[Federal Register Volume 83, Number 125 (Thursday, June 28, 2018)]
[Rules and Regulations]
[Pages 30289-30301]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-13869]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701

RIN 3133-AE31


Chartering and Field of Membership

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: The NCUA Board (Board) is amending its chartering and field of 
membership rules with respect to applicants for a community charter 
approval, expansion or conversion. The Board will allow the option for 
an applicant to submit a narrative to establish the existence of a 
well-defined local community instead of limiting the applicant to a 
presumptive statistical community. Also, the Board will hold a public 
hearing for narrative applications where the proposed community exceeds 
a population of 2.5 million people. Further, for communities that are 
subdivided into metropolitan divisions, the Board will permit an 
applicant to designate a portion of the area as its community without 
regard to division boundaries.

DATES: The final rule becomes effective September 1, 2018.

FOR FURTHER INFORMATION CONTACT: For program issues: Martha Ninichuck, 
Director; JeanMarie Komyathy, Deputy Director; Robert Leonard, 
Assistant Director; or Rita Woods, Assistant Director, Office of Credit 
Union Resources and Expansion (CURE), at 1775 Duke Street, Alexandria, 
VA 22314 or telephone (703) 518-1140. For legal issues: Marvin Shaw, 
Staff Attorney, Office of General Counsel, at the above address or 
telephone (703) 518-6553.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Overview

    The NCUA's Chartering and Field of Membership Manual, incorporated 
as Appendix B to part 701 of the NCUA regulations (``Chartering 
Manual''),\1\

[[Page 30290]]

implements the field of membership (``FOM'') requirements established 
by the Federal Credit Union Act (``Act'') for federal credit unions 
(``FCU'').\2\ An FOM consists of those persons and entities eligible 
for membership based on 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 ``specific 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\ Pub. L. 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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    Congress has delegated to the Board broad authority in the FCU Act 
to define what constitutes a well-defined local 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 that common interests or 
interaction among residents within those boundaries are 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 seeking to 
establish an area as a WDLC to submit for NCUA approval a narrative, 
supported by documentation, that demonstrated indicia of common 
interests or interaction among residents of a proposed community (the 
``narrative model'') if the community extended beyond a single 
political jurisdiction.\11\ A WDLC is required to consist of contiguous 
areas, and the Chartering Manual previously included the term 
``contiguous'' in its text.\12\ In 2010, the Board replaced the 
narrative model in favor of an objective model that provided credit 
unions a choice between two statistically based ``presumptive 
communities'' that each by definition qualifies as a WDLC (the 
``presumptive community model'').\13\ In doing so, the Board 
inadvertently removed the term ``contiguous'' from the Chartering 
Manual, but did not intend to remove the requirement that the relevant 
areas be contiguous.
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    \11\ 75 FR 36257 (June 25, 2010).
    \12\ 68 FR 18334 (April 15, 2003) ``The well-defined local 
community, neighborhood, or rural district may be met if: The area 
to be served is multiple contiguous political jurisdictions, i.e., a 
city, county, or their political equivalent, or any contiguous 
portion thereof and if the population of the requested well-defined 
area does not exceed 500,000 . . .''
    \13\ As explained in the final rule that discontinued the use of 
the narrative 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).
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    One kind of presumptive community is a ``Single Political 
Jurisdiction . . . or any contiguous portion thereof'' (``SPJ''), 
regardless of population.\14\ The second is a single Core Based 
Statistical Area (``CBSA'' \15\) as designated by the U.S. Census 
Bureau (``Census'') or a well-defined portion thereof, which under the 
2010 final rule was subject to a 2.5 million population limit.\16\
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    \14\ Appendix B, Ch. 2, sectionV.A.2. A Chartering Manual 
defines ``single political jurisdiction'' as ``a city, county, or 
their political equivalent, or any single portion thereof.''
    \15\ A CBSA is composed of the country's Metropolitan 
Statistical Areas and Micropolitan Statistical Areas. ``Metropolitan 
Statistical Areas are defined by OMB as having ``at least one 
urbanized area of 50,000 or more population, plus adjacent territory 
that has a high degree of social and economic integration with the 
core as measured by commuting ties.'' ``Micropolitan Statistical 
Areas'' are identical to Metropolitan Statistical Areas except that 
their urbanized areas are smaller, i.e., the urbanized area contains 
at least 10,000 but fewer than 50,000 people. A ``Metropolitan 
Division'' is a subdivision of a large Metropolitan Statistical 
Area. Specifically, a Metropolitan Division is ``a county or group 
of counties within a Metropolitan Statistical Area that has a 
population core of at least 2.5 million. OMB Bulletin No. 15-01 
(July 15, 2015)
    \16\ 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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    Currently, 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 is required to conform to 
the boundaries of such divisions. Under either ``presumptive 
community'' option, an FCU was required to demonstrate that it is 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, expansion or conversion.\17\
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    \17\ Appendix B, Ch. 2, Sec.  V.A.4.
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B. 2016 Rulemakings

