiable neighborhood.'' \9\ The boundaries themselves may consist 
of political borders, streets, rivers, railroad tracks, or other static 
geographical features.\10\ The Board continues to emphasize interaction 
or common interests among residents within those boundaries as 
essential features of a local community.
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    \7\ Id. Sec.  1759(g)(1)(A).
    \8\ Id. Sec.  1759(g)(1)(B).
    \9\ Appendix B, Ch. 2, section V.A.2.
    \10\ Appendix B, Ch. 2, section V.A.5.
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    Until 2010, the Chartering Manual required FCUs to submit for NCUA 
approval a narrative, supported by documentation, that presents indicia 
of common interests or interaction among residents of a proposed 
community (the ``narrative model''). In 2010, the Board abandoned the 
narrative model in favor of an objective model that gives credit unions 
a choice between two ``presumptive communities'' that each by 
definition qualifies as a WDLC (the ``presumptive community 
model'').\11\ The first of these is a ``Single Political Jurisdiction . 
. . or any contiguous portion thereof'' (each an ``SPJ''), regardless 
of population.\12\ The other is a single Core Based Statistical Area as 
designated by the U.S. Census Bureau (``Census'') or a well-defined 
portion thereof (each a ``CBSA''), subject to a 2.5 million population 
limit.\13\
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    \11\ As explained in the final rule that discontinued use of the 
subjective model, the Board ``does not believe it is beneficial to 
continue the practice of permitting a community charter applicant to 
provide a narrative statement with documentation to support the 
credit union's assertion that an area containing multiple political 
jurisdictions meets the standards for community interaction and/or 
common interests to qualify as a WDLC. As [the proposed rule] noted, 
the narrative approach is cumbersome, difficult for credit unions to 
fully understand, and time consuming. . . . While not every area 
will qualify as a WDLC under the statistical approach, NCUA stated 
it believes the consistency of this objective approach will enhance 
its chartering policy, assure the strength and viability of 
community charters, and greatly ease the burden for any community 
charter applicant.'' 75 FR 36257, 36260 (June 25, 2010).
    \12\ Appendix B, Ch. 2, section V.A.2.
    \13\ Id. ``A total population cap of 2.5 million is appropriate 
in a multiple political jurisdiction context to demonstrate cohesion 
in the community.'' 75 FR 36257, 36260 (June 25, 2010).
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    In the case of a CBSA that the Office of Management and Budget 
(``OMB'') has subdivided into metropolitan divisions, a community 
consisting of a portion of the CBSA must conform to the boundaries of 
such divisions. Under either ``presumptive community'' option, an FCU 
must be able to serve its entire proposed community, as demonstrated by 
its business and marketing plans that must accompany an application to 
approve a new community charter, an expansion or a conversion.\14\
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    \14\ Appendix B, Ch. 2, Sec.  V.A.4.
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    In a final rule published elsewhere in this volume of the Federal 
Register, the Board comprehensively overhauled the Chartering Manual. 
With respect to community charters, the final rule, among other things, 
affirmed the 2.5 million population cap that applies to a ``presumptive 
community'' consisting of a CBSA or portion thereof,\15\ and recognized 
an OMB-designated Combined Statistical Area or a portion thereof as a 
``presumptive community'' subject to the same population limit.\16\
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    \15\ The final rule also modified the ``statistical area'' 
definition to specify that in the case of a community consisting of 
a portion of either a CBSA or a Metropolitan Division within, the 
portion by itself must have a population of 2.5 million or fewer, 
regardless whether the CBSA or Metropolitan Division as a whole 
exceeds the limit. Appendix B, Ch. 2, section V.A.2.
    \16\ Appendix B, Ch. 2, Sec.  V.A.2. OMB Bulletin No. 15-01 to 
Heads of Executive Departments and Establishments (July 15, 2015) 
at: https://www.whitehouse.gov/sites/default/files/omb/bulletins/2015/15-01.pdf.
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    The final rule also permitted the addition of an adjacent area to 
an existing ``presumptive community'' based on a narrative presenting 
indicia that residents on both sides of the perimeter share common 
interests and interact with each other, subject to the same population 
limit. The Board narrowly reinstated the narrative model for this 
singular purpose. To achieve that purpose, the final rule directed the 
Office of Consumer Financial Protection and Access (``OCFPA'') to issue 
guidance identifying indicia corresponding to the criteria that an 
FCU's narrative should address to support the addition of an adjacent 
area,\17\ and which the Board will consider in deciding an FCU's 
application to do so.
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    \17\ 80 FR 76748, 76772 (Dec. 10, 2015) (referring to the 
presence of an economic hub, quasi-governmental agencies, Government 
designated programs, shared public services and facilities, and 
colleges and universities).
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B. Why is NCUA proposing this rule?

