Credit Union Trade Groups Endorse FOM Changes

Credit union trade groups have endorsed the NCUA’s proposed Field of Membership rules, although NAFCU did so with some reservations.

The rule would “allow credit unions to serve more underserved communities because it provides credit unions broader operating authority and imposes fewer unnecessary constraints on credit union operations,” Mahlet Makonnen, NAFCU’s regulatory affairs counsel said, in commenting on the rule.

However, Makonnen said that the trade group opposes the proposed requirement that credit unions demonstrate that its selection is not discriminatory.

That requirement would make a long process even longer, Makonnen said.

Bankers, on the other hand, are telling the agency that the rule would allow credit unions to essentially redline their fields of members. And the Independent Community Bankers of America has been spearheading a comment-writing campaign among its members.

“It’s unfortunate for Americans lacking access to financial services that the [American Bankers Association] and their partners continue to pursue strategies to limit access to credit unions,” Lance Noggle, CUNA’s senior director of advocacy and senior counsel for payments and cybersecurity, said.

The NCUA board earlier this year approved a proposed rule that board members said would help credit unions that want to serve core-based statistical areas without serving the urban core demonstrate that they are not discriminating against low- and moderate-income people.

The changes in the rule came in response to a direction by a federal appeals court to better explain that section of a rule that the agency has adopted.

A three-judge panel from the federal Appeals Court for the District of Columbia said, in dismissing a challenge by the American Bankers Association to the overall rule.

The panel said that the agency has broad discretion in issuing rules governing fields of membership.

The ABA is asking the full appeals court to hear the case.

But the appeals court also said the NCUA must better explain one section of the rule.

The agency issued the proposed rule in an attempt to better explain that section of the FOM regulations.

In the proposed rule, the board would restore a provision to allow an applicant to designate a Combined Statistical Area (CSA), or a contiguous portion, as a well-defined local community, provided that the chosen area has a population of 2.5 million or less.

The proposed rule also would make it clear that the agency will not tolerate redlining in Field-of-Membership expansion and will reject applications if it finds evidence of discrimination.

The rule would ensure that the expansion “is based on sound legal and business judgment and not an attempt to redline or discriminate on an illegal basis,” the agency stated in the proposal.

Noggle said that CUNA believes that the further explanation meets the requirements in the court ruling.

ICBA, in its comment asked that the NCUA delay issuing the rule until the full appeals court decides whether to hear the case.

“Acting now risks implementation of a rule that the full Court or the U.S. Supreme Court might eventually overturn. This would result in an inequitable result for credit unions that relied on the rulemaking, but more importantly, may confuse and harm consumers,” Michael Emancipator, the group’s vice president and regulatory counsel wrote.

Emancipator is a former senior regulatory affairs counsel at NAFCU.

Emancipator wrote that the NCUA should require federal credit unions to demonstrate a compelling need to exclude an urban core from its field of membership.

In addition to filing its own letter, the ICBA, as part of its “Wake Up” campaign, posted a form message echoing its opposition to the rule on its website. The message states that bankers needed to place the name of their bank in the form message before sending it to the agency.

A review of the comments filed with the NCUA shows that a host of community bankers filed that message with the agency.