    On October 27, 2016, the Board issued two rulemakings relating to 
the Chartering Manual. One was a final rule and the other a proposed 
rule. In the final rule,\18\ the Board comprehensively amended the 
Chartering Manual to organize it in a more efficient framework and to 
maximize member access to FCU services to the extent permitted by law. 
The final rule permitted an applicant to utilize, in limited 
circumstances, a narrative approach supported by objective 
documentation to demonstrate that an area adjacent to a presumptive 
community qualifies as part of that community.
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    \18\ 81 FR 88412 (Dec. 7 2016).
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    In the proposed rule, the Board proposed three additional changes 
to the community charter provisions.\19\ Specifically, the Board 
proposed permitting an applicant for a community charter to submit a 
narrative to establish the existence of a WDLC, as an alternative to 
selecting a presumptive statistical community. The narrative would 
serve the same purpose as in years prior to 2010 when the narrative 
model was used exclusively. The Board also proposed increasing to 10 
million the population limit on a community consisting of a statistical 
area or a portion thereof. In that regard, the Board requested comment 
on whether there should be any population limit at all for a 
statistical area and whether a public hearing would be appropriate for 
areas with large populations. Further, the Board proposed permitting an 
FCU to designate a portion of a statistical area as its community 
without regard to metropolitan division boundaries. The Board noted 
that consistent with its

[[Page 30291]]

responsibility under CUMAA to facilitate access to FCU services, the 
proposal sought to provide FCUs greater flexibility in that regard.
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    \19\ 81 FR 78748 (Nov. 9, 2016).
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    The Board received approximately 55 comments from federal and 
state-chartered credit unions, credit union associations, credit union 
leagues, banks, bank trade associations, and consultants. The majority 
of commenters were credit union affiliated entities, which uniformly 
supported the proposed rule. In contrast, the four bank-affiliated 
commenters uniformly opposed the proposal.

II. Federal District Court Decision

    Several provisions of the 2016 final rule were challenged by the 
American Bankers Association. On March 29, 2018, the U.S. District 
Court for the District of Columbia upheld two provisions and vacated 
two provisions of the 2016 final rule addressing community 
charters.\20\ Specifically, the court upheld the provision allowing an 
FCU to serve areas within a CBSA that do not include the CBSA's 
core.\21\ The court also upheld the provision allowing an FCU to add an 
adjacent area to a presumptive community. The court vacated the 
provision permitting automatic characterization of any individual 
portion of a combined statistical area (``CSA'') as belonging to a 
local community as long as that portion contains no more than 2.5 
million people.\22\ The court also vacated the provision to increase 
the population limit to 1 million people for rural districts.
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    \20\ ABA v. NCUA, 2018 WL 1542049, Case No. 16-2394, Mar. 29, 
1018 (``FOM Decision'').
    \21\ A CBSA consists of an urban core, its county, and any 
surrounding counties that are, according to OMB, highly socially and 
economically integrated with the core. 81 FR at 88440.
    \22\ Combined Statistical Areas are composed of adjacent CBSAs 
that share what OMB calls ``substantial employment interchange. OMB 
characterizes CSAs as ``representing larger regions that reflect 
broader social and economic interactions, such as wholesaling, 
commodity distribution, and weekend recreational activities, and are 
likely to be of considerable interest to regional authorities and 
the private sector.'' OMB Bulletin No, 15-01.
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III. 2018 Final Rule

