[Federal Register Volume 75, Number 150 (Thursday, August 5, 2010)]
[Rules and Regulations]
[Pages 47171-47173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19099]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 75, No. 150 / Thursday, August 5, 2010 /
Rules and Regulations
[[Page 47171]]
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
RIN 3133-AD75
The Low-Income Definition
AGENCY: National Credit Union Administration (NCUA).
ACTION: Interim final rule and request for comments.
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SUMMARY: NCUA is amending the definition of ``low-income members'' to
clarify that, in determining if a credit union qualifies for a low-
income designation, the comparison of credit union data, whether
individual or family income data, must be with statistical data for the
same category. The amendment will clarify the intention of the original
regulatory text so it is consistent with the geo-coding software the
agency uses to make the low-income credit union (LICU) designation.
DATES: The rule is effective August 5, 2010. Comments must be received
by October 4, 2010.
FOR FURTHER INFORMATION CONTACT: Sheila Albin, Staff Attorney, Office
of General Counsel, National Credit Union Administration, 1775 Duke
Street, Alexandria, Virginia 22314-3428, or telephone: (703) 518-6540.
SUPPLEMENTARY INFORMATION:
Background
The Federal Credit Union Act (Act) authorizes the NCUA Board
(Board) to define ``low-income members'' so that credit unions with a
membership consisting of predominantly low-income members can benefit
from certain statutory relief and receive assistance from the Community
Development Revolving Loan Fund. 12 U.S.C. 1752(5), 1757a(b)(2)(A),
1757a(c)(2)(B), 1772c-1. This authority has been implemented in Sec.
701.34 of NCUA regulations, known as the low-income rule. 12 CFR
701.34. In April 2008, the Board proposed substantial changes to the
rule, which had previously been based on measuring median household
income, with geographic differentials for certain areas with higher
costs of living. 73 FR 22836 (April 28, 2008). In brief, the Board
proposed to, and as adopted in the final rule, did replace median
household income with median family income or median earnings for
individuals as better measures, more flexible, and in line with
standards used by other federal agencies. 73 FR 71909 (Nov. 26, 2008).
As discussed in the preamble to the final rule, NCUA also undertook
as part of the regulatory changes to facilitate the low-income
designation process by eliminating the requirement for credit unions to
apply for the designation. NCUA is in the process of implementing geo-
coding software to make the calculation automatically for credit unions
during the examination process.
NCUA will make the determination of whether a majority of an
FCU's members are low-income based on data it obtains during the
examination process. This will involve linking member address
information to publicly available information from the U.S. Census
Bureau to estimate member earnings. Using automated, geo-coding
software, NCUA will use member street addresses collected during FCU
examinations to determine the geographic area and metropolitan area
for each member account. NCUA will then use income information for
the geographic area from the Census Bureau and assign estimated
earnings to each member.
73 FR 71910-11. NCUA's software ensures that the same categories of
data available for member income at a particular credit union are
compared with like categories of statistical data on income from the
Census Bureau. In particular, individual member earnings information is
compared to median individual earnings data, family income information
is compared to median family income data, and so forth.\1\
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\1\ NCUA's geo-coding software, known within the agency as the
``Low-Income Designation Assessment Tool,'' is currently a stand-
alone software program developed by NCUA's Office of the Chief
Information Officer with guidance from regional staff experienced in
low-income designation. Regional staff as well as Economic
Development Specialists currently use the tool as needed based on
requests from credit unions. Eventually, the same software rules
will be embedded into the NCUA AIRES examination software. The
current version performs 30 different ratio calculations for each
member based on a variety of factors and data to determine whether
the member meets the low-income definition. The variety of ratios is
expansive in order to provide all of the possible options for
members to meet the definition. Factors recognize the following: (1)
Data sources include both decennial income data as well as American
Community Survey income data; (2) different data is incorporated for
metro vs. non-metro geographic areas; and (3) ratio options include
comparisons of census tract and block group income data, to zip
code, county, MSA, state, and national data, plus comparisons of
county income data to CBSA, state, and national income data.
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The final rule in November 2008 also provided credit unions, as an
alternative to relying on NCUA's geo-coding software, the option of
providing actual income information about their members as a basis for
qualifying as a LICU. Confusion has arisen regarding the appropriate
comparison of actual member information and statistical data from the
Census Bureau, prompting the need for this clarifying amendment. The
confusion arises from a discussion in the preamble to the final rule,
where the Board stated:
The rule also provides an alternative basis for an FCU to
qualify for a LICU designation. An FCU may be able to demonstrate
the actual income of its members based on data it has, for example,
from loan applications or surveys of its members. An FCU may qualify
as a LICU if it can establish a majority of its members meet the
low-income formula. For example, an FCU with 1,000 members may be
able to show the actual income of 501 or more of its members is
equal to or less than 80% of the MFI for the metropolitan area(s)
where they live. As a practical matter, the Board thinks few FCUs
will need this option because NCUA's approach of matching member
residential information with Census Bureau income information will
provide an estimate very close to members' actual income.
73 FR 71911. The rule provides median family income or median
individual earnings as alternatives and, as noted above, NCUA's geo-
coding software compares like categories of data. Unfortunately, the
above-quoted statement in the preamble indicates that, as an
alternative to relying on the NCUA's geo-coding, a credit union could
apply for a low-income designation relying on a comparison of actual
income data for individual members to statistical data on median family
income as the basis for the designation. This would not be a valid or
meaningful comparison. The Board believes that, as a matter of logic
and
[[Page 47172]]
statistical reasoning, only like categories of data may be compared in
making the determination that a credit union's membership meets the
low-income definition. Actual individual member income information
should not be measured against median family income, but rather,
against individual median earnings.
