Credit unions in New York are hailing a regulatory win this week.
On Wednesday, the state’s Department of Financial Services issued an order under which state-chartered credit unions with student branches will be allowed to retain their student membership after the students are no longer enrolled at the school in which a branch is located.
Also, under terms of the order, DFS will permit student branches to allow faculty and staff of the school where the branch is located to become members of the student branch of the credit union as well.
The order falls under the aegis of the New York State Banking Law.
DFS explained the new action is part of its “continuing efforts” to support New York State-chartered institutions, including credit unions, and “ensure they are on equal footing” with their federally chartered counterparts.
“Student branches of credit unions provide important services and information such as financial literacy and personal financial management and training that benefit students well into their futures,” DFS Superintendent Maria T. Vullo said in a statement. “By authorizing these branches to continue to serve members after they are no longer enrolled in school and to have faculty and staff as members, DFS is encouraging them to continue to have a positive impact on their members’ financial well-being.”
New York currently has 16 state-chartered credit unions.
William J. Mellin, president and CEO at New York Credit Union Association, said “we strongly support this reasonable decision by the Department of Financial Services to create parity between New York-chartered and federally chartered credit unions.”
Student banking, Mellin added, “helps both students and faculty develop sound financial habits, and it is totally in line with the credit union mission and philosophy… The previous rules were so onerous that state-chartered credit unions were essentially unable to facilitate a school banking program. This action by the DFS changes that.”
Moreover, praised Vullo and DFS for showing a “real willingness” to work with the state’s credit unions to address these kinds of disparities. “We commend her and the department for continually working to improve the state charter and making New York a more competitive place for credit unions to do business,” he added.
Good news, but…
Dennis Dollar, a credit union consultant in Alabama and a former chairman of National Credit Union Administration, said the dual chartering system is “furthered by parity actions at the state level such as this positive action in New York.” Dollar added that “any such action that enhances the value of the state credit union charter is a good thing deserving of commendation.”
However, Dollar noted that although the DFS action is positive from a parity point of view, it is still “not plowing any real new ground since the federal charter and almost all states have recognized ‘once-a-member-always-a-member’ for decades.”
Dollar said he is ”somewhat surprised” that the state never previously recognized the concept of “once-a-member-always-a-member” for student branches “when the whole concept behind them is to foster good financial education decisions that can benefit students after they graduate. If they have come to recognize that as an area needing attention, they are to be commended for doing so.”
Michael Mattone, VP of Public Relations for Municipal Credit Union, said although the New York City-based CU "does not currently operate any in-school branches, we think it is great that the New York State Department of Financial Services continues to enhance the viability of our state charter so that state-chartered credit unions in New York can better serve their members and community."