A. Overview

    This final rule amends the community chartering provisions of the 
Chartering Manual. Any modification in this final rule is consistent 
with the District Court decision. The rule allows for the general use 
of the narrative model, so that an applicant can seek Board approval to 
form, expand, or convert to a community charter, provided that the 
applicant provides sufficient supporting documentation. The rule also 
provides that the NCUA will conduct a public hearing and solicit public 
comments on any community charter application that uses the narrative 
approach for an area whose population exceeds 2.5 million people. 
Further, the rule permits an FCU to designate a portion of a CBSA 
statistical area as its community without regard to metropolitan 
division boundaries.
    With respect to the proposal to raise the population limit for a 
presumptive community, the Board has decided not to move forward with 
this amendment at this time.

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

    In 2016, the Board proposed to allow the general use of the 
narrative model to form, expand, or convert to a community charter as 
an alternative to using the ``presumptive community'' model.\23\
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    \23\ 81 FR at 78749.
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    In response to the proposal, nearly every credit union-affiliated 
commenter supported allowing the narrative model as an alternative to 
the presumptive community model. These commenters stated that such an 
alternative provides added flexibility, thus potentially allowing FCUs 
to provide more financial services to the public. In contrast, bank-
affiliated commenters opposed this proposal, claiming that it was 
overly subjective. They stated that the Board's 2010 decision to 
replace this approach with an objective one enhanced the process 
because it provided greater consistency.
    The Board has determined that it is appropriate to permit the 
narrative model as an alternative to the presumptive community model. 
The Board believes that a significant majority of FCUs will rely on the 
presumptive community model for practical reasons. The presumptive 
community model is less costly and requires fewer resources for an 
applicant to expend. Further, an applicant can rely on a streamlined 
process, thus ensuring a more timely determination by utilizing the 
presumptive community model. While most applicants will be well served 
by the presumptive community model, the Board believes that some FCUs 
will find that using the narrative model will provide a better 
opportunity for them to establish that the relevant area is a WDLC. As 
is noted above, prior to 2010, a WDLC expressly needed to be 
``contiguous'' under the narrative model. Given that contiguity is 
still required in setting forth the parameters of a WDLC and for 
clarity, the Board specifically includes the contiguity requirement in 
the final rule's regulatory text.
    Some commenters stated that certain potential communities do not 
necessarily align with CBSAs, SPJs, or other recognized statistical 
areas. The Board anticipates that this change to allow the narrative 
model as an alternative will be used sparingly, given the associated 
costs in preparing a narrative package. As noted in the section 
addressing the Paperwork Reduction Act (PRA), CURE estimates that there 
would be approximately 25 FCUs per year that would use the narrative 
approach based on data from the five years preceding 2010. The Board 
notes any such costs are not mandated by the NCUA but rather are 
voluntarily assumed by a potential applicant.
    The Board has further determined that allowing such an alternative 
to the presumptive community model is appropriate because it expands 
the delivery of financial services to the public, particularly people 
from underserved communities, with no significant downside. The Board 
notes that the Act gives the Board broad discretion to define a WDLC 
for purposes of ``making any determination'' regarding a community 
credit union,\24\ and to establish criteria to apply to any such 
determination.\25\ (Emphasis added)
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    \24\ 12 U.S.C. 1759(g)(1)(A) (emphasis added).
    \25\ Id. Sec.  1759(g)(1)(B).
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    Under its statutory authority, the Board is adopting, with minor 
modifications from the proposal, a new appendix to the Chartering 
Manual, which sets thirteen ``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. The Board has determined that establishing 
such criteria will facilitate an applicant's ability to provide 
justification to support the common interest or interaction standard. 
The Board notes that if an FCU has successfully established that an 
area is a WDLC through the narrative process, then another FCU may 
adopt that exact area as a WDLC without submitting a narrative of its 
own, provided it complies with the other requirements of the Chartering 
Manual including submitting a business plan that demonstrates its 
ability to serve the proposed FOM.