Changes to the Low-Income Rule
This interim final rule amends Sec. 701.34(a)(1) by clarifying
that median family income and median earnings for individuals are
alternative bases on which credit union members may qualify as low
income. In addition, the subsection of the rule where the option for
credit unions to submit their own information for purposes of
qualifying for the designation is amended to clarify that actual member
data must be compared with a like category of statistical data. For
example, if a credit union provides individual income information for
members, the median earnings for individuals must be used to determine
if the members are low-income.
Interim Final Rule and Immediate Effective Date
NCUA is issuing this rulemaking as an interim final rule effective
on publication. The Administrative Procedure Act (APA), 5 U.S.C. 553,
generally requires that before a rulemaking can be finalized it must
first be published as a notice of proposed rulemaking with the
opportunity for public comment, unless the agency for good cause finds
that notice and public comment are impracticable, unnecessary, or
contrary to the public interest. Additionally, the APA requires that,
once finalized, a rulemaking generally must have a delayed effective
date of 30 days from the date of publication, except for good cause. In
this regard, NCUA believes good cause exists for issuing these
clarifying amendments as an interim final rule, effective immediately,
in order to eliminate as soon as possible any confusion resulting from
the preamble language that was inconsistent with or makes ambiguous the
regulatory text for the definition of low-income members. To that
extent, NCUA believes issuing this rulemaking as an interim final rule,
effective on publication, is also in the public interest. Finally,
credit unions should take notice that, upon the Board's adoption of
this interim final rule, NCUA will not consider requests from credit
unions under Sec. 701.34(a)(3) for a low-income designation based on a
comparison of actual individual member income data to median family
income data.
Although issuing these changes an interim final rule, effective
immediately, NCUA would like the benefit of public comment before
adopting the changes in a final rule and invites interested parties to
submit comments during a 60-day comment period. In adopting a final
regulation, NCUA may revise the interim rule in light of the comments
received if appropriate.
Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
to describe any significant economic impact any regulation may have on
a substantial number of small entities. 5 U.S.C. 603(a). For purposes
of this analysis, NCUA considers credit unions having under $10 million
in assets small entities. Interpretive Ruling and Policy Statement 03-
2, 68 FR 31949 (May 29, 2003). As of December 31, 2007, out of
approximately 8,410 federally insured credit unions, 3,599 had less
than $10 million in assets. This interim final rule merely clarifies
the existing low-income rule and, therefore, an analysis is not
required. NCUA, however, provided an analysis when it issued the final
rule in November 2008, concluding that the economic impact on entities
affected by the rule would not be significant. 73 FR 71911-12.
Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act (SBREFA) of
1996, Public Law 104-121, provides generally for congressional review
of agency rules. A reporting requirement is triggered in instances
where NCUA issues a final rule as defined by Section 551 of the
Administrative Procedures Act. 5 U.S.C. 551. While NCUA views this
clarifying amendment as minor, the formal determination by the Office
of Information and Regulatory Affairs is pending.
Paperwork Reduction Act
This clarifying amendment does not change the collection
requirements under the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C.
3501 et seq.
Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests. In
adherence to fundamental federalism principles, NCUA, an independent
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies
with the executive order. The final rule will not have substantial
direct effect on the states, on the connection between the national
government and the states, or on the distribution of power and
responsibilities among the various levels of government. NCUA has
determined this final rule does not constitute a policy that has
federalism implications for purposes of the executive order.
The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
NCUA has determined that this final rule will not affect family
well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, 1999, Public Law 105-277, 112
Stat. 2681 (1998).
List of Subjects in 12 CFR Part 701
Credit unions, Federal credit unions, Low income, Nonmember
deposits, Secondary capital, Shares.
By the National Credit Union Administration Board, on July 29,
2010.
Mary F. Rupp,
Secretary of the Board.
0
For the reasons stated above, NCUA amends 12 CFR part 701 as follows:
PART 701--ORGANIZATION AND OPERATIONS OF FEDERAL CREDIT UNIONS
0
1. The authority for part 701 continues to read as follows:
Authority: 12 U.S.C. 1752(5), 1757, 1765, 1766, 1781, 1782,
1787, 1789; Title V, Pub. L. 109-351, 120 Stat. 1966.
0
2. In Sec. 701.34, amend paragraph (a) by:
0
a. Removing the first two sentences in paragraph (a)(2) and adding a
new first sentence; and
0
b. Adding a new sentence to the end of paragraph (a)(3).
The additions read as follows:
Sec. 701.34 [Amended]
(a) * * *
(2) Low-income members are those members whose family income is 80%
or less than the median family income for the metropolitan area where
they live or national metropolitan area, whichever is greater, or those
members who earn 80% or less than the total median earnings for
individuals for the metropolitan area where they live or national
metropolitan area, whichever is greater. * * *
(3) * * * Actual member income data must be compared to a like
category of statistical data, for example, actual
[[Page 47173]]
individual member income may only be compared to total median earnings
for individuals for the metropolitan area where they live or national
metropolitan area, whichever is greater.
* * * * *
[FR Doc. 2010-19099 Filed 8-4-10; 8:45 am]
BILLING CODE 7535-01-P