WASHINGTON (6/16/15)--CUNA is seeking changes to field-of-membership (FOM) rules that the National Credit Union Administration could address if it is prepared to take an innovative approach to the agency’s current statutory authority.

The changes could go far to modernize the agency’s current rules and would reflect how modern Americans live, work and play and define their common interests, said CUNA.

“NCUA should not allow the past to become a barrier or an excuse [not] to more aggressively pursue FOM expansion. Boldness will reward credit unions with new opportunities to expand services to new areas and ensure that the federal charter remains strong,” said CUNA in a letter to the NCUA. “There are no safety and soundness concerns from innovating on these requirements, only the fear of criticism from competitors who would be happy to see credit unions fail in any case.”

NCUA Chair Debbie Matz has said it is on her 2015 regulatory relief agenda to look at making it easier for credit unions to alter fields of membership. NCUA Vice Chair Rick Metsger has urged credit unions to engage in the discussion.

CUNA’s recommendations take three approaches: proposals within NCUA’s immediate authority to implement, proposals allowable under current statutes that would require a change to current rules, and changes that would require congressional action.

CUNA’s proposals within NCUA’s immediate authority to simplify the FOM process include asking the agency to:

• Establish deadlines immediately for staff in approving charter requests, including conversions, expansions and merger requests;
• Improve the merger process by allowing a credit union merging with another with a different field of membership to retain both FOMs; and
• Update NCUA’s Chartering and FOM Manual for federal credit unions, which is several years out of date.

Several proposals would require rule changes, but would be allowed under the Federal Credit Union (FCU) Act. CUNA noted that NCUA should address these issues:

• Increase the population cap on local community size to 10 million from the current 2.5 million to allow the largest city to be included as a local community while still excluding the outer reaches of the largest metropolitan statistical areas (MSA).

• Eliminate the requirement that a Core Based Statistical Area (CBSA) contain a “core.” “Credit unions serve a variety of different communities and they do not necessarily contain a core area even though they do encompass a cohesive community and social and economic area,” said CUNA. Eliminating a core requirement would “provide greater flexibility in serving areas spanning beyond a single county that have not previously been designated as local or do not meet the requirements for being rural districts.” CUNA also noted, “NCUA’s current ‘well-defined local community’ to consider only MSAs and CBSAs is overly restrictive,” and it suggested including a narrative approach in the regulation so credit unions have an opportunity to explain why they are combining.

• Expand the FOM from those who live in, worship in, attend school in or work in a community to include those who work for a company located within a credit union’s community. CUNA noted this could be a replacement for the select employer group (SEG) designation.

• Simply the definition of “rural district” by amending it to a community that is “not urban”--an approach used by the U.S. Census Bureau. An alternative could be to increase or eliminate rural population limits, said CUNA.

• Consider an area as a community if it is a single congressional district. A congressional district inherently defines a community with shared interests.

• Allow a narrative approach for credit unions that don’t fit any of the criteria listed but do have a compelling reason that an expanded FOM is within its community. This is different than the narrative approach mentioned in the second proposal. “It should be allowed when all other methods to define ‘community’ fail,” said CUNA.

CUNA also proposed two changes related to a common bond and multiple occupational/associational common bond:

• Expand trade, industry and professional (TIP) to include groups closely aligned with the profession; and

• Allow any SEG under 3,000 members to be automatically added since the process is pro forma to make FCU Act requirements less burdensome.

Two changes relate to charter conversions:

• Federal credit unions converting to a community charter should not fear losing their previously approved SEGs, said CUNA; and

• Credit unions converting to a federal charter from a state charter should be able to keep their FOM and add to it.

For low-income credit unions (LICUs), CUNA supports expanding the definition of LICU to allow more than one way to meet the LICU certification. The change would allow credit unions to self-designate as low income and make community development financial institutions (CDFI) automatically considered as LICUs.

CUNA also outlined proposals likely requiring congressional action:

• Allow all federal credit unions to add underserved areas to their FOM. Currently, only multiple common bond credit unions can add underserved communities; and

• Enable federal credit unions to serve underserved areas without requiring these areas be communities.

CUNA suggested greater flexibility in or eliminating facilities requirements for credit unions serving underserved areas. NCUA could provide a national standard ratio of depository institutions per person as an optional benchmark for determining an underserved area or provide alternative methods to evaluate whether an area is underserved. Credit unions are unable to add underserved areas to their FOM because of the facilities requirement. NCUA requires them to establish an office or facility in the underserved community within two years.

CUNA’s comments are in response to NCUA’s request for comments about FOM changes.