    NCUA is proposing this rule to consider three recommendations from 
commenters that exceeded the scope of the Board's 2015 proposal to 
comprehensively overhaul the Chartering Manual.\18\ First, despite the 
ease and convenience of the ``presumptive community'' model as a safe 
harbor to establish a WDLC, it may be too limiting if it confines FCUs 
to ``presumptive community'' options that may be unsuited to their 
purposes and ability, leaving them with no recourse but to accept an 
area other than the one they ideally seek to serve. General use of the 
narrative model in seeking approval to charter, to expand, or to 
convert to, a community charter would address such a dilemma.
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    \18\ 80 FR 76748.
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    Second, the Board seeks to explore the possibility of increasing up 
to 10 million the population limit that applies to a local community 
other than an SPJ, to permit approval of a community within that 
maximum to the extent of an FCU's ability and commitment to adequately 
serve that community without compromising either the safety and 
soundness of the FCU's operations or the cohesion of the community.\19\
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    \19\ See note 13 supra.
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    Finally, when an FCU seeks to serve a portion of a Combined 
Statistical Area as its WDLC, that portion is not required to conform 
to the boundaries of the CBSA components that form the Combined 
Statistical Area. In contrast, when an FCU seeks to serve a portion of 
a CBSA as its community--notwithstanding that a CBSA is far more 
compact than a Combined Statistical Area--the existing rule nonetheless 
requires such portion of a CBSA to conform to the boundaries of the 
metropolitan divisions within, if any. Permitting a credit union to 
designate a portion of a CBSA as its community without regard to 
division boundaries would address this disparity in treatment of a 
community consisting of a portion of a CBSA versus that of a Combined 
Statistical Area.
    Consistent with the Board's responsibility under CUMAA to 
facilitate access to credit union services, the objective of the three 
proposals in this rule is to give FCUs greater flexibility in providing 
services to consumers who are eligible for FCU membership, particularly 
those of modest means.

II. Summary of the Proposed Rule

A. General Applicability of Narrative Model To Establish a Well-Defined 
Local Community

    The proposed rule would permit general use of the narrative model--
which the final rule makes available solely to add an adjacent area to 
an

[[Page 78750]]

