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Board Member Gigi Hyland’s Statement on Chartering and Field of Membership Amendments Considered at Today’s Board Meeting

June 22, 2006, Alexandria, Va. -- I commend NCUA staff for its hard work on Interpretive Ruling and Policy Statement 06-1 (IRPS 06-1). The issues presented by this IRPS have far-reaching implications for the viability of the federal credit union charter and for credit unions. I’m supporting the IRPS because after reviewing all the facts, the public comments and the law, I believe it is the only option available under the law as currently written.

As indicated, the IRPS is in response to current litigation in Utah. The litigation challenges NCUA’s authority to approve the addition of underserved areas to a community chartered FCU’s field of membership. The complaint filed in the litigation recognizes that the Credit Union Membership Access Act of 1998 (CUMAA) expressly authorizes the chartering of multiple common-bond credit unions but argues that the legislation permits only that type of charter to serve underserved areas.

I agree, as stated in the original proposal issued by this Board in January, that the statutory language also reflects Congress’ intent to make clear that multiple common-bond credit unions were authorized to add underserved areas. However, the statutory language to prohibit the other two federal charter types from doing so is less clear. 

For example, Congress recognized and reaffirmed credit unions’ “unique mission of meeting the credit and savings needs of consumers, especially people of modest means” in Section 2 of CUMAA. This recognition was made without reference to specific federal charter type. Moreover, at the time Congress enacted CUMAA it was aware of NCUA’s long-standing policy allowing all federal charters to serve communities and groups in need of additional financial services. At best, there is a glaring inconsistency between the legislative intent and language in Section 2 of CUMAA and the language of Section 109 of the Federal Credit Union Act which is the subject of the Utah litigation. The irony of this inconsistency in today’s political climate is not lost on this Board Member. On the one hand, this agency and credit unions are being challenged to document credit unions’ service to the underserved; on the other hand, the agency is simultaneously being chastised for making available a long-standing, effective tool to credit unions so that they can reach out to consumers who need mainstream financial services.

In addition to the inconsistency noted above, there are significant equities at play here. All federal charter types – community, single sponsor and multiple common bond – have relied on NCUA’s long-standing policy to allow them to add underserved areas. All federal charter types that have undertaken service to underserved areas have committed resources, time, money and personnel to provide services to consumers of modest means. These credit unions understood that under NCUA’s policy they would not need to disenfranchise existing members from the underserved areas they adopted. They also understood that they would continue to be able to add members from such underserved areas. I believe this IRPS honors those equities by (1) grandfathering non multiple common-bond credit unions that added underserved areas in reliance on NCUA’s policy and (2) allowing such credit unions to continue to add members from the underserved areas.

As part of my efforts to balance the language of the statute with the equities outlined above, I considered a variety of other approaches to assure minimal degradation of the federal credit union charter including consideration of multiple common-bond credit unions switching to community charter. I concluded that the inconsistencies we are being asked to reconcile today can only be reconciled by legislative action. Change needs to be made to the Federal Credit Union Act to align the clear congressional intent to allow credit unions to reach out to consumers of modest means with the tools to do so.

I commend Vice Chairman Hood’s creativity, commitment and effort to honor and balance all of these considerations. His concerns echo my own and reflect the importance of these issues to all federal charters. Regrettably, I do not agree that this agency has the authority to go beyond the provisions of the IRPS as drafted.   Such authority must be accomplished through legislation.

In closing, I believe that the IRPS we are issuing today strikes the closest balance possible that we as a regulatory agency can between the competing considerations of statutory language and the equity considerations for credit unions who have already reached out to serve underserved communities and consumers.

Revised Chartering and Field of Membership Policy IRPS 06-1 is available online at http://www.ncua.gov/RegulationsOpinionsLaws/RecentFinalRegs/final_regs.html

The National Credit Union Administration is the independent federal agency that regulates, charters and supervises federal credit unions. NCUA, backed by the full faith and credit of the U.S. government, also operates the National Credit Union Share Insurance Fund (NCUSIF), insuring the deposits of nearly 85 million account holders in all federal credit unions and the majority of state-chartered credit unions.