[[Page 30292]]

    Commenters generally supported the thirteen criteria. Several 
commenters emphasized that the NCUA should evaluate the ``totality of 
circumstances'' in assessing applications. These commenters stated that 
the criteria provided solid evidence of common interests and 
interaction. One commenter stated that the NCUA should allow 
consideration of additional criteria that are unique to a community. 
Another commenter stated that the NCUA should allow consideration of 
``on line communities'' given the trend toward such use. Bank 
commenters opposed the narrative approach, but said if it is adopted, 
then an applicant should be required to establish compliance with, most 
if not all, of the thirteen criteria.
    The NCUA's experience with community charter applications under the 
pre-2010 narrative model indicates that these thirteen criteria were 
generally 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.\26\ 
The Board reiterates that the proposed area does not have to match 
exactly the entirety of the thirteen criteria. Rather, the more a 
proposed area satisfies the criteria to establish a WDLC, the stronger 
the applicant's case. Consistent with this approach, Appendix B 
identifies for each of the thirteen criteria three levels of 
persuasiveness: ``most persuasive,'' ``persuasive,'' and ``not 
persuasive'' with examples of each.
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    \26\ 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 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 area, the greater the showing of common 
interests or interaction.
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 common 
interests or interaction.
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 or interaction. The higher the 
household penetration figures throughout the area, the greater the 
value in showing common interests or interaction. 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 or interaction. Objective data on viewer 
and listener audiences in the proposed

[[Page 30293]]

community can support the existence of a community.
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.
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 
common interests or interaction.

C. Public Hearing

    In the November 2016 proposal, the Board requested comment about 
whether it 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 of 2.5 million.
    One bank-affiliated commenter supported having a public hearing 
along with the opportunity for comment for applications for community 
charters for statistical areas exceeding 2.5 million. No credit-union 
affiliated commenter addressed this issue.
    The Board has determined that it is appropriate to require a public 
hearing along with opportunity for comment for charter applications 
using a narrative model over a certain population. The Board believes 
that such a procedure will allow applicants to present information, 
including their business and marketing plan, in a transparent manner. 
Other interested parties, including community groups, businesses, and 
competitors will have the opportunity to present their views. After 
further consideration of this issue and the comments, the Board has 
decided to modify the use of public hearings from what was discussed in 
the proposal. Specifically, the Board intends for the NCUA to conduct 
public hearings and solicit public comments on any narrative community 
application comprising an area whose population is in excess of 2.5 
million people. Any public comments should be submitted to the Board at 
least twenty business days prior to the public hearing.
    The Board intends to delegate to CURE the responsibility to conduct 
the public hearings on any narrative community applications in excess 
of 2.5 million people with assistance from the NCUA's Office of General 
Counsel (OGC). Upon receiving such an application, CURE will publish in 
the Federal Register information stating the location, time, procedures 
and other relevant information about the hearing at least 30 days prior 
to the hearing date. CURE will determine whether the hearing will be 
held at the NCUA's Headquarters in Alexandria, VA or a location near 
the applicant's anticipated community. The public hearing will last no 
more than four hours with interested parties being permitted to make 
presentations of no more than 30 minutes each. The applicant along with 
no more than seven other interested parties may request to make 
presentations. The first six entities that contact the NCUA in writing 
will be permitted to make such presentations. CURE will reserve one 
additional slot which it has the discretion to designate as eligible 
for a presentation by an interested party. In addition to the 
presentations, interested parties may submit written statements to CURE 
at least twenty business days prior to the hearing.
    CURE will take under advisement the presentations and written 
statements and will make a determination as to whether to approve, 
deny, or make modifications to the application. CURE will make this 
determination based on whether the applicant demonstrated common 
interests or interactions among residents of the area under 
consideration, thus qualifying the area as a WDLC. CURE will make this 
determination no sooner than 30 days after the date of the public 
hearing.