existing or a new community \20\--to seek NCUA approval to initially 
form, to expand, or to convert to, a community charter. In lieu of 
reliance on a ``presumptive community,'' the proposed rule would permit 
an FCU to submit a narrative, supported by appropriate documentation, 
to demonstrate that the community it proposes to serve qualifies as a 
WDLC based on common interests or interaction among the area's 
residents.
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    \20\ Appendix B, Ch. 2, Sec.  V.A.2.
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    The Act gives the Board broad discretion to define a WDLC for 
purposes of ``making any determination'' regarding a community credit 
union,\21\ and to establish criteria to apply to any such 
determination.\22\ Under that authority, the Board proposes, in a new 
appendix to the Chartering Manual, a set of ``Narrative Criteria to 
Identify a Well-Defined Local Community'' that an FCU should address in 
the narrative it submits to support its application to charter, expand, 
or convert to, a community credit union.
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    \21\ 12 U.S.C. 1759(g)(1)(A) (emphasis added).
    \22\ Id. Sec.  1759(g)(1)(B).
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    NCUA's experience with community charter applications under the 
pre-2010 narrative model indicates that these particular thirteen 
criteria generally were the most useful and compelling, when properly 
addressed and documented, to demonstrate common interests or 
interaction among residents of a proposed community. An area need not 
meet all of the narrative criteria to qualify as a local community; 
rather, the totality of circumstances within the criteria a credit 
union elects to address must indicate a sufficient presence of common 
interests or interaction among the area's residents. The new appendix 
explains each criterion in order to guide applicants in the prudent use 
of their resources, with minimal burden, to assess whether an area 
qualifies as a local community and, if so, to develop an effective and 
well-documented narrative to justify Board approval of its 
application.\23\
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    \23\ Appendix 6 to Appendix B.
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    Accordingly, the Board will consider the following criteria, and 
the supporting documentation for each, in evaluating the presence of 
interaction and/or common interest among residents sufficient to 
establish that an area is a WDLC:
1. Presence of a Central Economic Hub
    The proposed community includes an economic hub. An economic hub is 
evident when one political jurisdiction (city or county) within a 
proposed local community has a relatively large percentage of the 
community's population or is the primary location for employment. The 
application needs to identify the major employers and their locations 
within the proposed community.
2. Community-Wide Quasi-Governmental Agency Services
    The existence of organizations such as economic development 
commissions, regional planning boards, and labor or transportation 
districts can be important factors to consider. The more closely their 
service area matches the entire area, the greater the showing of 
interaction and/or common interests.
3. Governmental Designations With Community
    Designation of the proposed community by a government agency as a 
region or distinct district--such a regional transportation district, a 
water district, or a tourism district--is a factor that can be 
considered in determining whether the area is a local community. The 
more closely the designation matches the area's geographic boundaries, 
the greater the value of that evidence in demonstrating interaction 
and/or common interests.
4. Shared Public Services and Facilities
    The existence of shared services and facilities, such as police, 
fire protection, park districts, public transportation, airports, or 
public utilities, can contribute to a finding that an area is a 
community. The more closely the service area matches the geographic 
boundaries of the community, and the higher the percentage of residents 
throughout the community using those services or facilities, the more 
valuable the data.
5. Hospitals and Major Medical Facility Services
    Data on medical facilities should include admittance or discharge 
statistics providing the ratio of use by residents of each political 
jurisdiction. The greater the percentage of use by residents throughout 
the proposed community, the higher the value of this data in showing 
interaction. The application can also support the importance of an area 
hospital with documentation that correlates the facility's target area 
with the proposed local community and/or discusses the relative 
distribution of hospitals over a larger area.
6. College and University Enrollment
    College enrollment data can be a useful factor in establishing a 
local community. The higher the percentages of student enrollment at a 
given campus by residents throughout each part of the community, the 
greater the value in showing interaction. Additionally, the greater the 
participation by the college in community initiatives (e.g., partnering 
with local governments), and the greater the service area of these 
initiatives, the stronger the value of this factor.
7. Multi-Jurisdictional Mutual Aid Agreements
    The existence of written agreements among law enforcement and fire 
protection agencies in the area to provide services across multiple 
jurisdictions can be an important factor.
8. Organizations' and Clubs' Membership and Services
    The more closely the service area of an organization or club 
matches the proposed community's boundaries, and the greater the 
percentage of membership and services throughout the proposed 
community, the more relevant the data.
9. Newspaper Subscriptions
    A newspaper that has a substantial subscription base in an area can 
be an indication of common interests. The higher the household 
penetration figures throughout the area, the greater the value in 
showing common interests. Subscription data may include print copies as 
well as on-line access.
10. Attendance at Entertainment and Sporting Events
    Data to show the percentage of residents from each political 
jurisdiction who attend the events. The higher the percentage of 
residents from throughout the proposed community, the stronger the 
evidence of interaction. For sporting events, as well as some 
entertainment events, data on season ticket holders and memberships may 
be available. As with overall attendance figures, the higher the 
percentage of residents from throughout the proposed community, the 
stronger the evidence of interaction.
11. Local Television and Radio Audiences
    A television or radio station broadcasting in an area can be an 
indication of common interests. Objective data on viewer and listener 
audiences in the proposed community can support the existence of a 
community.

[[Page 78751]]

12. Community-Wide Shopping Patterns
    The narrative must identify the location of the major shopping 
centers and malls and include the percentage of shoppers coming from 
each part of the community. The larger the percentage of shoppers from 
throughout the community, the stronger the case for interaction. While 
of lesser value than the shopping data, identification of the shopping 
center's target area can be persuasive. The target area should closely 
match the geographic boundaries of the proposed community.
13. Geographic Isolation
    Some communities face varying degrees of geographic isolation. As 
such, travel outside the community can be limited by mountain ranges, 
forests, national parks, deserts, bodies of waters, etc. This factor, 
and the relative degree of isolation, may help bolster a finding of 
interaction or common interests.

