My position on the Field of Membership (FOM) rule proposed on Nov. 19 by the NCUA Board was misstated in the Credit Union Journal article, "NCUA Unveils FOM Proposal, Addresses Budget in Fiery Exchange."
The Federal Credit Union Act (FCUA) provides that a credit union may qualify as a "community credit union" if it serves a "well-defined local community, neighborhood, or rural district." See section 1759(b)(3) of the FCUA. The NCUA issued regulations that interpret "well-defined local community" in terms of statistical areas (e.g., Core Based Statistical Areas), subject to population caps. Congress required none of this, but the NCUA under its regulatory authority invented these cumbersome, arbitrary tests out of whole cloth. My point, quoted in your article, simply suggests that we go back to what Congress gave us – a four word concept – and allow credit unions to plead their case for the existence of a "well-defined local community" in accordance with "a plain language reading of that phrase" (third paragraph of my Board statement). This suggestion is strongly qualified by the last two paragraphs of my Board statement (quoted below) that any and all changes to the FOM rules must comply with the FCUA and that (to enhance the transparency of the regulatory process) the NCUA should publish its legal analysis in the Federal Register.
You article is misleading by stating that "Board member J. Mark McWatters suggested that the field-of-membership rules would remain overly restrictive even if all the proposed changes were implemented," quoting the suggestion from my Board statement noted above, but then failing to reference the last two paragraphs of my Board statement where I unequivocally note the primacy of the FCUA over the NCUA's regulatory authority. In other words, while you quoted a paragraph of my statement, you quoted me out of context and didn't tell the entire story. The broader implication of your article is that the NCUA Board is acting as a "cheerleader" for the credit union community in issuing the proposed FOM rule. I certainly am not acting in such a manner as a complete reading of my Nov. 19 Board statement clearly indicates.
In the written statement on the proposed FOM rule (that I read during the NCUA Board meeting), I conclude as follows:
"As I have previously cautioned, while we want to provide flexibility as allowed by the Federal Credit Union Act, we must not misread the law to either expand fields of membership or limit them. I encourage the agency to publish in the Federal Register legal analysis to support all proposed and final changes to the field-of-membership regulations.
"In the agency's review of the field-of-membership rule, we must not jeopardize those credit unions that rely on our rules by failing to provide sufficient legal analysis necessary to support the changes we propose and adopt."
In another section of the statement, I admonish:
"The NCUA should analyze [FOM] issues consistent with the requirements of the Federal Credit Union Act."
[Full text is available at
Some may argue that the NCUA should actively resist the conversion of federal to state charters, and enhance the NCUA's reason for being, by "liberalizing" the agency's FOM rule. As noted in my FOM Board statement, the NCUA should not modify the FOM rule in any matter that is contrary to the FCUA. Those who advocate the NCUA should "modernize" the FOM rule so as to make the federal credit union charter more "competitive" with state charters, or suggest that the NCUA should so act because Congress is "deadlocked," misunderstand the role of regulators. The NCUA Board's job is to interpret the FCUA within its four corners and leave to market participates the analysis regarding charter selection. While some may lament the conversion of federal charter credit unions to state charters, as a safety and soundness regulator, I view that as a policy issue reserved for Congress. Sure, the NCUA has some latitude to modify the FOM rule (and I did vote to issue the proposed FOM rule), but any amendment that does not fall squarely within the FCUA must emanate from Congress and not the NCUA.
Regrettably, this issue has become politicized. It is important for your readers to appreciate that I will not vote for any changes to the FOM rules unless I am of the opinion – based upon more than 30 years of legal work – that the changes comply with the FCUA. It is more important for them to understand I said that in my Board statement on Nov. 19.
J. Mark McWatters, Board Member
NCUA, Alexandria, Va.
