This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

56134

Vol. 62, No. 209

Wednesday, October 29, 1997

NATIONAL CREDIT UNION

ADMINISTRATION

12 CFR Part 701

Organization and Operations of

Federal Credit Unions

AGENCY: National Credit Union

Administration.

ACTION: Proposed rule and request for

comments.

SUMMARY: The NCUA Board requests

comment on the issue of field of

membership overlaps and the use of

exclusionary clauses. Also, the NCUA

Board proposes to update the

requirements for obtaining a community

charter. The proposal clarifies the

documentation requirements necessary

for a new, expanding or converting

community charter. Most importantly,

the credit union must document its plan

to serve all segments of the community.

The proposal also clarifies the authority

of the NCUA Board to take supervisory

and/or administrative action against a

credit union that fails to follow its

marketing plan and/or business plan to

serve all segments of the community.

DATES: Comments on the proposed

amendments to § 701.1 of NCUA’s

regulations and IRPS 94–1 (section B of

the Supplementary Information) must

be received by November 28, 1997.

Comments on Section A of the

Supplementary Information regarding

the request for comments must be

postmarked or received by December 29,

1997.

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. E-Mail

comments to boardmail@ncua.gov.

Please send comments by one method

only.

FOR FURTHER INFORMATION CONTACT: J.

Leonard Skiles, President, Asset

Management and Assistance Center,

4807 Spicewood Springs Road, Suite

5100, Austin, Texas 78759, or telephone

(512) 795–0999; Stephen E. Austin,

Director of Supervision, Office of

Examination and Insurance, 1775 Duke

Street, Alexandria, Virginia, or

telephone (703) 518–6360; Lynn K.

McLaughlin, Program Officer, at the

above address and telephone number;

Michael J. McKenna, Staff Attorney,

Office of General Counsel, at the above

address or telephone (703) 518–6540.

SUPPLEMENTARY INFORMATION:

A. Overlaps and Exclusion Clauses

Overlaps in credit union fields of

membership have increased in recent

years due to a number of factors. The

overlaps primarily are a result of more

credit unions either being chartered as

community credit unions, or existing

occupational/associational based

charters making application to convert

to community charters. Also, many state

regulators routinely permit overlaps of

not only state chartered credit unions,

but also federally chartered credit

unions. As a result, issues relating to the

competitive relationship between

overlapped credit unions, particularly a

community charter and any

occupational/associational based credit

union within the community charter’s

area of operations, are being reviewed.

Data on the implications to both the

credit unions and the members of

federal credit unions directly competing

with one another is limited but it is

recognized that credit unions are an

integral part of a dynamic and

constantly changing financial

marketplace. It is, therefore, important

to identify all potential issues as they

relate to the policy on overlaps. For

example:

• From the perspective of the credit

union member, what harm or benefit is

derived from exclusionary clauses?

• Is overlap protection necessary for a

credit union properly serving its

members?

• What confusion, if any, is created

for a credit union member when he or

she is unable to join a community credit

union because he/she is part of an

excluded group?

• Do overlapping fields of

membership increase or decrease

services to the member?

• Should the NCUA Board consider

safety and soundness concerns in the

advent of credit unions with

overlapping fields of membership?

• Will small credit unions and credit

unions chartered to serve low-income

areas be affected by overlapping fields

of membership?

• Do overlapping fields of

membership affect the ‘‘cooperative

spirit’’ philosophy as articulated and

practiced in the credit union

movement?

• Should other factors, such as

mutual consent, be taken into

consideration in allowing or not

allowing overlaps?

• Should federal credit unions gain

tangible, quantifiable regulatory

competitive protection from other

federal credit unions, but not from state

chartered credit unions?

• What are state policies and

experience on overlaps?

• Do newly chartered, low-income, or

any other types of credit union need

overlap protection?

• Should the size of either the

overlapped or overlapping credit union

be taken into consideration in

permitting or not permitting the

overlap?

Issues relating to overlaps must be

thoroughly analyzed in order to develop

a revised policy on overlaps.

Accordingly, the Board invites

comments on the issues related to

NCUA’s overlap policy and the use of

exclusion clauses.

B. Community Service Amendments

NCUA’s community chartering policy

is not affected by the injunction issued

in the consolidated cases of First

National Bank and Trust Co., et al. v.