B. Increase in Statistical Area Population Limit to 10 Million

    The proposed rule would increase to 10 million the 2.5 million 
population limit that presently applies to a community consisting of a 
CBSA or Combined Statistical Area (each a ``statistical area'') or 
other area an FCU designates, subject to an FCU's ability and 
commitment to adequately serve the area. Despite having just affirmed a 
2.5 million population limit, the Board anticipates that many areas 
that would qualify as a WDLC will experience population growth over 
time. The Board therefore believes that its policy should anticipate 
and accommodate inevitable growth, to the extent permissible under the 
Act, in order to maximize the potential membership base available to 
community credit unions.
    Three grounds justify a population limit of 10 million. First, it 
would conform to the population of the most populous SPJ the Board has 
approved (Los Angeles County) and, notwithstanding that an SPJ is not 
subject to a population cap, the FCU that serves that community has not 
experienced adverse safety or soundness consequences attributable to 
its population size.\24\
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    \24\ The FCU that serves the Los Angeles County community has 
approximately 32,000 members, representing a community penetration 
rate of 3 percent.
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    Second, the Board believes the population limit on a community 
consisting of a statistical area must be sufficiently accommodating to 
minimize the disparity between such communities and those comprised of 
an SPJ, which is unbound by any population limit. Third, a 10 million 
population limit would narrow the inherent imbalance between the 
population cap that applies to FCUs and the uncapped state credit 
unions in at least the nine states with a population between 2.5 and 10 
million. The laws of these states allow their credit unions to serve a 
state-wide FOM.
    To fully consider an increase in the population limit on a 
community consisting of a statistical area, the Board seeks the benefit 
of public comments addressing the following issues affecting a 
statistical area--
     Whether to apply any population limit at all if the area 
is completely or primarily urban according to Census data.
     Whether to designate a particular metric on which to rely 
in setting and adjusting a population limit.
     Whether to apply any population limit at all to a CBSA or 
Statistical Area given that neither one is defined, by the Census or 
OMB respectively, according to maximum population.
     Whether to apply a population limit equivalent to the most 
populous/largest SPJ NCUA has approved (i.e., Los Angeles County, as 
explained above).
     Whether to apply a population limit equivalent to either 
the average or median population among either all CBSAs with a 
population in excess of 2.5 million, or all Combined Statistical Areas 
with population in excess of 2.5 million.
     Whether to apply a population limit equivalent to the 
greater of either 2.5 million or a specific percentage of the 
population of the CBSA or Combined Statistical Area, and if so, what 
the percentage should be.
     Whether to apply a population limit equivalent to the most 
populous/largest Metropolitan Statistical Area that is totally or 
partially encompassed by the proposed community.
     Whether to apply a population limit equivalent to the most 
populous/largest SPJ that is totally or partially encompassed by the 
proposed community.
     Whether to apply a population limit that, to ensure 
service to persons of modest means, excludes individuals living in a 
household that either is low- or moderate-income; that earns less than 
200 percent of the national poverty level; or in which the principal 
wage-earner earns no more than the federal minimum wage (based on a 40-
hour work week for 50 weeks per year); or is based on a combination of 
these metrics.
     Whether to delegate to NCUA staff the authority to set a 
population limit not exceeding a specified ceiling, and what that 
ceiling population should be (e.g., 2.5 million, 5 million, 10 
million), with the Board retaining authority to approve a limit in 
excess of the delegated ceiling.
     Whether to apply the same population limit regardless 
whether an FCU's initial application to charter, or to convert to, a 
community credit union includes an area adjacent to its statistical 
area, versus a subsequent application to expand an FCU's existing 
community to add such an adjacent area.
     Whether NCUA should establish a process to give the public 
notice and an opportunity to comment on an FCU's application for 
approval of a statistical area with a population in excess 2.5 million.
     Whether, in view of technological advances since CUMAA, 
such as the internet, the Board should consider whether, and how, 
online social communities qualify as WDLCs.
     Whether there are other definitions of ``community'' that 
would be a relevant gauge for community credit unions (e.g., the area's 
student population eligible to attend its local community college, the 
population eligible to benefit from its quasi-government agency 
services and facilities).
     Whether to reinstate the narrative model for use by FCUs 
seeking approval serve a statistical area within certain population 
parameters (e.g., between 2.5 and 10 million).
     Whether to discard the ``presumptive community'' model and 
reinstate the narrative model for general applicability, or to give 
FCUs the option to elect either model to support the area each proposes 
to serve as its community.
     Whether to add certain criteria to, or to delete or modify 
certain ones from, the new appendix of ``Narrative Criteria to Identify 
a Well-Defined Local Community,'' and how to evaluate the narrative 
criteria to determine whether an area qualifies as a WDLC.

C. Portion of CBSA as a Well-Defined Local Community Regardless of 
Internal Boundaries

    When an FCU seeks to serve a portion of a single CBSA as its WDLC, 
the existing rule requires such portion to conform to the boundaries of 
the Metropolitan Divisions, if any, within the CBSA. In contrast, when 
an FCU seeks to serve a portion of a Combined Statistical Area as its 
WDLC--notwithstanding that it is far more expansive than a CBSA--that 
portion is not required to conform to the boundaries of the adjoining 
CBSAs that form a Combined Statistical Area, nor to the boundaries of 
any Metropolitan

[[Page 78752]]

Divisions within those CBSAs. To correct this inconsistency in the 
treatment of a portion of a CBSA versus that of a Combined Statistical 
Area, the proposed rule would permit a credit union to designate a 
portion of a CBSA as its community without regard to division 
boundaries.

III. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a regulation may have on a 
substantial number of small entities.\25\ For purposes of this 
analysis, NCUA considers small credit unions to be those having under 
$100 million in assets.\26\ Although this rule is anticipated to 
economically benefit FCUs that choose to charter, expand or convert to 
a community charter, NCUA certifies that it will not have a significant 
economic impact on small credit unions.
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    \25\ 5 U.S.C. 603(a).
    \26\ 80 FR 57512 (Sept. 24, 2015).
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Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to collections of 
information through which an agency creates a paperwork burden on 
regulated entities or the public, or modifies an existing burden.\27\ 
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. The Office of Management and Budget (OMB) 
previously approved the current information collection requirements for 
the Chartering and Field of Membership Manual and assigned them control 
number 3133-0015.
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    \27\ 44 U.S.C. 3507(d); 5 CFR part 1320.
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    Regarding a community common bond, the proposed rule gives 
community charter applicants the option, in lieu of a presumptive 
community, to submit a narrative to establish common interests and 
interaction among residents of the area it proposes to serve, thus 
qualifying the area as a well-defined local community. For that 
purpose, the rule includes guidance in identifying compelling indicia 
of interaction or common interests that would be relevant in drafting a 
narrative summarizing the indicia that community residents meet the 
requirements of a well-defined local community. In addition, the 
proposed rule increases to as much as 10 million the population limit 
on a community consisting of a statistical area, and when such an area 
is subdivided into Metropolitan Divisions, the rule permits a credit 
union to designate a portion of the area as its community without 
regard to division boundaries.
    NCUA has determined that the procedure for an FCU to assemble and 
document a narrative summarizing the evidence to support its community 
charter application would create a new information collection 
requirement. As required, NCUA is applying to OMB for approval to amend 
the current information collection to account for the new procedure.
    Prior to 2010, when NCUA moved to an objective model of presumptive 
communities, FCUs had the following three choices for a community 
charter: Previously approved areas; single political jurisdictions; and 
multiple political jurisdictions. For applications involving multiple 
statistical areas, NCUA required FCUs to submit for NCUA approval a 
narrative, supported by documentation, that presents indicia of common 
interests or interaction among residents of the proposed community.
    In the five-year period preceding the move to an objective model of 
presumptive communities, NCUA processed an average of twenty-five FOM 
applications involving multiple statistical areas. Based on this 
historical trend, NCUA estimates that, on average, it would take an 
FCU's staff approximately 160 hours to collect the evidence of 
interaction or common interests and to develop a narrative to support 
its application to expand or to convert. Accordingly, NCUA estimates 
the aggregate information collection burden on existing and would-be 
FCUs that elect to use the narrative option to form, expand, or convert 
to a community charter would be 160 hours times 25 FCUs for a total of 
4,000 hours. NCUA is proposing to amend the current information 
collection control number 3133-0015 to account for these additional 
burden hours.
    Organizations and individuals wishing to submit comments on this 
information collection requirement should direct them to the Office of 
Information and Regulatory Affairs, OMB, Attn: Shagufta Ahmed, Room 
10226, New Executive Office Building, Washington, DC 20503, with a copy 
to the Secretary of the Board, National Credit Union Administration, 
1775 Duke Street, Alexandria, Virginia 22314-3428.
    NCUA will consider comments by the public on this proposed 
collection of information in:
     Evaluating whether the proposed collection of information 
is necessary for the proper performance of the functions of the NCUA, 
including whether the information will have a practical use;
     Evaluating the accuracy of NCUA's estimate of the burden 
of the proposed collection of information, including the validity of 
the methodology and assumptions used;
     Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
     Minimizing the burden of collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology (e.g., permitting 
electronic submission of responses).

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. In 
adherence to fundamental federalism principles, NCUA, an independent 
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies 
with the executive order. Primarily because this rule applies to FCUs 
exclusively, it will not have a substantial direct effect on the 
states, on the connection 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.

Assessment of Federal Regulations and Policies on Families

    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.\28\
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    \28\ Public Law 105-277, 112 Stat. 2681 (1998).
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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 October 27, 
2016.
 Gerard S. Poliquin,
 Secretary of the Board.

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

[[Page 78753]]

PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

0
1. The authority 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 
701.6 is also authorized by 15 U.S.C. 3717. 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 42 U.S.C. 4311-4312.

0
2. Appendix B to part 701 is amended as follows:
0
a. Section V.A.2. of Chapter 2 is revised.
0
b. Appendix 6 to Appendix B is added.
    The revision and addition read as follows:

