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Charter Modernization, Fee Schedule, and MDI Preservation

The National Credit Union Administration (NCUA) board was briefed on efforts to update the new charter process during the agency’s monthly meeting this week. Specifically, the agency is pursuing two projects aimed at helping organizing groups launch new credit unions:

  • The first is the modernization of the agency’s chartering process itself.
  • The second is a provisional charter that provides time for fledgling credit unions to raise the capital they need to become a fully operational credit union.

The agency will begin a provisional charter pilot program that will allow the credit union organizing group to become a legal entity before being authorized to commence full operations in order to obtain required capital. During the pilot, the credit union will be able to do certain things, such as conducting limited lending to show they have the ability to do so.

Under the provisional charter, a credit union will have up to 12 months to secure necessary funding. Staff noted that an extension may be permitted under certain circumstances. Board Chair Todd Harper asked staff to look into the option for new credit unions to be able to pool of capital, similar to what is permitted by the Federal Deposit Insurance Corporation (FDIC).

Before the end of the year, NCUA expects to seek input on the provisional charter for a 60-day comment period, as well as launch the provisional charter pilot.

RFC: Operating Fee Schedule Methodology
The board issued a request for comment (RFC) on proposed adjustments to the methodology the agency uses to determine how it apportions operating fees charged to federal credit unions. Specifically, the proposal would increase the exemption threshold for paying the operating fee from $1 million to $2 million and would make annual inflationary adjustments to the threshold in the future. The RFC also seeks input on whether the agency should modify the current three-tier Operating Fee Schedule.

Currently, 128 federal credit unions are exempt from paying the operating fee; the proposed threshold increase would exempt an additional roughly 100 federal credit unions. In response to a question from Board Member Rodney Hood regarding whether staff considered a $10 million threshold, staff stated that such an increase would exempt 23 percent of federal credit unions, whereas an increase to $2 million would exempt 7 percent of federal credit unions.

In recommending the $2 million threshold, staff noted that the 7-percent exemption number is more consistent with the initial effect of the 2012 exemption threshold of $1 million, which exempted slightly less than 8 percent of federal credit unions.

The NCUA will accept comments for 60 days following publication in the Federal Register.

Proposed IRPS: MDI Preservation Program
The board issued a proposal to amend Interpretive Ruling and Policy Statement 13-1 to reflect changes to the agency’s structure and current administration of the Minority Depository Institution Program (MDI) by the Credit Union Resources and Expansion Office (CURE), and to improve the MDI Program, including:

  • Recognizing the transfer of the MDI program administration to CURE.
  • Incorporating recent program initiatives.
  • Simplifying “community it services, as designated in its charter” to refer to an MDI’s field of membership.
  • Referencing guidance the NCUA provides examination staff who continue to play a significant role in supporting and guiding MDIs under their supervision.
  • Explaining how the NCUA will review an MDI’s designation status during routine evaluations.
  • Adding subsections on engagement, technical assistance, MDI examinations, Community Development Revolving Loan Fund (CDRLF) grants and loans, training and education, and MDI preservation.

The NCUA will accept comments for 60 days following publication in the Federal Register.

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