Title of Regulation: 10VAC5-40. Credit Unions (adding 10VAC5-40-70).

Statutory Authority: §§ 6.2-1303 and 12.1-13 of the Code of Virginia.

Public Hearing Information: A public hearing will be scheduled upon request.

Public Comment Deadline: January 6, 2012.

Agency Contact: Werner Paul, Deputy Commissioner, Bureau of Financial Institutions, State Corporation Commission, P.O. Box 640, Richmond, VA 23218, telephone (804) 371-9698, FAX (804) 371-9416, or email werner.paul@scc.virginia.gov.

Summary:

The State Corporation Commission is proposing a regulation to enable state-chartered credit unions that predominantly serve low-income members as defined in 12 CFR 701.34 to obtain a low-income designation. A low-income designated credit union would have the following additional powers to the same extent, and subject to the same terms and conditions, as is authorized for federal credit unions that have obtained a low-income designation to: (i) accept nonmember deposits in accordance with 12 CFR 701.32 and 12 CFR 741.204; (ii) accept secondary capital in accordance with 12 CFR 701.34 and 12 CFR 741.204; (iii) participate in the Community Development Revolving Loan Program in accordance with 12 CFR Part 705; (iv) be eligible for an exception to the aggregate loan limit on member business loans in accordance with 12 CFR 723.17 and 12 CFR 723.18; and (v) obtain funds from the Community Development Financial Institutions Fund operated by the United States Department of the Treasury.

AT RICHMOND, NOVEMBER 28, 2011

COMMONWEALTH OF VIRGINIA, ex rel.

STATE CORPORATION COMMISSION

CASE NO. BFI-2011-00235

Ex Parte: In re: low-income
designated credit unions

ORDER TO TAKE NOTICE

Section 6.2-1303 of the Code of Virginia authorizes the State Corporation Commission ("Commission") to adopt such regulations as may be necessary to permit state-chartered credit unions to have powers at least comparable with those of federal credit unions, regardless of any existing statute, regulation, or court decision limiting or denying such powers to state-chartered credit unions. Federal credit unions that predominantly serve low-income members as defined in 12 CFR § 701.34 may obtain a low-income designation. Low-income designated credit unions are eligible under federal law to accept nonmember deposits and secondary capital, participate in the Community Development Revolving Loan Program, and obtain funds from the Community Development Financial Institutions Fund operated by the United States Department of the Treasury. Low-income designated credit unions are also eligible for an exception to the aggregate loan limit on member business loans.

The Commission is informed that certain state-chartered credit unions wish to have the power to obtain a low-income designation so that they can also take advantage of the aforementioned benefits and resources, and the Bureau of Financial Institutions ("Bureau") has submitted to the Commission a proposed parity regulation.

NOW THE COMMISSION, based on the information supplied by the Bureau, is of the opinion and finds that the proposed regulation should be considered for adoption.

Accordingly, IT IS ORDERED THAT:

(1) The proposed regulation is appended hereto and made a part of the record herein.

(2) Comments or requests for a hearing on the proposed regulation must be submitted in writing to Joel H. Peck, Clerk, State Corporation Commission, c/o Document Control Center, P.O. Box 2118, Richmond, Virginia 23218, on or before January 6, 2012. Requests for a hearing shall state why a hearing is necessary and why the issues cannot be adequately addressed in written comments. All correspondence shall contain a reference to Case No. BFI-2011-00235. Interested persons desiring to submit comments or request a hearing electronically may do so by following the instructions available on the Commission's website: http://www.scc.virginia.gov/case.

(3) This Order and the attached proposed regulation shall be posted on the Commission's website: http://www.scc.virginia.gov/case.

(4) The Commission's Division of Information Resources shall send a copy of this Order, including a copy of the attached proposed regulation, to the Virginia Registrar of Regulations for publication in the Virginia Register of Regulations.

AN ATTESTED COPY hereof, together with a copy of the proposed regulation, shall be sent by the Clerk of the Commission to the Commission's Office of General Counsel and the Commissioner of Financial Institutions, who shall send a copy of this Order, together with a copy of the proposed regulation, to all state-chartered credit unions as well as other interested parties designated by the Bureau.

10VAC5-40-70. Low-income designated credit unions.

A. Upon the filing and investigation of a written application, the Commissioner of Financial Institutions (commissioner) shall designate a state-chartered credit union as a low-income credit union if (i) the commissioner finds that a majority of the credit union's members qualify as low-income members as defined in 12 CFR 701.34 and (ii) the National Credit Union Administration concurs with the designation. If the application filed by a credit union is denied, the commissioner shall notify the credit union of the denial and the reasons for the denial.

B. A low-income designated credit union shall have the following additional powers to the same extent, and subject to the same terms and conditions, as is authorized for federal credit unions that have obtained a low-income designation pursuant to 12 CFR 701.34 to:

1. Accept nonmember deposits in accordance with 12 CFR 701.32 and 12 CFR 741.204.

2. Accept secondary capital in accordance with 12 CFR 701.34 and 12 CFR 741.204.

3. Participate in the Community Development Revolving Loan Program in accordance with 12 CFR Part 705.

4. Be eligible for an exception to the aggregate loan limit on member business loans in accordance with 12 CFR 723.17 and 12 CFR 723.18.

5. Obtain funds from the Community Development Financial Institutions Fund operated by the United States Department of the Treasury.

Whenever any of the federal regulations referenced in this subsection require a credit union to submit a written request, plan, application, or other documents to the National Credit Union Administration, the credit union shall send a copy of such written request, plan, application, or other documents to the commissioner.

C. The commissioner may at any time, based upon supervisory, legal, or safety and soundness considerations, impose additional terms or conditions upon a low-income designated credit union in conjunction with its exercise of any of the powers enumerated in subsection B of this section.

D. A low-income designated credit union shall submit written reports to the commissioner containing any information that the commissioner may require concerning the credit union's services to low-income members.

E. 1. If the commissioner determines that a low-income designated credit union no longer meets the criteria for the low-income designation, the commissioner shall notify the credit union in writing. The credit union shall, within five years, meet the criteria for the designation or comply with the regulatory requirements applicable to state-chartered credit unions that do not have a low-income designation. The designation shall remain in effect during the five-year period.

2. If a credit union is unable to qualify again for the designation but has secondary capital or nonmember deposits with a maturity beyond the five-year period, the commissioner may extend the time for the credit union to comply with regulatory requirements to allow the credit union to satisfy the terms of any account agreements.

3. Within 60 days of the date of the notice from the commissioner, a credit union may appeal the commissioner's determination that the credit union no longer meets the criteria for a low-income designation to the State Corporation Commission by filing a petition in accordance with its Rules of Practice and Procedure (5VAC5-20).

4. A low-income designation shall be removed by the commissioner with the concurrence of the National Credit Union Administration.