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

* * * * *

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

    In addition to the documentation requirements in Chapter 1 to 
charter a credit union, a community credit union applicant must 
provide additional documentation addressing the proposed area to be 
served and community service policies.
    An applicant has the burden of demonstrating to NCUA that the 
proposed community area meets the statutory requirements of being: 
(1) Well-defined, and (2) a local community or rural district.
    ``Well-defined'' means the proposed area has specific geographic 
boundaries. Geographic boundaries may include a city, township, 
county (single, multiple, or portions of a county) or a political 
equivalent, school districts, or a clearly identifiable 
neighborhood. Although state boundaries are well-defined areas, 
states themselves do not meet the requirement that the proposed area 
be a local community.
    The well-defined local community requirement is met if:
     Single Political Jurisdiction--The area to be served is 
a recognized Single Political Jurisdiction, i.e., a city, county, or 
their political equivalent, or any single portion thereof.
     Statistical Area--A statistical area is all or an 
individual portion of one of the following:
     A Core-Based Statistical Area designated by the U.S. 
Census Bureau, including a Metropolitan Statistical Area, with a 
population of 10 million or fewer; or
     A Combined Statistical Area designated by the U.S. 
Office of Management and Budget, with a population of 10 million or 
fewer.
     To meet the well-defined local community requirement, 
an individual portion of a statistical area need not conform to 
internal boundaries within the area, such as metropolitan division 
boundaries within a Core-Based Statistical Area, and the boundaries 
of adjoining Core-Based Statistical Areas that form a Combined 
Statistical Area.
     Compelling Evidence of Interaction or Common 
Interests--In lieu of a statistical area as defined above, this 
option is available when a credit union seeks to initially charter a 
community credit union; to expand an existing community; or to 
convert to a community charter, subject in any case to the same 
population limit established for a statistical area. Under this 
option, the credit union must demonstrate a sufficient level of 
interaction or common interests among area residents to qualify the 
area as a local community. For that purpose, an applicant must 
submit for NCUA approval a narrative, supported by appropriate 
documentation, establishing that the area's residents meet the 
requirements of a local community.
    To assist a credit union in developing its narrative, Appendix 6 
of this Manual identifies criteria a narrative should address, and 
which NCUA will consider in deciding a credit union's application 
to: Initially charter a community credit union; to expand an 
existing community, including by an adjacent area addition; or to 
convert to a community charter. In any case, the credit union must 
demonstrate, through its business and marketing plans, its ability 
and commitment to serve the entire community for which it seeks NCUA 
approval.
* * * * *

Appendix 6

Narrative Criteria To Identify a Well-Defined Local Communty

    This Appendix applies when the community a federal credit union 
(``FCU'') proposes to serve is not a ``presumptive community'', 
under either option in chapter 2, section V.A.2. of Appendix B to 
Part 701, and thus would not qualify as a well-defined local 
community (``WDLC''). In that event, this Appendix prescribes the 
criteria an FCU should address in the narrative it develops and 
submits to the Board to demonstrate that residents of the community 
it proposes to serve share common interests and/or interact with 
each other. The narrative should address the criteria below as the 
FCU deems appropriate, as well as any other criteria it believes are 
persuasive, to establish to the Board's satisfaction the presence, 
among residents of the proposed community, of indicia of common 
interests and/or interaction sufficient to qualify the area as a 
WDLC.

1. Central Economic Hub

    The proposed community includes an economic hub. An economic hub 
is evident when one political jurisdiction (city or county) within a 
proposed local community has a relatively large percentage of the 
community's population or is the primary location for employment. 
The application needs to identify the major employers and their 
locations within the proposed community.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Most Persuasive...................  At least 25 percent of the workers
                                     living in the proposed community
                                     commute to work in the central
                                     economic hub.
Persuasive........................  Over 15 percent of the workers
                                     living in the proposed community
                                     commute to work in the central
                                     economic hub.
Not Persuasive....................  Less than 15 percent of the workers
                                     living in the proposed community
                                     commute to work in the central
                                     economic hub.
------------------------------------------------------------------------

2. Quasi-Governmental Agencies

    The existence of organizations such as economic development 
commissions, regional planning boards, and labor or transportation 
districts can be important factors to consider. The more closely 
their service area matches the entire area, the greater the showing 
of interaction and/or common interests.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Most Persuasive...................  The quasi-governmental agency covers
                                     the proposed community exclusively
                                     and in its entirety, derives its
                                     leadership from the area,
                                     represents collaboration that
                                     transcends traditional county
                                     boundaries, and has meaningful
                                     objectives that advance the
                                     residents' common interests in
                                     economic development and/or
                                     improving quality of life.
Persuasive........................  The quasi-governmental agency
                                     substantially matches the proposed
                                     community and carries out
                                     objectives that affect the relevant
                                     common interests for the entire
                                     area's residents.
Not Persuasive....................  The quasi-governmental agency does
                                     not match the proposed community
                                     and carries out only incidentally
                                     relevant objectives or carries out
                                     meaningful objectives in localized
                                     sections of the proposed community.
------------------------------------------------------------------------


[[Page 78754]]

