If NCUA's risk-based capital proposal is a bitter pill to swallow, credit unions can at least be thankful for the spoonful of sugar the agency is currently working on: revamping the field of membership rules.
As Vice Chairman Rick Metsger has pointed out on a number of occasions, the FOM rules were promulgated 17 years ago. In the land of legislation, that's actually not all that long ago — look at some of the so-called "blue laws" that are still on the books that prohibit (among other things) playing cards on Sundays, and most of those were written more than 100 years ago. The difference, of course, is that many of those laws aren't still being enforced.
But FOM sure is. Metsger has said he wanted to spearhead the agency's effort to update FOM because so much has changed in the last 17 years. These rules were established before a member could deposit a check using her smartphone, before a member could apply for a loan online. Just the leaps and bounds that technology has made in the last 17 years, alone, are reason enough that NCUA should be reexamining its FOM rules.
But here's another reason: NCUA has come a long way, too, baby.
When the agency promulgated those rules, in response to the Credit Union Membership Access Act (aka: HR 1151), think of all it had been through getting to that point: a number of court battles that eventually led to final showdown at the Supreme Court. Credit unions often think of themselves as the target of that lawsuit —a nd, of course, they were — but the suit was actually filed against NCUA. Though AT&T Family FCU (now Truliant FCU) was named in the case, NCUA was the one being sued, and it was the regulator that lost. Then there was the frantic effort by the credit union lobby to get HR 1151 passed, in which many a compromise was called for, with the shadow of that Supreme Court ruling looming over it.
Having been referred to as a "rogue federal agency" by a federal judge, having lost in Supreme Court, having seen what the bankers were able to cram down CUs' throats in the bid to pass HR 1151, could anyone blame NCUA for being a tad conservative when the time came to draft the new field of membership rules?
I'm guessing I'd be a little paranoid, too, after all that. I'm also guessing I might not have been in too big of a hurry to be seen as overstepping again. And so, the regulators definitely erred on the side of caution.
This isn't just about a brave new world of technology. It's a brave new world of regulation.
But some things, of course, never change. No sooner did CUNA publish its letter to NCUA about changes its member credit unions would like to see made to the FOM rule than the American Bankers Association responded.
"We're profoundly disappointed that the credit union lobby is once again asking their federal regulator to play games with credit union membership limits to expand their scope far beyond what Congress ever intended," ABA President Frank Keating wrote. "For years, tax-dodging credit unions have been granted extensive authority by their regulator, leveraging their taxpayer subsidy to grow aggressively while resorting to gimmicks to evade existing membership restrictions. These new actions, if taken, would be yet another abuse of both the letter and spirit of the law.
"We must remember that as the credit union industry seeks to expand, it does so at the expense of all taxpayers. [CUNA's] attempts to expand the membership limits — by increasing the population cap on local community size for community charters 400% to 10 million and by allowing a credit union to consider any area a community if it is a single congressional district, just to name a few — would harm both community banks and the taxpayers they serve. Congress should be very concerned, and NCUA should quickly and strongly reject this attempted power grab."
A couple of things about this fascinate me. One is that apparently ABA wasn't aware of the fact that updating FOM wasn't CUNA's idea — it was NCUA's. That's not to say both NAFCU and CUNA weren't thrilled that the agency had decided to revisit FOM. The other is that it might be awkward for a member of the House of Representatives to argue that his or her congressional district is not a valid community.
Let the games begin.
Editor in Chief Lisa Freeman can be reached at email@example.com.