What is “reasonable proximity” for field of membership purposes?

For credit unions making plans for medium to long-term growth, the discussion often comes down to what charter gives them the most flexibility to grow?  For instance, if they are a community charter, will they have more opportunities to expand under the state’s laws or do they have enough flexibility under NCUA’s more stringent regulations?  If the credit union doesn’t want to become a community charter, will it have the ability to take in enough groups to expand their membership footprint?

In June, NCUA issued an important legal opinion letter for those credit unions considering using the multiple SEG approach.  When this letter is read in conjunction with NCUAs updated field of membership regulations it means that federal credit unions have much more expansion flexibility than they had just months ago.

When a multiple SEG credit union is seeking to add a new group to its membership, one of the most basic things the credit union must demonstrate is that the group is within “reasonable proximity” to the credit union’s service area.  But what is reasonable proximity and is there a specific geographic limit restraining the acquisition of new groups?  In a legal opinion letter by NCUAs Office of General Counsel, the answer is:

 

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