3. Governmental Designations

    Designation of the proposed community by a government agency as 
a region or distinct district--such a regional transportation 
district, a water district, or a tourism district--is a factor that 
can be considered in determining whether the area is a local 
community. The more closely the designation matches the area's 
geographic boundaries, the greater the value of that evidence in 
demonstrating interaction and/or common interests.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Most Persuasive...................  A division of a federal or state
                                     agency specifically designates the
                                     proposed service area as its area
                                     of coverage or as a target area for
                                     specific programs.
Persuasive........................  A division of a federal or state
                                     agency designates a regional area
                                     that includes the coverage area,
                                     but offers special programs
                                     tailored to the common interests
                                     shared by the residents of the
                                     proposed service area.
Not Persuasive....................  A division of a federal or state
                                     agency designates an area as a
                                     coverage area that encompasses
                                     several local communities.
------------------------------------------------------------------------

4. Shared Public Services/Facilities

    The existence of shared services and facilities, such as police, 
fire protection, park districts, public transportation, airports, or 
public utilities, can contribute to a finding that an area is a 
community. The more closely the service area matches the geographic 
boundaries of the community, and the higher the percentage of 
residents throughout the community using those services or 
facilities, the more valuable the data.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Most Persuasive...................  Statistical evidence documents how
                                     residents from the entire proposed
                                     service area mutually benefit from
                                     a public facility.
                                    Formal agreements exist that
                                     transcend traditional county lines
                                     and provide for a common need
                                     shared by all of the residents,
                                     such as common police or fire
                                     protection.
Persuasive........................  Public facilities exist that cross
                                     county lines and cover the majority
                                     of the area's population, but do
                                     not cover the area in its entirety.
Not Persuasive....................  The applicant cites public
                                     facilities that serve areas that do
                                     not correlate with the proposed
                                     service area.
------------------------------------------------------------------------

5. Hospitals and Major Medical Facilities

    Data on medical facilities should include admittance or 
discharge statistics providing the ratio of use by residents of each 
political jurisdiction. The greater the percentage of use by 
residents throughout the proposed community, the higher the value of 
this data in showing interaction. The application can also support 
the importance of an area hospital with documentation that 
correlates the facility's target area with the proposed local 
community and/or discusses the relative distribution of hospitals 
over a larger area.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Most Persuasive...................  The applicant provides statistics
                                     demonstrating residents from
                                     throughout the proposed community
                                     use hospitals in the major
                                     population or employment center.
Persuasive........................  Statistical data are not available,
                                     but the application demonstrates
                                     through other documentation a
                                     medical facility is the only viable
                                     option for a significant portion of
                                     the proposed community's residents.
Not Persuasive....................  The area has multiple health care
                                     facilities at geographically
                                     dispersed locations with
                                     duplicative services.
------------------------------------------------------------------------

6. Colleges and Universities

    College enrollment data can be a useful factor in establishing a 
local community. The higher the percentages of student enrollment at 
a given campus by residents throughout each part of the community, 
the greater the value in showing interaction. Additionally, the 
greater the participation by the college in community initiatives 
(e.g., partnering with local governments), and the greater the 
service area of these initiatives, the stronger the value of this 
factor.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Most Persuasive...................  The application provides statistical
                                     data showing the institutions of
                                     higher learning cited attract
                                     significant numbers of students
                                     from throughout the proposed
                                     community.
Persuasive........................  The statistical data regarding where
                                     students live is either
                                     inconclusive or unavailable.
                                     However, qualitative information
                                     exists to demonstrate the
                                     institutions' relevance to the
                                     entire proposed community, such as
                                     unique educational initiatives to
                                     support economic objectives
                                     benefiting all residents and/or
                                     partnerships with local businesses
                                     or high schools.
Not Persuasive....................  The statistical data tends to
                                     support the institutions recruit
                                     students from a broad based area
                                     transcending the proposed
                                     community's boundaries.
------------------------------------------------------------------------

7. Mutual Aid Agreements

    The existence of written agreements among law enforcement and 
fire protection agencies in the area to provide services across 
multiple jurisdictions can be an important factor.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Most Persuasive...................  The mutual aid agreements cover the
                                     proposed community exclusively and
                                     in its entirety, represents
                                     collaboration that transcends
                                     political boundaries such as city
                                     or county limits.
Persuasive........................  The mutual aid agreements
                                     substantially matches the proposed
                                     community.
Not Persuasive....................  The mutual aid agreements do not
                                     match the proposed community.
------------------------------------------------------------------------

8. Organizations and Clubs

    The more closely the service area of an organization or club 
matches the proposed community's boundaries, and the greater the 
percentage of membership and services throughout the proposed 
community, the more relevant the data.

