NCUA Finalizes New Round of Loosened Credit Union Membership Limits

Just months after receiving a legal rebuke for its efforts to loosen field-of-membership limitations on federal credit unions, the National Credit Union Administration today issued a final rule that makes it easier for credit unions to evade these limits. Specifically, the final rule allows FCUs to use a “narrative” to apply for expansion of a community charter rather than relying on statistical benchmarks.

“The fact that the NCUA today chose to allow tax-exempt credit unions to make up what constitutes a ‘well defined local community’ is disappointing, but given previous decisions, not terribly surprising,” said American Bankers Association President and CEO Rob Nichols. “The reality is the rule approved today effectively allows large credit unions to operate with no membership limitations at all, well beyond Congress’ original intent.”

While NCUA did add a requirement for a public hearing when FCUs apply to include a statistical area larger than 2.5 million people in its field of membership, NCUA imposed strict limits on who may participate: only up to six entities may apply in writing within 10 days to oppose the expansion, and each will be limited to a 30-minute presentation. A seventh entity may be permitted to make a presentation, but only at the discretion of NCUA staff.

The final rule was issued after a federal district judge in March invalidated two elements of NCUA’s previous field of membership rule. In a lawsuit brought by ABA, the judge vacated the inclusion of combined statistical areas with fewer than 2.5 million people and the dramatic expansion of a “rural area” to include areas with up to 1 million people. NCUA cited the judge’s ruling in its decision not to finalize its proposal to increase the population limit on a well-defined local community from 2.5 million to 10 million.

Even so, “NCUA’s action only adds to legitimate questions the courts and lawmakers have raised about this regulator and the unbridled growth of large, tax-exempt credit unions,” Nichols added. “No one will be hurt by this expansion more than taxpayers and small credit unions actually fulfilling their mission. ABA will consider all of its options as we carefully review this latest, misguided action by NCUA.”