Bankers: Defeat Legislation to Change Field of Membership Rules

State bankers associations have pushed back against a proposed expanded definition of underserved areas for credit union field of membership. Learn why.

David Baumann


Apr 12



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David Baumann

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David Baumann

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State banker associations argue against expanded definition of underserved areas.

Legislation that would allow credit unions to expand their field of membership (FOM) into underserved areas is unnecessary and would create a major loophole for those institutions to increase their business lending, a group of state bankers associations has told the House Financial Services Committee.

“Community credit unions can already serve underserved areas if they identify a local need and choose to do so,” the associations said in a joint letter.

What is the Proposed Change to Underserved Areas?

House Financial Services Committee Chairwoman Rep. Maxine Waters, D-Calif., last month introduced legislation that would expand the definition of an underserved area to include any area that is more than ten miles from the nearest branch of a financial institution. In addition, the measure, H.R. 7003, would exempt all business loans made by credit unions in underserved areas from the credit union member business lending cap.

Why are Bankers Associations Pushing Back?

The bankers told the committee that while only well-defined local communities can be the basis of a community credit union’s membership, there are still ways for a credit union to add multi-state areas to their membership and count that as a local community. As a result, they said, the legislation is not needed.

H.R. 7003 would allow credit unions to expand out of market, “a reality that the credit union lobby has attempted to obfuscate in this debate,” the bankers wrote. “Congress should not help facilitate tax-exempt regional or national banks.”

The bankers added further that the credit union member business lending cap helps ensure institutions focus on consumer lending rather than business lending. They noted the legislation ignores the need to subject credit unions to the accountability that the Community Reinvestment Act (CRA) provides for banks.

“One of the primary reasons credit unions are excluded from CRA is because of field of membership requirements—credit unions are supposed to only serve those eligible to join, and not the general public,” they stated.

The Larger Fight Over Field of Membership Regulations

The bankers additionally claimed the trend of credit unions purchasing banks demonstrates that field of membership rules now have little meaning.

“These transactions simply would not occur were there a question whether acquired customers could get in the front door,” they wrote. “If credit unions and banks can compete for customers in exactly the same way because, literally, anyone can join a credit union, comparable regulatory requirements that provide accountability as to whether the credit union is serving all types of customers are appropriate.”

The bankers also contend credit unions are targeting wealthy communities and serving wealthy consumers.


To learn more about underserved areas and how they could impact your credit union, visit our field of membership page or connect with us directly through our FOM consulting services.

Field of Membership Expansion

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