Since the beginning of 1999, more than 210 federal credit unions have converted to community charters. The evidence suggests that this trend is going to continue.

Many credit union managers believe that the cream of employee groups has already been skimmed off the top and a community charter is the most viable way to grow their institutions. Additionally, community chartered credit unions can serve businesses and are eligible for Small Business Administration guaranteed loans.

The Credit Union Membership Access Act purportedly narrowed the size of communities served by credit unions by adding the term “local” to “well-defined.” However, Congress left it to NCUA’s imagination to interpret what “local and well-defined” means. NCUA took the terms “local and well-defined” and gave them a whole new meaning. 

The usual application for a credit union getting a community charter requests “to serve persons who live, worship, work, or attend school in, and businesses and other legal entities located in” a given geographic area. But a recent application for Western Sun FCU (Tulsa, Okla.), approved by the NCUA Board, added “volunteer” to the list. 

However, the potential membership listed in the application is only for those people who reside in the area based on the latest census data. This represents a huge undercount in the number of people who can qualify for membership.

For example, San Francisco FCU was granted a community charter by the NCUA Board for the city of San Francisco — the 12th largest city in the United States. The application stated that the population of the city was approximately 750,000. At an NCUA Board meeting reviewing the application, NCUA Board member Yolanda Wheat stated that size doesn’t matter. Unfortunately, it does.

What is more disturbing is that the NCUA analysis failed to take into account commuting patterns to work when estimating the customer base and determining whether the community is local and well-defined. If these commuting patterns were considered, an additional 560,000 people would have been added, and they are not all commuting from Oakland. This would make the potential customer base at least 1.3 million people, and we have not even started to count people who worship or attend school in San Francisco, and immediate family members.

From where would people commute? The communities would include Alameda, Contra Costa, San Mateo, Sacramento and Los Angeles Counties, just to name a few. In fact, 23 people say they work in San Francisco and live in the District of Columbia, according to Census Bureau data. Local? Well-defined? I don’t think so.

Furthermore, my barber here in Washington, D.C., could be eligible to join because her son attends college in San Francisco. I estimate the distance at 3,000 miles as the crow flies. Local and well-defined? Again, I don’t think so.

This example is not unique. All over the country, this abuse is taking place. NCUA’s community chartering policy is a sham. Hopefully, the Court of Appeals will agree.

If not, let’s end the charade and call these community-chartered credit unions what they are: banks.

—      Keith Leggett