NCUA and the American Bankers

Association v. NCUA et al., which was

partially stayed by the Court of Appeals

on December 24, 1996. Current policy

requires that a community charter must

be based on ‘‘a well-defined

neighborhood, community, or rural

district.’’ Given the diversity of

community characteristics throughout

the country, NCUA’s policy is to limit

the community to a single,

geographically well-defined area where

residents have common interests or

interact. NCUA recognizes four types of

affinity on which a community charter

can be based—persons who live in,

worship in, go to school in, or work in

the community. More than one

community credit union may serve the

same community area.

The Board believes it is important, for

reasons discussed below, to provide
Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Proposed Rules 56135

clarification to credit unions on what is

necessary for the approval of a request

to convert to a community charter. The

Board wishes to ensure that credit

unions requesting to convert have fully

considered the challenges in serving an

entire community. Community credit

unions are frequently more susceptible

to competition from other local financial

institutions and do not have a

sponsoring company or association. The

lack of a payroll deduction makes it

more difficult to develop a savings

promotion program and in the

collection of loans. A diverse

membership base creates new

challenges in developing an appropriate

business plan and marketing strategy,

especially if this diverse population is

located in a rural community. This

guidance also applies to newly

established community credit unions as

well as credit unions wishing to expand

their community boundaries.

IRPS 94–1, as amended by IRPS 96–

1, specifies certain requirements that

must be satisfied before a community

charter can be granted. Integral to the

current approval process for a

community charter is the requirement

that a business plan and marketing

strategy for serving the community must

be submitted. The business plan

requirements, primarily an analysis of

the market area, a service market

strategy, an organizational/management

plan, and financial plan, remain the

same. However, further guidance has

been requested on what constitutes an

acceptable business plan/marketing

strategy for approval as a community

charter. In particular, questions have

arisen regarding the NCUA Board’s

expectations relative to a community

charter. In response to these questions,

the NCUA Board believes it is necessary

to clarify certain aspects regarding how

a credit union intends to serve a

community as evidenced by its business

plan/marketing strategy.

First, the Board is clarifying that all

community charters must be prepared to

serve all segments of the community.

The credit union must be willing and

able within a reasonable period to not

only serve, but also to market, to a

diverse membership base, which should

generally reflect the make-up of the

community. This may require

community credit unions to develop

special marketing programs or services

and products for different segments of

the community. This type of

information needs to be addressed in

either the business plan or the

marketing plan. Most importantly, this

amendment highlights the fundamental

difference between a community charter

and other types of charters. That is, a

community charter must make

reasonable and prudent efforts to market

its services to all segments of the

community. An overall marketing

strategy that primarily targets one

segment, or select segments, of the

community to the exclusion of others

will not be acceptable. Membership and

loan penetration rates, among other

factors, will be reviewed to assess how

well the credit union is serving the

entire community.

Second, the Board is also clarifying

that a new community charter or a

credit union converting to a community

charter will be held accountable for its

business plan/marketing strategy

outlining how it will serve the entire

community submitted to NCUA as part

of the approval process. Of course, there

may be safety and soundness concerns,

as well as other reasons, why a credit

union did not follow or could not meet

its business plan or marketing strategy

objectives. Such reasons would be

factored into any review by NCUA

before a decision is made to take any

supervisory and or administrative

action. For example, if a credit union

established and then implemented a

special marketing plan for a group in

specific need of credit union service

within the community, and,

notwithstanding its best efforts to attract

membership from and provide service to

that group the penetration rate is lower

than projected, then failure to meet the

business plan would not be cause for

supervisory action. The NCUA Board

recognizes that local marketplace factors

may influence the time tables and even

the ability to meet the business plan,

though reasonable due diligence to meet

the plan is expected.

Third, the Board is clarifying that the

requirements set forth in Chapter I of

the Chartering Manual to obtain a

community charter, except for any

requirements to demonstrate

community support, also apply to an

existing credit union converting to a

community charter. The Board is

requesting comment on the deletion of

the requirements in IRPS 94–1 to

provide written evidence of community

support such as letters of support,

petitions, or surveys.