[[Page 78755]]



------------------------------------------------------------------------
 
------------------------------------------------------------------------
Most Persuasive...................  Statistical data supports that
                                     organizations with meaningful
                                     objectives serve the entire
                                     proposed community.
Persuasive........................  Other qualitative documentation
                                     exists to support that
                                     organizations with meaningful
                                     objectives serve the entire
                                     proposed community.
Not Persuasive....................  The applicant lists organizations
                                     that either do not cover the
                                     proposed community in its entirety
                                     or have objectives that are too
                                     limited to have a meaningful impact
                                     on the residents' common interests.
------------------------------------------------------------------------

9. Community Newspaper

    A newspaper that is widely read in an area can be an indication 
of common interests. The higher the household penetration 
circulation figures throughout the area, the greater the value in 
showing common interests. Circulation data may include print copies 
as well as on-line access.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Most Persuasive...................  Statistical evidence indicates a
                                     significant portion of residents
                                     from throughout the proposed
                                     community read the local general
                                     interest newspaper. The paper has
                                     local stories focusing on the
                                     proposed community and has a
                                     marketing target area consistent
                                     with the proposed community
                                     boundaries.
Persuasive........................  Local newspapers and periodicals
                                     specifically cater to the proposed
                                     community.
Not Persuasive....................  The area lacks a general newspaper
                                     that covers the proposed community.
                                     There are no specialized
                                     publications catering to the entire
                                     proposed community.
------------------------------------------------------------------------

10. Entertainment and Sporting Events

    Data to show the percentage of residents from each political 
jurisdiction who attend the events. The higher the percentage of 
residents from throughout the proposed community, the stronger the 
evidence of interaction. For sporting events, as well as some 
entertainment events, data on season ticket holders and memberships 
may be available. As with overall attendance figures, the higher the 
percentage of residents from throughout the proposed community, the 
stronger the evidence of interaction.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Most Persuasive...................  Statistical data exist to support
                                     that the venue attracts residents
                                     from throughout the proposed
                                     community.
Persuasive........................  Statistical evidence is not
                                     available, but other qualitative
                                     information documents the
                                     importance the venue has for the
                                     proposed community.
Not Persuasive....................  The applicant lists local venues
                                     without discussing where users
                                     originate from or otherwise
                                     documenting the relevance for the
                                     residents of the entire area.
------------------------------------------------------------------------

11. Local Television and Radio Stations

    A television or radio station broadcasting in an area can be an 
indication of common interests. Data on viewership or listenership 
in the proposed community can support the existence of a community.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Most Persuasive...................  Statistical evidence indicates a
                                     significant portion of residents
                                     from throughout the proposed
                                     community view or listen to the
                                     local television and radio
                                     stations. The media has local
                                     stories focusing on the proposed
                                     community and has a marketing
                                     target area consistent with the
                                     proposed community boundaries.
Persuasive........................  The television and radio stations
                                     provide news and sports coverage
                                     specifically catering to the
                                     proposed community.
Not Persuasive....................  The area lacks television or radio
                                     stations serving the proposed
                                     community.
------------------------------------------------------------------------

12. Shopping

    The narrative must identify the location of the major shopping 
centers and malls and include the percentage of shoppers coming from 
each part of the community. The larger the percentage of shoppers 
from throughout the community, the stronger the case for 
interaction. While of lesser value than the shopping data, 
identification of the shopping center's target area can be 
persuasive. The target area should closely match the geographic 
boundaries of the proposed community.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Most Persuasive...................  The application provides statistics
                                     from a reliable third party source
                                     that demonstrates the major
                                     shopping facility cited in the
                                     application is the major shopping
                                     facility for the residents of the
                                     entire area.
Persuasive........................  The applicant provides documentation
                                     supporting how the area's shopping
                                     facilities cluster within the
                                     area's hub and residents do not
                                     have other realistic alternatives
                                     to meet their shopping needs.
Not Persuasive....................  The applicant lists large shopping
                                     facilities without providing
                                     statistics or other documentation
                                     that demonstrates relevance to the
                                     proposed community.
------------------------------------------------------------------------

13. Geography

    Some communities face varying degrees of geographic isolation. 
As such, travel outside the community can be limited by mountain 
ranges, forests, national parks, deserts, bodies of waters, etc. 
This factor, and the relative degree of isolation, may help bolster 
a finding of interaction or common interests.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Most Persuasive...................  Area is geographically isolated and/
                                     or distinct from immediate
                                     surrounding area.
Persuasive........................  Area has geographic commonalities
                                     that influence other aspects of the
                                     residents' lives (i.e., tourism,
                                     allocation of government
                                     resources).
Not Persuasive....................  The area's geographic features do
                                     not appear to influence other
                                     social or economic characteristics
                                     of the area.
------------------------------------------------------------------------


[[Page 78756]]

[FR Doc. 2016-26921 Filed 11-8-16; 8:45 am]
 BILLING CODE 7535-01-P