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

    In 2016, the Board proposed to permit an FCU to designate a portion 
of a CBSA as its community without regard to metropolitan division 
boundaries. The Board noted that when an FCU seeks to serve a portion 
of a single CBSA as its WDLC, the existing rule requires such a portion 
to conform to any boundary of a metropolitan divisions. In contrast, a 
CSA was not required to conform to any metropolitan division boundary, 
even though CSAs cover a wider geographic area. For purposes of 
consistency, the Board proposed permitting an FCU to designate a 
portion of a CBSA as its community without regard to division 
boundaries.
    No commenter objected to this proposal, and approximately ten 
credit union-affiliated commenters specifically supported it. The 
commenters stated that the change would correct a disparity in 
treatment between a community consisting of a portion of a CBSA and a 
CSA. The commenters who supported it viewed it as affording regulatory 
relief via a common sense change to enhance consistency and provide 
flexibility.
    The Board has determined that it is appropriate to amend the 
Chartering Manual to designate a portion of a CBSA as its community 
without regard to the boundaries of any metropolitan divisions within a 
CBSA.\27\ This modification corrects an inconsistency that was never 
intended. In light of the District Court decision, the Board has 
removed reference to Metropolitan Divisions with respect to CSAs.
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    \27\ The Board is modifying Appendix B to delete reference to 
Metropolitan Divisions in CSAs as a result of the District Court 
decision.
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E. Eliminating the Population Limit for a Statistical Area

    As noted above, the Board issued a final rule in 2010 recognizing 
as a presumptive community a CBSA as designated by the U.S. Census, or 
a CSA as designated by OMB, subject in either case to a population 
limit of 2.5 million and proof of the FCU's ability and commitment to 
serve the entire community.\28\ At the time, the Board recognized a 2.5 
million population ``as a logical breaking point in terms of community 
cohesiveness with respect to a multijurisdictional area.'' \29\
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    \28\ 75 FR 36257, 36260.
    \29\ 75 FR 36257, 36259.
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    In the 2015 proposal, the Board decided to retain the existing 2.5 
million population cap as the upper limit for a presumptive community, 
although it solicited public comment on whether to adjust the amount, 
and for what reasons.\30\ Specifically, the Board stated that a CBSA 
qualifies as a WDLC only if its population does not exceed 2.5 million, 
and that ``[b]y design, this population limit conforms to the 
population parameter by which [the Office of Management and Budget 
(``OMB'')] recognizes metropolitan divisions within a Core Based 
Statistical Area.'' \31\
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    \30\ 80 FR at 76749.
    \31\ 80 FR at 76748-49.
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    In their comments to the 2015 proposal, bankers opposed raising the 
existing population limit. For instance, a bank trade association 
stated that ``NCUA's overly broad interpretation of what is `rural' or 
`local' is at odds with any reasonable interpretation of those

[[Page 30294]]

terms and makes a mockery of the field of membership restrictions''
    The 2016 final rule retained the 2.5 million population limit that 
applies to a community consisting of a CBSA or CSA. However, in the 
November 2016 proposed rule, the Board requested comment on its 
proposal to increase the limit to ``up to 10 million'' or to eliminate 
it completely. Despite affirming the then current 2.5 million 
population limit in that final rule, the Board stated that it 
anticipates that many areas that would qualify as a WDLC will 
experience population growth over time and that it 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.\32\
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    \32\ 80 FR at 78751.
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    Comments were mixed about the proposal on the population cap for 
statistical areas that comprise more than a single political 
jurisdiction. Virtually all credit union-affiliated commenters urged 
the Board to eliminate the population cap on statistical areas 
altogether. Alternatively, they preferred the 10 million cap to the 2.5 
million cap, if the Board decided to retain a population cap. In 
contrast, bank-affiliated commenters continued to oppose increasing the 
existing 2.5 million population cap on CBSAs and CSAs. The bankers 
argued that the proposal oversteps congressional bounds established by 
the Act, particularly with respect to the definition of ``local.'' 
Specifically, they stated that this interpretation of ``local'' would 
``allow nearly any federal community credit union to serve almost any 
geographic area or population center.'' The bankers further stated that 
a 10 million population cap would allow an FCU to serve a statistical 
area with a population that exceeds the population of 41 states and 
would add 20 additional CSAs to qualify as presumptive communities. 
Thus, they stated that all but two CSAs would be presumptive 
communities. In addition, these commenters claimed that the NCUA 
provided ``no analysis to support this arbitrary, massive increase.''
    The Board has determined that increasing the population cap for 
presumptive communities is not appropriate at this time. The Board is 
evaluating population caps for presumptive communities in light of the 
above-referenced District Court decision.

III. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires the NCUA to prepare an 
analysis to describe any significant economic impact a regulation may 
have on a substantial number of small entities.\33\ For purposes of 
this analysis, the NCUA considers small credit unions to be those 
having under $100 million in assets.\34\ Although this rule is 
anticipated to economically benefit FCUs that choose to charter, expand 
or convert to a community charter, the NCUA certifies that it will not 
have a significant economic impact on a substantial number of small 
credit unions.
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    \33\ 5 U.S.C. 603(a).
    \34\ 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.\35\ 
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. OMB previously approved the current 
information collection requirements for the Chartering Manual and 
assigned them control number 3133-0015.
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    \35\ 44 U.S.C. 3507(d); 5 CFR part 1320.
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    Regarding a community charter, the rule gives community charter 
applicants 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 WDLC. 
For that purpose, the rule includes guidance in identifying compelling 
indicia of common interests or interaction that would be relevant in 
drafting a narrative summarizing how the community meets the 
requirements of a WDLC. In addition, when a CBSA 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.
    The 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, the NCUA applied to OMB for approval to amend 
the current information collection to account for the new procedure.
    Prior to 2010, when the 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, the NCUA required FCUs to submit 
for the 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, the NCUA processed an average of twenty FOM 
applications involving multiple statistical areas. From 2010 to 2018, 
the NCUA processed 2 applicants for multiple statistical areas that 
exceeded 2.5 million people. Based on this historical trend, the NCUA 
estimates that, on average, it would take an FCU's staff approximately 
160 hours to collect the evidence of common interests or interaction 
and to develop a narrative to support its application to expand or to 
convert. Accordingly, the 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 10 FCUs for a total of 1600 hours. The NCUA is 
amending the current information collection control number 3133-0015 to 
account for these additional burden hours.
    In the proposal, the Board directed organizations and individuals 
who wished to submit comments on this information collection 
requirement to 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.
    The NCUA considered comments by the public on the proposed 
collection of information in:
     Evaluating whether the 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 the NCUA's estimate of the 
burden of the 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

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     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. The 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. The 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

    The 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.\36\
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    \36\ 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 June 21, 
2018.
Gerard Poliquin,
Secretary of the Board.

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

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. In appendix B to part 701, section V.A.2 of chapter 2 is revised and 
appendix 6 is added to read as follows:

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

* * * * *

Chapter 2--Field of Membership Requirements for Federal Credit Unions

* * * * *

V--Community Charter Requirements

* * * * *

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.
    For an applicant seeking a community charter for an area with 
multiple political jurisdictions with a population of 2.5 million 
people or more, the Office of Credit Union Resources and Expansion 
(CURE) shall publish a notice in the Federal Register seeking 
comment from interested parties about the proposed community and (2) 
conduct a public hearing about this application.
    ``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.
    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 a Core-Based Statistical Area (CBSA) 
designated by the U.S. Census Bureau, including a Metropolitan 
Statistical Area. To meet the well-defined local community 
requirement, the CBSA or a portion thereof, must be contiguous and 
have a population of 2.5 million or less people. 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.
     Compelling Evidence of Common Interests or 
Interaction--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. Under this option, the credit union 
must demonstrate that the areas in question are contiguous and 
further demonstrate a sufficient level of common interests or 
interaction 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.
* * * * *
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