CU Trades Support NCUA’s Changes to ‘Archaic’ FOM Requirements

Officials with the credit union trade organizations, CUNA and NAFCU, threw their support behind the NCUA’s proposed reforms of the field of membership (FOM) definitions and requirements that the agency announced in February.

NCUA’s proposal would make nine changes to the Chartering and FOM Manual “to enhance consumer access to financial services, while reducing duplicative or unnecessary paperwork and administrative requirements.” It would also make four changes on underserved areas that multiple common bond federal credit unions may seek to add to their FOMs. The agency believes these “changes would streamline existing application requirements and clarify the role of data and criteria that other federal agencies provide relating to underserved areas.”

According to comments filed by CUNA and NAFCU on Tuesday, the comment deadline, both groups supported the proposals laid out by the NCUA.

In a 10-page letter, CUNA Senior Director of Advocacy and Counsel Luke Martone wrote, “CUNA’s federal and state-chartered credit union members have expressed concern that the federal charter is falling behind many state charters and thus has become a barrier to the flexibility needed to operate dynamic and efficient cooperative financial institutions.”

In the letter, Martone listed the ways the FOM proposal would help credit unions:

• Make several changes on underserved areas that multiple common bond FCUs may seek to add to their FOMs. The changes would streamline existing application requirements and clarify the role of data and criteria that other federal agencies provide relating to underserved areas.
• Simplify application requirements for community-based FCUs by eliminating the need to submit redundant or less useful information and providing a standard form for business and marketing plans.
• Eliminate the business and marketing plan requirement for certain federally insured state-chartered credit unions (FISCU) that seek to convert to a federal charter while serving the same community FOM.
• Expand the community-based FOM affinities—relationships between a person and the geographic community—to recognize the growth of telecommuting and remote work for companies headquartered in a community.
• Better capture the ongoing bond between individuals within a field of membership and their immediate family members following the death of a member.
• Correct unintended consequences of prior rules, including a provision that may prevent credit unions from expanding into certain underserved rural areas.

NAFCU Regulatory Affairs Counsel Dale Baker wrote, “NAFCU supports the principles underlying NCUA’s proposed changes to the Manual but encourages the NCUA to adopt a more principles-based Chartering and Field of Membership final rule that preserves FCUs’ existing broad authority to serve surviving spouses, provides decedents’ and honorably discharged veterans’ immediate families and households an adequate opportunity to evaluate the benefits of joining an FCU, and recognizes the deep connections many individuals have to the employers, schools, and religious centers they remotely attend.”

According to NAFCU, the organization has also asked the NCUA to consider the following items:

• Maintain the Chartering and Field of Membership Manual’s standalone secondary member groups for surviving spouses, rather than combining it with the group that encompasses other immediate family and household members.
• Extend the proposed six-month secondary member eligibility timeframe for other immediate family and household members to 24 months.
• Amend the manual’s existing secondary member groups for honorably discharged veterans to include both honorably discharged veterans and members of their immediate family or household.
• Strengthen the proposal’s addition of a fifth affinity group for paid employees of a legal entity headquartered in a federal credit union’s community or rural district by expanding it to also include remote students and remote worshippers.
• Further reform credit unions’ ability to add underserved areas to their FOMs and support legislative efforts to do so.
• Modify the proposed rule’s provisions related to community charter applications and conversions to make the standardized community charter request application available only as an option for prospective applicants and continue to have the option to submit a free-form narrative application.

Martone wrote, “Today, the archaic FOM 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.”

READ MORE: NCUA’s proposed changes to the FOM rules.