As NCUA re-examines its own field of membership rules in search of opportunities to make it easier for credit unions to grow, it's not just looking inward. The regulator is also looking toward the 45 states that have CU-enabling statutes of their own.
Looking at what the states allow could be pretty eye-opening, according to NCUA Vice Chairman Rick Metsger, who has been spearheading the effort to update the agency's FOM rules.
"Unlike about two-thirds of the state credit union charters, the federal charter does not allow credit unions to mix occupational fields of membership with community-based fields of membership, just as one example," Metsger told Credit Union Journal. "NCUA can look at the states and see what has worked there, look at what the experience has been there and apply those lessons learned at the federal level. We can look at states that have approved a statewide charter, for example, and see for ourselves that the world did not come to an end."
And it's high time for NCUA to revamp FOM, according to Metsger.
"A lot of things have transpired since the Credit Union Membership Access Act was passed 17 years ago and NCUA promulgated its field of membership rules," he said. "Online banking was in its infancy, things like electronic payments and mobile banking didn't exist. Our rules are defined by the world as it was in 1998. It's time for us to look at how that world has changed and allow that to inform our decisions."
There are a lot of lessons the federal regulator can learn from the states, Metsger noted.
"Take Texas, for example. They have agricultural districts in Texas. If that is an accepted definition of a rural community in Texas, why can't NCUA accept that as a rural community?"
Changes CUs Want
The agency established a work group on FOM and has been receiving input from across the nation. Here are some the key changes that credit unions want:
- Redefine "reasonable proximity" in the requirement that a CU have a branch and/or ATM within "reasonable proximity" of a community or group it seeks to serve. "I belong to a credit union Portland, Ore.," said Metsger, who moved to Washington to take his post at NCUA. "I haven't been back to a branch in Portland for several years, but I can go the shared service branch at the State Department right around the corner. We need to take shared branching into consideration."
- Redefine "well-defined local community." Of course, many credit unions would like to see the word "local" removed that phrase, but as that is mandated by law, it would take an act of Congress to do that. But that doesn't mean NCUA can't expand on this definition. "We could look at allowing larger geographical area, combining [Metropolitan Statistical Areas (MSAs)], use congressional districts or other political districts," Metsger suggested. "Baltimore and Washington are two different MSAs, but anyone who lives in or between those two cities can tell you they are very closely tied together. We could look at removing the requirement that the core area' of an MSA is served. Here's the thing about that, the core area is usually already well served or even over-served, because that's where the money is. Everyone — including the banks — wants to serve the core area. It's the when you get outside of the core area that you find the underserved areas, and isn't that where we want credit unions to go? We could allow a community charter to expand into contiguous counties."
- Ease restrictions on combining community and SEG-based FOMs. "We should allow a state charter that is converting to a federal community charter to not only keep their existing fields of membership," he said, explaining that the current rule allows such a CU to keep its existing members, but they cannot continue to add new members from their SEGs. "Why would we specifically take away someone's ability to join a credit union that they previously would have been allowed to join?"
- Allow multi-SEG credit unions to include contract workers. "The Library of Congress, like a lot of other employers, uses a lot of long-term contract workers. Some of these contract workers have been with the Library of Congress for decades, but they can't join the Library of Congress FCU," Metsger noted. "This is incredible to me. And we are in a time when more and more employers are relying on contract workers. Heck, even at NCUA, a lot of our technical support is provided by contract workers, but if NCUA had a credit union — which, of course, we don't — but if we did, none of those workers would be able to join it."
- Expand definitions of rural and underserved areas.
Metsger has long said that though there are a number of things NCUA is doing that have generated more talk than its efforts related to FOM, FOM may well be the single biggest, positive thing the agency can do to help credit unions grow.
And he's not the only CU community insider who hopes people still take notice.
"We are hoping NCUA's work on field of membership gets a lot of attention," said NASCUS CEO Lucy Ito. "This is something that is important on both the federal and the state side. We are big believers in the power of the dual chartering system and the way both sides can work off of one another to advance credit unions. I'm also hoping that NCUA's efforts could prompt states to look at their own rules, as well."
Interstate Branching Issues
While the vast majority of states have far more generous FOM rules than the federal charter, there is one area where state charters sometimes lag, Ito said: interstate branching.
Earlier this year, nine states agreed to sign an interstate branching agreement — Idaho, Indiana, Kentucky, Michigan, Ohio, Oregon, Washington, West Virginia and Wisconsin. That follows a previous agreement signed in 2009 among seven states: Alabama, Florida, Georgia, Mississippi, Missouri, North Carolina and Tennessee.
Ito said NASCUS has helped put NCUA in touch with a variety of state regulators who could share what they experienced when updating their FOM rules. "We also invited Vice Chairman Metsger to speak on field of membership at NASCUS summit, where he'll also moderate a panel," she added. "Field of membership is such an important topic, and we fully support and applaud NCUA's efforts."
NAFCU and CUNA have also weighed in, sharing recommendations culled from their respective member credit unions.
"We put together a task force of 50 NAFCU members to work on this," said Alicia Nealon, director of regulatory affairs at NAFCU. "Overall, what our members are looking for is more efficiency, timeliness and transparency in the process."
CUNA said its members shared similar concerns. "Field of membership is really complex. Our members want to see it simplified," said Lance Noggle senior director of advocacy and counsel at the trade group.
NCUA staff has been tasked with looking at all of the suggestions being offered and putting them into three categories: changes the agency can handle administratively or procedurally (such as issuing an interpretative ruling statement that doesn't require formal rulemaking); changes that will require using the formal rulemaking process; and changes that will require congressional action.
While some of the biggest FOM hurdles are, in fact, mandated by law — such as requiring investigation into any application for a SEG with more than 3,000 potential members and the inclusion of the word "local" in a "well-defined local community" — even some of these things could possibly be handled or interpreted differently.
How quickly might credit unions see real action on this?
"I want to move as quickly as is practicable," Metsger said. "My hope is to have the things that we can handle administratively ready to go by the end of this year and to have proposals to the board for the things requiring the formal rulemaking process by the end of the year, as well."
As for the things that require an act of Congress, Metsger said he would encourage his fellow board members to consider reporting to lawmakers about NCUA's efforts on field of membership, which would be something the chairman would do.
"But first we have to be able to show Congress that we have done everything we can before we ask Congress to step up to the plate," he said. "We have to get our own house in order first."