A converting credit union must

provide information on the groups being

served, including penetration rates of all

segments of its field of membership,

marketing efforts to service the current

field of membership and any special

programs the credit union may have

sponsored to assist groups in need of

credit union services, such as adding a

low-income community to its field of

membership or mentoring a low-income

community.

Finally, the Board is proposing to

eliminate the ability of a credit union

converting to a community charter to

continue to serve groups outside the

new community boundaries. Continued

service to occupational and

associational groups outside the

community is not consistent with the

nature of a community charter. This

proposal is consistent with NCUA’s

policy regarding new community

charters. Credit unions could continue

to serve members of record of groups

outside the community boundaries.

C. Thirty-Day Comment Period

These proposed amendments are

being issued with a thirty (30) day

comment period since the amendments

are simply clarifying the Board’s policy

on community charters and explicitly

stating the Board’s implicit enforcement

authority. Because these are technical

amendments the Board believes a 30

day comment period is appropriate.

Requests for comment is being

expedited due to ongoing work

requirements of NCUA’s Field of

Membership Task Force and the number

of pending community charter

conversions.

Regulatory Procedures

Regulatory Flexibility Act

The Regulatory Flexibility Act

requires NCUA to prepare an analysis to

describe any significant economic

impact a regulation may have on a

substantial number of small credit

unions (primarily those under $1

million in assets). The proposed

amendments will not have a significant

economic impact on a substantial

number of small credit unions and

therefore 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

actions on state interests. This proposed

amendment makes no significant

changes with respect to state credit

unions and therefore, will not materially

affect state interests.

Congressional Review

NCUA has determined that this is not

a major rule under 5 U.S.C. Chapter 8.
56136 Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Proposed Rules

List of Subjects in 12 CFR Part 701

Credit, Credit unions, Reporting and

recordkeeping requirements.

By the National Credit Union

Administration Board on October 22, 1997.

Hattie Ulan,

Acting Secretary of the Board.

Accordingly, NCUA proposes to

amend 12 CFR part 701 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 12 U.S.C. 1601, et seq.,

42 U.S.C. 1981 and 3601–3610. Section

701.35 is also authorized by 12 U.S.C. 4311–

4312.

2. Section 701.1 is revised to read as

follows:

§ 701.1 Federal credit union chartering,

field of membership modifications, and

conversions.

National Credit Union Administration

policies concerning chartering, field of

membership modifications, and

conversions are set forth in Interpretive

Ruling and Policy Statement 94–1,

Chartering and Field of Membership

Policy (IRPS 94–1), as amended by IRPS

96–1 and IRPS 97–1. Copies may be

obtained by contacting NCUA at the

address found in § 792.2(g)(1) of this

chapter. The combined IRPS are

incorporated into this section.

(Approved by the Office of Management

and Budget under control number 3133–

0015.)

Note: The text of the Interpretive Ruling

and Policy Statement (IRPS 94–1) does not,

and the following amendments will not,

appear in the Code of Federal Regulations.

1. In IRPS 94–1, Chapter 1, Section

IV.A.4.b is revised to read as follows:

IV.A.4.b.—Special Requirements for

Community Credit Unions

Community credit unions are

frequently more susceptible to

competition from other local financial

institutions and generally do not have

substantial support from any single

sponsoring company or association.

Additionally, community credit unions

must be prepared to serve all segments

of the community. As a result, a

community charter will often encounter

financial and operational factors that

differ from an occupational and

associational charter serving select or

defined groups. This results primarily

from the fact that a community credit

union will have a more diverse and

possibly geographically dispersed

membership base, which should

generally reflect the make-up of the

community. This diverse membership

potential may require special marketing

programs targeted to different segments

of the community. For example, the lack

of payroll deduction creates special

challenges in the development of

savings promotional programs and in

the collection of loans. Accordingly, it

is essential for the proposed community

charter to develop a detailed and

practical business plan for at least the

first three years of operation that focuses

on the accomplishment of the unique

financial and operational factors of a

community charter. The business plan

shall contain, but not necessarily be

limited to, the following:

• Analysis of market area—

geographic, demographic, employment,

income, housing, and economic data;

• Service/marketing strategy for all

segments of the community—financial

and other services to be provided, new

member/share/loan promotion policies

and procedures and income generation

strategy;

• Organizational/management plan—

qualification and planned training of

officials/employees, operating facilities

to include office space/equipment and

supplies, accounting system,

safeguarding of assets, insurance

coverage, etc.; and

• Financial plan—sources and

application of funds statements and pro

forma balance sheet and income/

expense statements and assumptions.

