[Federal Register Volume 75, Number 246 (Thursday, December 23, 2010)]
[Rules and Regulations]
[Pages 80677-80678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-32130]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701

RIN 3133-AD75


The Low-Income Definition

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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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: Effective December 23, 2010 this rule finalizes without change, 
the interim final rule published on August 5, 2010, 75 FR 47171 (Aug. 
5, 2010). That interim rule was effective upon publication on August 5, 
2010.

FOR FURTHER INFORMATION CONTACT: Regina Metz, 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 at 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 and family income 
information is compared to median family income data.\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 at 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 indicated 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 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.

Interim Final Rule and Comments

    In July 2010, the Board issued an interim final rule amending 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. 75 FR 47171 (Aug. 5, 2010). In 
addition, the interim final rule amended the subsection of the rule 
regarding the option for credit unions to submit their own information

[[Page 80678]]

for purposes of qualifying for the designation to clarify that actual 
member data must be compared with a like category of statistical data.
    NCUA received three comment letters: One from a federal credit 
union and two from credit union trade associations. All three 
commenters supported the clarification in the interim final rule. The 
two trade associations, commenting on an issue outside the scope of the 
interim final rule, urged the NCUA to consider further amendment of the 
low-income rule to permit credit unions that do not qualify under 
NCUA's geo-coding software to use a statistically valid, random sample 
of member income data to support a designation as a low-income credit 
union. Concurrent with issuing this final rule, the Board is separately 
issuing a proposed rule addressing the use of a statistically valid, 
random sample to support the low-income designation.

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. The Office of Information 
and Regulatory Affairs has determined that this final rule is not a 
major rule for purposes of SBREFA.

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 December 
16, 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
Accordingly, the interim final rule amending 12 CFR part 701 which was 
published at 75 FR 47171 on August 5, 2010, is adopted as a final rule 
without change.

[FR Doc. 2010-32130 Filed 12-22-10; 8:45 am]
BILLING CODE 7535-01-P