NCUA Finalizes FOM Rule, Proposes Additional Expansions

The National Credit Union Administration board voted today to finalize a controversial rule further expanding the already loose fields of membership from which federal credit unions can draw their customers, and proposed a new rule that would remove some of the few remaining FOM restraints. ABA is closely examining the final rule and considering legal action to block its implementation.

Under the final rule, FCUs can apply to serve entire geographic regions, so-called “rural districts” up to 1 million people (which include the entirety of Alaska, North Dakota, South Dakota, Vermont and Wyoming), and areas contiguous to their existing service areas. NCUA is also facilitating easier conversions to community charters.

After much vocal opposition from ABA and bankers across the industry, NCUA struck from the final rule a provision to allow FCUs to apply to serve entire congressional districts, including at-large districts encompassing entire states, as well as others that would leverage online and mobile banking platforms to allow FCUs to expand their field of membership even without physical proximity.

In the separate proposed rule, NCUA moved to increase the population limits on areas served by FCUs with community charters from 2.5 million to 10 million. In addition, FCUs applying for a community charter would be able to submit a narrative and supporting documentation to demonstrate that a community it proposes to serve qualifies as a “well-defined local community” based on a wide range of criteria. In cases where a statistical area is subdivided into metropolitan divisions, FCUs would be permitted under the rule to designate a portion of the area as its community without regard to division boundaries.

Today’s actions are the latest by NCUA to end-run statutory limits on CUs, said ABA President and CEO Rob Nichols, noting a rule NCUA finalized last spring that substantially loosens the cap on business lending by CUs. “We’re deeply concerned about NCUA’s decision to go beyond its statutory authority to move credit unions even further away from the common bonds that define their missions,” Nichols said. “By passing today’s field of membership rule, NCUA ignores two congressionally mandated limits on credit union membership — ‘well-defined’ and ‘local’ — in a move that would dramatically expand the scope of the credit union tax subsidy.”