A National Credit Union Administration proposal governing shared credit union service facilities that had attracted vocal opposition from banker and consumer groups, not to mention the agency’s own chairman, has undergone a significant rewrite that left few on either side of the debate completely satisfied.
Banking advocates, who historically have been resistant to measures that might expand credit unions’ fields of membership, had argued the initial proposal in December would have watered down limits on membership-eligibility for a group of credit unions — those with multiple common bonds — that sought to expand into underserved areas.
The American Bankers Association and the Independent Community Bankers of America complained the plan violated a statutory requirement that an expansion-minded, multiple-common-bond credit union establish and maintain a physical presence in close proximity to any new area it planned to serve. The issue: It would have counted ATMs and online services as a sufficient presence in an area to sign up members.
Even a community activist group, the National Community Reinvestment Coalition, had joined banks in opposition to the plan earlier this week. They wrote in
In the face of that pressure, the three-member NCUA board on Thursday stripped out several key provisions. It eliminated the sections that would have let limited-service ATMs and mobile banking platforms count as service facilities in underserved areas.
As a result, NCUA Chairman Todd Harper, a Democrat, switched his vote from nay to yea, paving the way for unanimous adoption of the revised rule, which will take effect 30 days after publication in the Federal Register. Board members Rodney Hood and Kyle Hauptman, both Republicans, had previously expressed their support.
“My concerns about the legal underpinning of this final rule have been resolved by removing internet websites and mobile applications from being considered service facilities,” Harper said. “We will not allow a leased ATM that primarily distribute cash” to count either.
However, Harper may have been the only party who was satisfied with the outcome. Bankers continued to urge lawmakers to rein in credit unions, while leading trade groups for credit unions, along with Hood, said the final rule didn’t go far enough to empower credit unions to serve disadvantaged populations.
Bankers acknowledged Thursday that the changes the NCUA made in the final rule reflected edits they had suggested to limit its impact. But that didn’t stop them from describing the document as flawed and repeating calls for Congress to extend the Community Reinvestment Act requirements to credit unions and toughen oversight of them.
“We still have significant concerns about this rule and the more general pattern of NCUA actions to expand credit union field of membership at the expense of the low-income communities they were chartered to serve,” said Jeff Sigmund, a spokesman for the American Bankers Association.
“Although we appreciate that NCUA removed portions of the proposal that would have been the most egregious, today’s final rule continues the agency’s trend of enabling national, growth-oriented credit unions to the detriment of locally based financial institutions,” said Michael Emancipator, the ICBA’s vice president and regulatory counsel.
Thursday’s rule affects federally chartered multiple-common-bond credit unions, which are permitted under the Federal Credit Union Act to add underserved geographical areas to their fields of membership, so long as they establish a service facility there.
Under existing rules, shared facilities could be leveraged to meet the service requirement so long as the expanding credit union maintains an ownership interest in the facility or network of facilities it was using to expand, and the facility is able to accept deposits and loan applications and to disburse the proceeds of loans.
The initial proposal removed the ownership requirement. It also would have allowed limited-service facilities, such as ATMs, to count as service facilities, even if they didn’t accept loan applications or disburse loan proceeds. Finally, it asked stakeholders to comment on the possibility counting digital platforms as service facilities.
Ultimately, the final rule did do away with the ownership requirement, which proponents said prevented smaller credit unions that couldn’t afford to invest in a shared-service facility, from expanding. The other proposals, involving ATMs and mobile banking apps, were scratched.
A spokesperson for the National Association of Federally-Insured Credit Unions said the final rule “fell short” in providing the help credit unions needed.
“NAFCU is disappointed in the NCUA’s decision to exclude ATMs under the definition of a service facility in its rule,” said Ann Kossachev, the group’s vice president of regulatory affairs. “We also believe that it is critical for online and mobile banking platforms to be recognized as service facilities as technologies continue to evolve and consumer needs and demands change. A legislative change may be necessary to achieve this.”
Rodney Showmar, CEO of the $1.7 billion-asset Arkansas Federal Credit Union in Little Rock, also defended the stripped-out elements of the original proposal.
“A functioning website and online-banking platform should be considered a service facility, and all credit unions with such capabilities should be permitted to onboard a new member from anywhere,” Showmar said.
"In some parts of America, what was considered close proximity in the 1930s was how far you could travel on your horse and be back in time for dinner. Things have changed,” Showmar added.
While Hood said the elimination of the ownership requirement amounted to a “win” for smaller credit unions, he added that he “would have preferred” a broader definition of service facility, encompassing digital applications.
“I do wish we were going further to consider other technological advances in what constitutes a service facility,” Hood said. "We should be considering that many credit union member owners consider mobile apps to be their respective credit union. … I hope at some point in the future we can do more.”
