Banks Stuff The Mailbox On FOM Proposal

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In an attempt to sway NCUA board opinion, bankers submitted well over half the more than 480 comment letters collected by NCUA during the just-completed 60-day comment period on the proposal to ease field of membership (FOM) rules further.

In a move akin to stuffing the ballot box, more than 150 of the comments were identical form letters submitted by bank employees in Florida insisting that there "is no legal or economic justification for the public to subsidize credit union that are of the size of large banks and offer services that are indistinguishable from commercial financial institutions."

Though most of the letters had names but no letterhead, they were submitted electronically from email addresses such as,, and

The affects of the bankers' unprecedented attempt to influence NCUA policymaking remains to be seen as NCUA Chairman Dennis Dollar has insisted in the past that the rulemaking process is not a public referendum, even though the NCUA board has rarely approved measures that are opposed by a clear consensus of public commentaries, at least credit union commentaries.

Efforts to "stuff the ballot box" are nothing new at NCUA, where CUNA and the leagues regularly coach credit union executives on what phrases to include in their comment letters, often resulting in hundreds of identically worded letters being submitted. On more than one occasion NCUA has rejected these overtures, like the proposal to require a community action plan, or CAP, against which CUNA and NAFCU generated more than 1,000 letters. The CAP, since overturned, was passed anyway by the NCUA board.

The clear consensus of credit union commentaries was supportive of the NCUA proposals, which would create a new charter known as TIPs-representing tradewide, industrywide or professionwide common bonds; liberalize standards for community FOMs; establish ATMs as a standard for determining "reasonable proximity" to a potential select group; and eliminate, once and for all, traditional overlap protection from competing credit unions.

The credit union commentaries were almost unanimous in their support of the elimination of overlap protection.

"Limiting competition within the credit union world with overlap protection hinders growth and restricts consumer choices," wrote John McGrath, chairman of Chartway FCU, Virginia Beach, Va., in a letter representative of the consensus. "Additionally, overlap protection is competitively difficult for federal credit unions when state regulators permit overlaps."

A handful of credit union executives opposed the proposal to scrap the tradition limiting competition among credit unions. The elimination of overlap protection and the ability to establish ATMs for reasonable proximity's sake, suggested Muriel Blake, president of $80-million Southern Utah FCU, St. George, Utah, "will effectively allow large credit unions to locate wherever they want to, regardless of current available credit union services in a given area. If the long-term goal of the NCUA is to speed the decline of the number of credit unions in the United States, this proposal should be quite effective."

The TIPs proposal, which has been germinating within the credit union movement for decades, also proved popular. "As a representative of a single-sponsor credit union, I am in favor of occupational credit unions having a single common bond based on industry, trade or profession," wrote Rick Foley, executive vice president of Delta Employees CU, Atlanta. "In fact, I believe this change would actually strengthen the concept of the 'common bond.'"

The proposal to allow credit unions to use ATMs as a standard for establishing reasonable proximity to a select group was also popular among commentaries. The original rule, embedded in HR 1151, the CU Membership Access Act, required that a credit union establish reasonable proximity to a physical branch before adding a select group to its FOM. But considering the rapid spread of technology, NCUA proposed expanding that to include an ATM. The proposal, wrote Wayne Gross, executive vice president of Bethpage FCU, Bethpage, N.Y., "will allow credit unions to reinvest that capital into their business and better serve their members."

"Federal credit unions," wrote Becky McCrary, of South Carolina Telco FCU, "should be allowed to bring in new members based on its wholly owned ATM. In rural SC, we rely upon ATMs to be a local connection with our members."

David Styler, president of Lockheed FCU, Burbank, Calif., wanted NCUA to expand the proposal from allowing wholly owned ATMs to qualify, to include branded ATMs.

Martin Breland, president of Tower FCU, Laurel, Md., wanted NCUA to go even further. "Given the availability of personal computers and Internet access, and the increasing willingness of consumers to conduct financial transactions online, the NCUA should consider the merits and statutory limitations of eliminating service area (reasonable proximity) restrictions entirely. Ideally, consumers should define what is convenient for them," he wrote.

One of the few opposed to the proposal was Gary Base, chairman of the Texas CU Commission and president of Community CU, Plano, Texas. "I do not consider an ATM a full-service facility," wrote Base. "If a credit union wants to expand its FOM, it should provide full-service facilities."

Credit union comment letters were also in favor of the proposals to ease the standards for establishing a geographical area as a 'well defined' community for developing it as an FOM. Styler of Lockheed FCU, noted that, as in NCUA's proposal, cities, counties and Metropolitan Statistical Areas are generally accepted as communities, rather than limits on population size. "Geographic and political descriptions and parameters provide a better definition of community," he wrote.

Several CU executives proposed further reforms to NCUA FOM rules. One executive suggested NCUA allow federal CUs to operate under dual charters, enabling them to be community-based in one state and multiple-group- based in another state of operations. Another executive urged NCUA to expand SEG allowances to permit them to serve not only employees of certain groups, like public service providers, but also those people served by those groups. Several commenters asked NCUA to scrap the requirement that they forfeit their select groups when converting to a community charter.

The NCUA board is expected to approve a proposal similar to the one issued for comment some time this spring.

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