Community credit unions will be

required to follow the marketing and/or

business plan submitted with their

application. In the event any

community credit union fails to follow

its marketing and/or business plan,

supervisory and/or administrative

actions may be taken against the credit

union. If the business plan is not

sufficiently detailed or does not

satisfactorily address how the credit

union will serve all segments of the

community, the charter request may be

conditionally approved by NCUA

subject to the credit union’s agreement

of the imposed conditions.

A community credit union will be

expected to regularly review its business

plan as well as membership and loan

penetration rates throughout the

community to determine if the entire

community is being adequately served.

NCUA may require periodic service

status reports on its service to the

community and will review the credit

union’s service to the entire community

during examinations.

2. In IRPS 94–1, Chapter 2, Section

IV.B is revised to read as follows:

IV.B—Conversion to Community

Charter

An existing occupational,

associational, or multiple group federal

credit union may apply to convert to a

community charter. In order to support

a case for a conversion to community

charter, the applicant federal credit

union must, in addition to the

requirements for a community charter

set forth in Chapter I (except for the

requirement to demonstrate community

support), develop a detailed business

plan which may include, but not be

limited to the following data:

• Current financial statements,

including the income statement and a

summary of loan delinquency;

• A map or maps showing both the

existing and proposed boundaries for

the field of membership, as well as

existing and planned service facilities;

• A written description of the area of

community service for the proposed

community credit union;

• The most current population figures

for the existing and proposed

boundaries;

• The source of the population

information (census data are considered

the most authoritative); the greater the

population of the proposed area, the

greater justification necessary to support

the existence of the ‘‘community’’ and

interaction among its residents;

• Evidence that the proposed area is

a ‘‘community’’ as defined in

‘‘Community Common Bond’’ in

Chapter 1;

• Information concerning the

availability of financial services to the

residents of the new area;

• A list of credit unions with a home

or branch office in the proposed area (If

present credit union service to the

residents of the new area is adequate,

there may be no basis for the proposed

conversion.);

• Information regarding the attitude

of the current credit union sponsors and

existing credit union members toward

the proposed conversion (a letter from

the board of directors of the credit union

is sufficient evidence);

• Information on the groups presently

being served, to include, but not

necessarily limited to, income data on

its membership, the penetration rate of

the current field of membership, core

group, and any low to moderate group,

and any special programs the credit

union sponsored to serve a low to

moderate group; and
Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Proposed Rules 56137

• The anticipated financial impact on

the credit union in terms of need for

additional employees and fixed assets.

* * * * *

[FR Doc. 97–28587 Filed 10–28–97; 8:45 am]

BILLING CODE 7535–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 97–NM–135–AD]

RIN 2120–AA64

Airworthiness Directives; Saab Model

SAAB SF340A and SAAB 340B Series

Airplanes

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Notice of proposed rulemaking

(NPRM).

SUMMARY: This document proposes the

adoption of a new airworthiness

directive (AD) that is applicable to

certain Saab Model SAAB SF340A and

SAAB 340B series airplanes. This

proposal would require an inspection to

determine the serviceability of the fire

extinguisher of the forward lavatory

waste bin, and corrective actions, if

necessary. This proposal also would

require installation of a placard adjacent

to the fire extinguisher in the forward

lavatory waste bin. This proposal is

prompted by the issuance of mandatory

continuing airworthiness information by

a civil airworthiness authority. The

actions specified by the proposed AD

are intended to prevent leakage of the

fire extinguishing agent, which could

prevent proper distribution of the agent

within the lavatory waste bin in the

event of a fire.

DATES: Comments must be received by

November 28, 1997.

ADDRESSES: Submit comments in

triplicate to the Federal Aviation

Administration (FAA), Transport

Airplane Directorate, ANM–103,

Attention: Rules Docket No. 97–NM–

135–AD, 1601 Lind Avenue, SW.,

Renton, Washington 98055–4056.

Comments may be inspected at this

location between 9:00 a.m. and 3:00

p.m., Monday through Friday, except

Federal holidays.

