Jim Nussle

Eliminating FOM would be major step toward financial inclusion

June 30, 2020

Monday’s Supreme Court decision was a win for consumers and the credit union movement, CUNA President/CEO Jim Nussle wrote in Credit Union Journal this week. And while it allows credit unions to expand access to safe and affordable services, it also raises questions about the future of fields of membership.

“As a concept, field of membership is nearly as old as the credit union mission and structure, but it’s never been a part of either,” Nussle wrote, noting the difference between the membership access tool and the factors at the core of the credit union tax status. “Instead, it was established as a credit-worthiness tool at a time when modern and sophisticated tools like credit reports and credit scores did not exist. When all the members of a credit union worked together or lived in the same neighborhood, members had more confidence lending to each other because they knew each other.”

“But today, more than 85 years after enactment of the Federal Credit Union Act, lenders have a host of modern creditworthiness tools at their disposal. Field of membership has gone the way of the horse and buggy when it comes to assessing whether a borrower has the wherewithal to pay his or her debt,” he added.

Nussle says now is the time to make it easier for credit unions to reach all consumers, allowing them to expand into more underserved communities and banking deserts.

“Twenty years into the 21st century, it simply is not necessary for the law to require someone seeking credit union services to prove that they meet arbitrary qualification standards to join,” he wrote. “Credit union field of membership restrictions are exclusionary, and eliminating them would be a major step toward promoting financial inclusion and financial well-being while also enhancing credit union safety and soundness.”

The worldwide pandemic has set the world’s economy back, meaning credit union members and small businesses need credit unions more than ever, Nussle writes, and “The court’s decision is a step in the right direction, and now Congress should open the doors of credit unions to all who seek their services.”