If the National Credit Union Administration is worried about litigation from the Independent Community Bankers of America in response to its new field of membership rule, it is not showing.
At a recent panel discussion at the California and Nevada Credit Union Leagues' Annual Meeting and Convention in Las Vegas, a trio of representatives from NCUA offered an update on several recent initiatives. Because the ICBA filed suit against the credit union regulator in September over its new member business lending rule — and has threatened another suit pertaining to NCUA's new field of membership rule — the session drew a large crowd of credit union executives and directors.
Michael Radway, chief of staff to NCUA Chairman Rick Metsger, said the motivation for the new FOM rule was not to help credit unions — "although we are happy it will have a beneficial impact," he said — but to help American consumers.
"We wanted to make it easier for people to affiliate with a credit union of their choice," he told the audience.
NCUA's Region V Director Cherie Freed also took part in the panel.
Outlining FOM Expansion
The week prior to the CCUL/NCUL Meeting, the NCUA board finalized one new field of membership rule and proposed a second FOM rule. Why? Technical and legal reasons, Radway explained, noting the regulator is required to give stakeholders the opportunity to comment on rules.
"There are about a dozen changes to the rules," Radway said. "For affinity charters, the agency has simplified rules regarding a presumptive community. This includes using Metropolitan Statistical Areas."
When the NCUA board established presumptive communities, it used 2.5 million people as a cap, which Radway noted left out many large communities. The regulator changed the rule to serve up to 2.5 million in an MSA.
"There also was a rule requiring serving the core of an MSA, which hampered many small credit unions that do not want to serve an entire MSA," he said. "These changes were designed for credit unions to define service for themselves, rather than having the government define it for them."
Another change involved adding an adjacent area to a natural community. Credit unions now can apply to add such areas, said Radway. "In rural districts, community charters formerly were limited by 3% population percentage. This was changed to 1 million people, which we think will give a lot more flexibility."
Another important change is independent contractors who work for companies in an affinity group can be added as members. "This recognizes the changing American workforce," said Radway.
"We made it easier for credit unions to add an entire industrial park, office building or shopping mall, and add all the people in those settings. This came with a limit of 2,000 people in a SEG without a review from NCUA to determine if those people could form their own credit union."
As for the FOM rule, Radway said there are two primary changes: One, the population cap increased to 10 million from 2.5 million; secondly, the regulator took the adjacent area rule and gave CUs the ability to define an area as a community.
When asked about threats of suits over FOM and MBL, Metsger replied, "We do not issue regs we do not feel comfortable with from a legal standpoint, including field of membership and member business lending. Not only are we within our authority, we are within our responsibility."
Added Radway: "If we didn't do something because someone threatened to sue, we pretty much wouldn't do anything."
