NCUA finalizes changes to two regulations

The NCUA has published two final rule changes in the Federal Register. These changes involve Field of Membership (FOM) and voluntary mergers.

Regarding the FOM rule, the NCUA board is reviving a previously used method, submission of a narrative, to establish a well-defined local community. When the proposed community’s population is above 2.5 million people, the board will hold a public hearing to allow input from interested parties. Additionally, a credit union may designate a portion of an area for its community charter rather than an entire metropolitan area. The approved changes will appear in the updated Chartering manual, and this rule’s effective date is Sept. 1, 2018.

These finalized rules come after they were upheld in litigation between NCUA and the American Bankers Association. Portions of the original rule, allowing populations of 2.5 million to automatically qualify as a community and allowing rural communities to consist of 1 million people, were overturned by a district judge and are presently on appeal to the D.C. Circuit Court of Appeals. This is the court that most often hears appeals involving regulatory agencies. The LSCU will continue to monitor this litigation and support NCUA in the litigation.

The other finalized rule will more narrowly define ‘‘merger-related financial arrangement,’’ which designates information that must be disclosed to the membership prior to their voting on a potential merger involving various forms of compensation for employees of the merging credit union who will become employed with the remaining one. NCUA is also designating a portion of its website to accommodate member-to-member communications relating to the merger process. The merger manual will be updated to including the finalized changes, as well as all forms necessary to be completed prior to the approval of a merger. This rule will take effect on Oct. 1, 2018.

If you have any questions on these changes, or particularly if your credit union is considering a merger after Oct. 1, or considering FOM changes, please contact Michael.lee@lscu.coop.