The service information referenced in

the proposed rule may be obtained from

SAAB Aircraft AB, SAAB Aircraft

Product Support, S–581.88, Linko ̈ping,

Sweden . This information may be

examined at the FAA, Transport

Airplane Directorate, 1601 Lind

Avenue, SW., Renton, Washington.

FOR FURTHER INFORMATION CONTACT:

International Branch, ANM–116, FAA,

Transport Airplane Directorate, 1601

Lind Avenue, SW., Renton, Washington

98055–4056; telephone (425) 227–2110;

fax (425) 227–1149.

SUPPLEMENTARY INFORMATION:

Comments Invited

Interested persons are invited to

participate in the making of the

proposed rule by submitting such

written data, views, or arguments as

they may desire. Communications shall

identify the Rules Docket number and

be submitted in triplicate to the address

specified above. All communications

received on or before the closing date

for comments, specified above, will be

considered before taking action on the

proposed rule. The proposals contained

in this notice may be changed in light

of the comments received.

Comments are specifically invited on

the overall regulatory, economic,

environmental, and energy aspects of

the proposed rule. All comments

submitted will be available, both before

and after the closing date for comments,

in the Rules Docket for examination by

interested persons. A report

summarizing each FAA-public contact

concerned with the substance of this

proposal will be filed in the Rules

Docket.

Commenters wishing the FAA to

acknowledge receipt of their comments

submitted in response to this notice

must submit a self-addressed, stamped

postcard on which the following

statement is made: ‘‘Comments to

Docket Number 97–NM–135–AD. The

postcard will be date stamped and

returned to the commenter.

Availability of NPRMs

Any person may obtain a copy of this

NPRM by submitting a request to the

FAA, Transport Airplane Directorate,

ANM–103, Attention: Rules Docket No.

97–NM–135–AD, 1601 Lind Avenue,

SW., Renton, Washington 98055–4056.

Discussion

The Luftfartsverket (LFV), which is

the airworthiness authority for Sweden,

notified the FAA that an unsafe

condition may exist on certain Saab

Model SAAB SF340A and SAAB 340B

series airplanes. The LFV advises that it

has received reports indicating that,

during maintenance, the capillary tube

of a fire extinguisher of a forward

lavatory waste bin was bent and

fractured, which resulted in leakage of

the fire extinguishing agent. This

condition, if not corrected, could

prevent appropriate distribution of the

fire extinguishing agent within the

lavatory waste bin in the event of a fire.

Explanation of Relevant Service

Information

Saab has issued Service Bulletin

SAAB 340–25–235, dated December 11,

1996, which describes procedures for

performing an inspection to determine

the serviceability of the fire extinguisher

of the forward lavatory waste bin, and

corrective actions, if necessary. The

service bulletin also describes

procedures for installation of a placard

adjacent to the fire extinguisher to

provide instructions for installation of

the fire extinguisher. Accomplishment

of the actions specified in the service

bulletin is intended to adequately

address the identified unsafe condition.

The LFV classified this service bulletin

as mandatory and issued Swedish

airworthiness directive (SAD) 1–106,

dated December 12, 1996, in order to

assure the continued airworthiness of

these airplanes in Sweden.

FAA’s Conclusions

These airplane models are

manufactured in Sweden and are type

certificated for operation in the United

States under the provisions of section

21.29 of the Federal Aviation

Regulations (14 CFR 21.29) and the

applicable bilateral airworthiness

agreement. Pursuant to this bilateral

airworthiness agreement, the LFV has

kept the FAA informed of the situation

described above. The FAA has

examined the findings of the LFV,

reviewed all available information, and

determined that AD action is necessary

for products of this type design that are

certificated for operation in the United

States.

Explanation of Requirements of

Proposed Rule

Since an unsafe condition has been

identified that is likely to exist or

develop on other airplanes of the same

type design registered in the United

States, the proposed AD would require

accomplishment of the actions specified

in the service bulletin described

previously.

Cost Impact

The FAA estimates that 141 airplanes

of U.S. registry would be affected by this

proposed AD, that it would take

approximately 2 work hours per

airplane to accomplish the proposed

actions, and that the average labor rate

is $60 per work hour. Based on these

figures, the cost impact of the proposed

AD on U.S. operators is estimated to be

$16,920, or $120 per airplane.