[Federal Register Volume 61, Number 24 (Monday, February 5, 1996)]
[Proposed Rules]
[Pages 4238-4240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-2019]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 701 and 705
Community Development Revolving Loan Program For Credit Unions
AGENCY: National Credit Union Administration (NCUA).
ACTION: Proposed Amendments.
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SUMMARY: The purpose of the Community Development Revolving Loan
Program for Credit Unions is to make reduced rate loans and provide
technical assistance to both federal and state-chartered credit unions
serving low-income communities. The Board is proposing to modify this
regulation to: eliminate the limits on technical assistance that may be
provided per year to participating credit unions; clarify that student
credit unions may not participate in the Program; clarify that credit
unions may receive up to $300,000 in loans in the aggregate at any one
time; and require additional documentation from nonfederally insured
credit unions that may wish to participate in the Program. Finally, the
Board is requesting comment on updating the percentage of the
differentials used to calculate the low-income levels.
DATES: Comments must be received on or before April 5, 1996.
ADDRESSES: Comments should be directed to Becky Baker, Secretary of the
Board. Mail or hand-deliver comments to: National Credit Union
Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. Fax
comments to (703) 518-6319. Post comments on NCUA's electronic bulletin
board by dialing (703) 518-6480. Please send comments by one method
only.
FOR FURTHER INFORMATION CONTACT: Joyce Jackson, Special Assistant,
Office of Community Development Credit Unions, at the above address or
telephone (703) 518-6610 or Michael J. McKenna, Staff Attorney, Office
of General Counsel, at the above address or telephone (703) 518-6540.
SUPPLEMENTARY INFORMATION: The purpose of the Community Development
Revolving Loan Program (``Program'') is to make reduced rate loans and
provide technical assistance to federal and state-chartered credit
unions serving low-income communities so that they may provide needed
financial services and help to stimulate the economy in the community
served.
Although the Program has functioned well, the Board is proposing
five amendments to improve and clarify certain aspects of the Program.
Section 705.3 Definitions
This section, among other things, defines the term low-income
members. In documenting its low-income membership, a credit union that
serves a geographic area where a majority of residents fall at or below
the annual income standard is presumed to be serving predominantly low-
income members. In applying the low-income standard the Regional
Director must use specifically defined differentials for geographical
areas with a higher cost of living. These differentials were originally
obtained from a list maintained by the Bureau of Labor Statistics, as
updated by the Employment and Training Administration. In order to
recognize geographic economic differences, cities that were above the
national average for the lower level standard of living numbers for the
25 largest metropolitan areas were provided differentials to be applied
by the Regional Director. Since the differentials were added to the
regulation in April 1993, there have been changes in economic
conditions in many cities. NCUA is studying how the differentials
should be adjusted and invites comment on how they should be updated.
Some in the credit union community have questioned whether student
credit unions are eligible to participate in the Program. The preamble
to the final 1993 amendments stated that although ``student federal
credit unions are `low-income credit unions' for purposes of receiving
nonmember deposits, they do not qualify for participation in the
Program because they are not specifically involved in the stimulation
of economic development activities and community revitalization
efforts.'' 58 FR 21642, 21645 (April 23, 1993). The Board proposes to
amend Section 705.3(b) to clarify that student credit unions may not
participate in the Program.
Section 705.5 Application for Participation
The Board is proposing that a nonfederally insured credit union
that wishes to participate in the Program provide additional
documentation during the application process. Because NCUA neither
regulates nor insures nonfederally insured state chartered credit
unions, additional information is required so that NCUA may properly
consider the application. This change would provide documentation that
is comparable to the information accessible to NCUA for federally
insured credit unions. Accordingly, the Board is proposing that Section
705.5(b)(1) be amended to require non federally insured credit union to
provide in its application for Program participation a copy of its most
recent outside audit report and proof of deposit and surety bond
insurance which states the maximum insurance levels permitted by the
policies.
Section 705.7 Loans to Participating Credit Unions
Section 705.7 states that a participating credit union is eligible
``to receive up to $300,000, as determined by the NCUA Board, in the
form of a loan from the Community Development Revolving Loan Fund for
Credit Unions.'' Some have questioned whether this means that a credit
union may receive more than one $300,000
[[Page 4239]]
loan under the Program. The Board does not believe it is appropriate to
grant loans in excess of $300,000 to one credit union considering the
Program's limited funds. Accordingly, the proposed amendment to Section
705.7(a) clarifies that the aggregate dollar amount of outstanding
loans to one credit union is limited to $300,000.
Section 705.10 Technical Assistance
Under the current Section 705.10, technical assistance may not
exceed $120,000 per year. The Board believes that technical assistance
is a vital component of the Program and anticipates that available
earnings may soon exceed $120,000. As a result, the Board is proposing
to eliminate the dollar threshold on technical assistance. This change
will provide NCUA greater flexibility in providing technical
assistance.
Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
to describe any significant economic impact a proposed regulation may
have on a substantial number of small credit unions (primarily those
under $1 million in assets). The proposed amendments generally clarify
operational issues. The one significant change regarding technical
assistance is expected to benefit credit unions by increasing the
available pool of funds for technical assistance. Accordingly, the
Board determines and certifies that this proposed rule does not have a
significant impact on a substantial number of small credit unions and
that a Regulatory Flexibility Analysis is not required.
Paperwork Reduction Act
NCUA has determined that the proposed amendments do not increase
paperwork requirements under the Paperwork Reduction Act of 1995 and
regulations of the Office of Management and Budget (OMB). 60 FR 44978
(August 29, 1995).
Executive Order 12612
Executive Order 12612 requires NCUA to consider the effect of its
action on state interests. The Program is implemented in its entirety
by the NCUA. The proposed rule will permit more funds to be available
for technical assistance to all credit unions, including state-
chartered credit unions. The proposed amendments impose a minimal
burden on nonfederally insured state chartered credit unions that wish
to participate in the Program. The amendments will not have a
substantial direct effect on the states, on the relationship between
the national government and the states, or on the distribution of
powers among the various levels of government.
List of Subjects
12 CFR Part 701
Credit, Credit unions.
12 CFR Part 705
Community development, Credit unions, Loans programs-housing and
community development, Reporting and recordkeeping requirements,
Technical assistance.
By the National Credit Union Administration Board on January 25,
1996.
Becky Baker,
Secretary of the Board.
Accordingly, NCUA proposes to amend 12 CFR parts 701 and 705 as
follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
1. The authority citation for part 701 continues to read as
follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a,
1761b, 1766, 1767, 1782, 1784, 1787, 1789. Section 701.6 is also
authorized by 31 U.S.C. 3717. Section 701.31 is also authorized by
15 U.S.C 1601 et seq.; 42 U.S.C. 1861 and 3601-3610. Section 701.35
is also authorized by 42 U.S.C. 4311-4312.
2. Section 701.34 is amended by revising paragraph (a)(1) to read
as follows:
Sec. 701.34 Designation of Low-Income Status; Receipt of Secondary
Capital Accounts by Low-Income Designated Credit Unions.
(a) Designation of low-income status. (1) Section 107(6) of the
Federal Credit Union Act (12 U.S.C. 1757(6)) authorizes federal credit
unions serving predominantly low-income members to receive shares,
share drafts and share certificates from nonmembers. In order to
utilize this authority, a federal credit union must receive a low-
income designation from its Regional Director. The designation may be
removed by the Regional Director upon notice to the federal credit
union if the definition set forth in paragraphs (a)(2) and (3) of this
section are no longer met. Removals may be appealed to the NCUA Board
within 60 days. Appeals should be submitted through the Regional
Director.
* * * * *
PART 705--COMMUNITY DEVELOPMENT REVOLVING LOAN PROGRAM FOR CREDIT
UNIONS
3. The authority citation for part 705 is revised to read as
follows:
Authority: 12 U.S.C. 1772c-1; 42 U.S.C 9822 and 9822 note.
4. Section 705.3 is amended by revising paragraph (b) to read as
follows:
Sec. 705.3 Definitions.
* * * * *
(b) For purposes of this part, a participating credit union means a
state- or federally chartered credit union that is specifically
involved in the stimulation of economic development activities and
community revitalization efforts aimed at benefiting the community it
serves; whose membership consists of predominantly low-income members
(excluding students) as defined in paragraph (a) of this section or
applicable state standards as reflected by a current low-income
designation pursuant to Sec. 701.34(d)(1) or Sec. 741.204 of this
chapter or, in the case of a state-chartered nonfederally insured
credit union, under applicable state standards; and has submitted an
application for a loan and/or technical assistance and has been
selected for participation in the Program in accordance with this Part.
5. Section 705.5 is amended by revising paragraph (b)(1) to read as
follows:
Sec. 705.5 Application for participation.-
* * * * *
(b) * * *
(1) Information demonstrating a sound financial position and the
credit union's ability to manage its day-to-day business affairs,
including the credit union's latest financial statement. Nonfederally
insured credit unions must include the following:
(i) A copy of its most recent outside audit report;
(ii) Proof of deposit and surety bond insurance which states the
maximum insurance levels permitted by the policies;
(iii) A balance sheet for the most recent month-end and each of the
twelve months preceding that month-end;
(iv) An income and expense statement for the most recent month-end
and each of the twelve months preceding the month-end;
(v) A delinquent loan list for the most recent month-end and each
of the twelve months preceding the month-end.
* * * * *
Sec. 705.7 [Amended]
5. Section 705.7 is amended in paragraph (a) by adding ``in the
aggregate'' after the number ``$300,000''.
6. Section 705.10 is revised to read as follows:
[[Page 4240]]
Sec. 705.10 Technical assistance.
Based on available earnings, NCUA may contract with outside
providers to render technical assistance to participating credit
unions. Participating credit unions can be provided with technical
assistance without obtaining a Program loan. Technical assistance
provided will aid participating credit unions in providing services to
their members and in the efficient operation of such credit unions.
[FR Doc. 96-2019 Filed 2-2-96; 8:45 am]
BILLING CODE 7535-01-P
