ROYAL OAK, Mich. — Is NCUA's proposed rule regarding associational common bonds a reaction to banker arguments that some CUs make it too easy for consumers to join?
Several analysts who spoke with Credit Union Journal see it that way, along with others who say the rule could stop abuses of associational relationships that are in place only to add members.
NCUA's proposal to amend the agency's chartering and field of membership rules is drawing a
1. Bankers Claim Common Bond Violations
With bankers vocal about alleged CU common bond violations — forming associations for the primary purpose of expanding FCU membership — analysts have asserted NCUA's new FOM rule may be a response to the banker attention.
"In today's environment, where 'about us' sections on CU websites are readily available, as well as online advertising, banker groups can easily see how the credit union is portraying itself," said Steven Van Beek, attorney at Howard & Howard.
"Things are more transparent now than 10 years ago," continued Van Beek. "Banker groups can track this easier, write letters to NCUA and say, 'Here is an example of a credit union being very open about its field of membership.' It puts pressure on NCUA to look at this issue."
Credit union executives, apparently, prefer to keep a low profile in talking publicly about the FOM proposal, sources indicated. Van Beek expects that some credit unions will hesitate to discuss their specific situations.
"They don't want NCUA to focus on this subject during the review process," proposed Van Beek. "NCUA has said it will be increasing its review of associational groups. Credit unions don't want to put themselves out there and bring about a full review of their associational groups."
2. New Rule Can't Remove Existing Associations
Carrie Hunt, NAFCU SVP of government affairs and general counsel, pointed out that NCUA has had rules on its books for years about associational common bonds and has approved associations within federal CUs' FOMs.
Hunt said NAFCU would be very concerned if the new rule eliminated some approved associations.
"If suddenly groups that were approved were deemed not to be permissible, NAFCU certainly would have some strong questions," said Hunt.
Hunt continued that NAFCU will look closely at all aspects of the proposed rule. "As you know, we at NAFCU are always concerned when NCUA puts up regulatory roadblocks for credit unions to do business with their members, and we will do whatever we can to fix that when it happens."
3. A Good Rule
While industry insiders have stated that the proposal could slow indirect lending by removing associations lenders rely on to sign new members at the dealership, the largest CU indirect lender in the nation does not see any problems with the rule.
"For the most part what NCUA is doing is just codifying what the practice has been (with associational common bonds) in recent years," said John Worthington, EVP at Security Service FCU in San Antonio. "It just wants to make sure the associations within credit unions' fields of membership are legitimate."
Worthington perceives the rule, if it goes through as currently written, will not slow his CU's indirect lending. Security Service, an $8 billion shop, is a multi-SEG CU and falls under the proposed rule's purview. State and community chartered CUs are exempt from the rule.
"At this time we don't see a direct impact on our indirect lending operations," said Worthington.
