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Throughout our history, the Federation has helped charter dozens of credit unions nationwide, but particularly new credit unions to serve memberships that no other financial institution will serve. Many have grown into full service institutions, serving tens of thousands of low-income members who would otherwise have no access to a reglated financial instituion.
Among the only credit union movement organizations dedicating significant resources to assist start-up credit unions, we continue to see increased interest and receive dozens of requests each year for assistance in organizing new credit unions.
Despite the record interest, we have also seen the number of new credit union charters drop significantly over the past few years, with only one new federal charter granted in 2011. This realityconcerns us greatly, both in terms of the communities that are not being served, but also for the overall future of the credit union movement, which is becoming increasingly consolidated as institutions are merged or liquidated. In some cases, the communities being served are left in a financial vacuum, where their last resort are the fringe financial service providers, whose practices can sometimes be exploitative or downright predatory.
As such, the Federation has continued to advocate with NCUA on various fronts.
Length of Chartering Process - Our experience indicates that it is not uncommon for the chartering process to consume three years or even longer, and while some delays are attributable to the specific group seeking a charter, we believe it is important for NCUA to identify and prioritize as early on in the process those that are potentially viable candidates. We have urged NCUA that those groups which are able to identify grant and other sources of funding to launch a credit union be processed as expeditiously as possible. Grant commitments don’t have an indefinite shelf life, and excessive delays may result in cancellation or withdrawal of the grant offer, which may make it difficult or impossible for a group to pursue a charter as intended.
Field of Membership: Associations and Virtual Technology - There have been several organizing groups we have worked with that have sought NCUA approval for fields of membership for members of multiple statewide associations who deeply share a common mission, but they were told that any organizing group seeking this type of associational membership would have to demonstrate the ability to provide service in each of the respective states; although, this would not be an issue if there was one umbrella association that the various state associations could each participate in. While it is hypothetically possible for this chartering group to create such an umbrella association, the process is time-consuming and tedious, without adding much value. We have sought to explore whether there is another interpretation of the regulations and policies that would permit this group to be chartered for their present configuration of multiple state associations with a common bond. We think that this issue is likely to be increasingly important in the future, as common bonds are increasingly becoming virtual in nature. A geographically dispersed group with a strong common bond can readily serve its respective members through electronic means; certainly, a vast and growing portion of the nation’s population do much or all of their banking remotely and electronically. If the agency is convinced that current regulations do not permit the kind of charter that we have described – i.e., multiple, parallel associations across a region – we would like to urge the agency to review its policies and regulations with respect to use of virtual technologies.
Expediting Chartering Processes and Procedures - The chartering process involves a number of steps, from ascertaining the appropriateness of a proposed field of membership, to vetting the board of directors (including background checks), to reviewing business plans, to requiring detailed policies and procedures. To expedite the process, we believe it is vital to:
Make all chartering requirements as transparent as possible from the very beginning of the chartering effort.
Work with organizers to conduct inquiries and complete required processes in parallel, rather than sequentially.
Provide template formats wherever possible, such as for succession and continuity plans, but also more broadly, for business plans and lending policies, including providing sample pro formas in formats the agency prefers. This could save months of processing time and reduce NCUA’s overall work load.
Shorten response time on charter applications. In some instances it has taken up to five months from the time of submission of a proposed credit union’s charter application for them to receive a first response from NCUA. Just as NCUA has greatly sped up the processing time for credit union field of membership expansions, we urge comparable changes to reduce the time on charter application review.
While NCUA has sought to address some of these issues, we are concerned that not enough is being done to promote new credit union development. In February 2012 the Federation submitted these recommendations to NCUA.
NCUA's March 21, 2012 response to the Federation proposals is available by clicking here.