The rule would didn't propose expanding the community charter core area population limit beyond 2.5 million. However, the plan would expand the rural district population limit to 1,000,000, regardless of the state in which the majority of the district's population is located.

For community credit unions, the 2.5 million population limit will be expanded under the proposed rule beyond a core based statistical area to include any well-defined portion thereof.

"For example, a smaller, well-defined portion of a statistical area with a population of 1.5 million will not be denied for consideration simply because the population of the larger encompassing statistical area exceeds the population limit of 2.5 million," the rule read.

Federal credit unions will also be able to apply to serve combined statistical areas, as designated by the Office of Management and Budget, per the proposed rule.

Federal credit unions could apply to serve an outside area contiguous to its existing core area or single political jurisdiction. To qualify, credit unions must provide a written narrative to demonstrate interaction or common interests of the proposed expanded community as a whole when seeking to add an adjacent area.

The proposed rule would further recognize an individual congressional district as a well-defined local community and permit federal credit unions to serve that area.

NCUA Board Member Mark McWatters said he would prefer a rule that would allow credit unions to propose their own core area; however, he also said a defined population figure could also be included to provide credit unions with a legal safe habor.

"Some may argue, however, that there is some comfort with the statistical based approach to analyzing the existence of a well-defined local community and that stripping those rules from the regulations would vest too much discretion within the NCUA regarding whether a particular community qualifies as a community credit union. The agency should address this issue by using the statistical based approach with increased population caps to create a safe harbor rule, while also permitting credit unions to alternatively employ a de novo narrative approach completely independent of the restrictions and limitations inherent in the statistical approach with population caps to articulate a well-defined local community," McWatters said.

Download and read McWatters' prepared remarks here.

Matz responded that when she was on the board during her first term, credit unions were allowed to proposed their own core areas, but it was extremely burdensome. However, she acknowledged that perhaps the time had come to reconsider it.

Vice Chairman Rick Metsger noted that state charters are more flexible on field of membership than federal charter. He said the NCUA addressed reg relief within its authority, and the next step would be to recommend statutory change to Congress. Metsger also named credit union executives who pointed out specific problems with existing FOM rules.

While the NCUA expanded the rural district area to a maximum population of 1 million, the rule would limit multi-state expansions to only those states with borders immediately bordering the state containing the federal credit union's headquarters or main office.

Regarding underserved areas, the NCUA proposed re-calculating the concentration of facilities ratio analysis to exclude any non-depository institutions, non-community credit unions or both. However, the rule would still include other multiple common bond credit unions already serving the underserved area as a community.

The NCUA will also consider alternative methods a federal credit union can rely on to determine whether a proposed area is underserved by other financial institutions, provided the analysis relies on NCUA data or another federal banking agency's data.

The NCUA also proposed to extend SEG contractor eligibility for multiple occupational common bonds, provided the contractor has a strong dependency relationship with the sponsor in each case. Employees of an industrial park's tenants, such as retail tenants of a shopping mall, business tenants of an office building or complex, were also included in the rule. However, those tenants must have fewer than 3,000 employees working at a facility within the park, and only employees who work regularly at the park would be eligible for membership.

TIP charters were expanded to include employees of entities that have a strong dependency relationship with other entities within the industry. The proposal defined a strong dependency relationship as hinging on the likelihood of a significant economic impact on either or both parties if one were unable to continue in its operations without doing business with the other, according to the NCUA.