Bankers & Credit Unions Fighting Again Over Field of Membership Rules

Credit union officials and bankers once again are squaring off on an NCUA proposal to expand the rules governing credit unions’ fields of membership.

In December, the NCUA approved a proposed rule to include any shared branch, shared ATM or shared electronic facility in the definition of “service facility” for a federal credit union that participates in a shared branching network.

In comments submitted to the NCUA board, bankers said that the proposal would allow an illegal expansion of credit union fields of membership. Many of the comments are the same, word for word.

“The proposed rule is yet another example of [the] NCUA fueling the growth of the credit union industry at the expense of their congressional mandate to serve low-income and underserved communities,” Jeff Loomis, president/CEO of the Huron Community Bank in East Tawas Michigan, said.

Other bankers — one as far away as Alaska — repeated that argument, word for word.

Credit union trade groups, on the other hand, said the rule updates the field of membership rules to take into account new technology and new ways that people do their banking.

“Today, the archaic field of membership restrictions to which credit unions are subject are antithetical to the goal of financial inclusion and economic equity, and they impede credit unions more fully fulfilling their statutory mission to promote thrift and provide access to credit for provident purposes,” CUNA Chief Advocacy Officer Ryan Donovan told the NCUA board.

Bankers and credit unions have been battling for decades over field of membership rules. In the most recent skirmish, the American Bankers Association challenged the last NCUA expansion of field of membership rules. The U.S. Supreme Court upheld those rules last year.

CUNA and NAFCU officials contended that the proposed rules are needed to allow credit unions to adapt to new ways that their members may do business.

“The proposed rule would define ‘service facility’ in a manner that provides clarity, consistency and the appropriate recognition of technological advances and the current operation of shared branching,” Elizabeth Young LaBerge, NAFCU’s senior regulatory counsel, told the NCUA.

She said that while credit union fields of membership are part of what makes credit unions unique, the rules should not be used to stifle credit union growth.

“To that end, the NCUA must take every regulatory opportunity to streamline and simplify field of membership requirements to ensure the long-term health and survival of America’s credit unions,” she wrote.

And she asked the agency to ignore the arguments of the bankers.

In his letter, Donovan wrote that CUNA is aware that the American Bankers Association had flooded the agency with letters opposing the rule.

“Their opposition to this proposal is disappointing but not surprising and stands in stark contrast with their words promoting financial inclusion and equity in the banking sector,” Donovan wrote. “Credit union membership should be available to all.”

He said that CUNA supports the rule, adding that it would allow credit unions to deliver financial services to more people, but he also added that Congress and the NCUA board should do more to allow credit unions to serve underserved areas.

Loomis and the other bankers said the proposed rule would “eviscerate” requirements for a physical presence by including such things as a shared ATM.

“The proposal would enable significant field of membership expansion while diluting the physical presence of credit unions in the communities that need it most,” the bankers said. They said the rule would hurt people living in underserved areas.

“Credit union members – especially in underserved communities – rely on, value and expect individualized communications and conversation with credit union staff who can respond to their specific needs,” they said. “An ATM or the availability of remote services does not provide the same level of personal touch provided by in person staff.”