A proposal to ease “common bond” membership requirements for federal credit unions is part of a series of policy actions that have steadily expanded credit union membership beyond the limits intended by Congress, the American Bankers Association said today in a letter to the National Credit Union Administration.
NCUA has proposed a new “streamlined” charter system for federal credit unions with changes for determining whether a credit union’s membership shares a common bond, as required under federal law. Currently, associations primarily based on a client-customer relationship do not qualify for common bond status. The proposal would remove that automatic disqualification and instead allow for a “most holistic evaluation,” according to the agency.
In its letter, ABA said the proposed change is narrow in scope but part of a larger pattern of “incremental changes that, taken together, have steadily expanded federal credit union membership beyond the limits contemplated by Congress.” That cumulative effect has had “a meaningful weakening of the common bond framework.”
“Federal credit unions benefit from a distinct legal and tax status justified by their limited mission and bounded membership structure,” ABA said. “As those limitations are relaxed, the rationale for that differential treatment becomes increasingly difficult to sustain. Preserving statutory limits on credit union membership requires avoiding incremental rule changes that collectively expand membership beyond congressional intent.”
ABA recommended that, at a minimum, the NCUA adopt standards that “more precisely define when a client-customer relationship is incidental and when it is central to an organization’s purpose.”
