Community Bankers: NCUA FOM Plan Would Harm Small Credit Unions

The ICBA is worried a proposed NCUA field of membership expansion rule may harm smaller institutions and lead to 'super-regional credit unions.' Learn why.

David Baumann


Jun 1



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David Baumann

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David Baumann

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ICBA worried new rule would lead to “super-regional credit unions."

An NCUA proposal designed to streamline field of membership expansion applications actually would allow large credit unions to expand at the expense of smaller institutions, the Independent Community Bankers of America said this week.

“ICBA is concerned that, if finalized, these changes will further enable growth-obsessed, national credit unions to either acquire credit unions in rural markets, or leverage their size to the detriment of existing credit unions and locally-based financial institutions in those markets,” Michael Emancipator, the banking trade group’s vice president and regulatory counsel wrote, in commenting on the NCUA proposal.

Credit union trade groups, on the other hand, generally were more supportive of much of the proposal, although NAFCU said the agency could improve the process even more.

Backstory and Context

In February, the NCUA approved a proposed rule intended to simplify application requirements for community-based federal credit unions by providing a standard form for both business and marketing plans. The rule also would expand community-based FOM affinities—relationships between a person and the geographic area—in an effort to recognize the growth of telecommuting and remote work for companies headquartered within a community.

Additionally, the rule also would amend the agency’s FOM manual to cross-reference the CDFI Fund’s economic distress criteria. The change states that the NCUA will defer to the CDFI on such measures, given the fund may soon be updating them.

Comments on the proposed rule were due Tuesday.

ICBA Concerned About ‘Super-Regional Credit Unions’

Emancipator said his trade group is most concerned about the proposed removal of restrictions on multiple common bond credit unions expanding their fields of membership through the addition of underserved areas. The current rule has several restrictions, he noted, adding that one of them prohibits an FOM boundary to exceed the outer borders of states that are immediately contiguous to the state in which the credit union maintains its headquarters.

The NCUA board, he said, is proposing to remove this restriction, thereby allowing multiple common bond credit unions to add underserved areas in rural districts without regard to location.

“ICBA believes that permitting multiple common bond credit unions to add underserved areas that include rural districts will usher in a new wave of super-regional credit unions, whose geographic footprint will cover thousands of miles,” Emancipator wrote. “Not only would this new breed of credit unions be able to serve millions of consumers across the country through their affiliation with existing affinity groups, but they will be able to add members across the country based in rural areas.”

NAFCU’s Views

Among other suggestions, NAFCU said the NCUA should expand its fifth community charter affinity group even more to allow community credit unions to serve people who remotely attend school and religious services provided by legal entities within their respective field of membership.

In his letter, NAFCU Regulatory Affairs Counsel Dale Baker wrote that the trade group generally supports the NCUA’s proposal to eliminate prescriptive business and marketing plan requirements for community charter applications. He added, however, that NAFCU does not support the NCUA’s proposal to make a new standardized community charter request application mandatory.

“The standardized application may not be appropriate for all applicants, and applicants should continue to have the option to submit a free-form narrative application to the NCUA if that is in their best interests,” he wrote.

CUNA’s Perspective

CUNA’s member credit unions are concerned that the federal charter is falling behind many state charters and has become “a barrier to the flexibility needed to operate dynamic and efficient cooperative financial institutions,” Luke Martone, the trade group’s senior director of advocacy and counsel, wrote, in commenting on the proposed rule.

Martone added that CUNA supports the agency’s proposal to replace the business and marketing plan required for community-based state-chartered credit unions that wish to convert to a federal charter with three questions.

“The NCUA believes the proposed removal of the business and marketing plan requirement for FISCU [Federally Insured State-Chartered Credit Union] conversions will not hinder the agency’s ability to assess the applicant’s economic advisability and its capacity to provide services to low- and moderate-income members,” he wrote. “The proposed changes will reduce the time involved for both the credit union and NCUA staff.”

Martone noted further that CUNA supports the NCUA’s effort to remove limits on credit unions serving a community that has employers with staff located outside the community. 

Additionally, he said CUNA also supports using the CDFI Fund’s economic distress criteria.

However, he expressed reservations about the NCUA’s plan to use a fillable, standardized application form for all community charter actions. “While it may be appropriate for the fillable application to be mandatory at some point, we believe it makes most sense initially to allow credit unions to use the form on a voluntary basis,” Martone stated.


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