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What's in store for field of membership?
A federal judge recently struck down two provisions in the National Credit Union Administration's field-of-membership rule while keeping two other elements of the rule intact. Members of the NCUA board haven't explicitly stated whether the agency will appeal the decision but, as reported, there are a variety of risks for credit unions if the regulator takes that path. No matter what happens, members of the credit union community had plenty of opinions on how the board should proceed. Read on for a sampling of their views.
Marcus Schaefer, Truliant FCU.JPG
Marc Schaefer, CEO of Truliant Federal Credit Union
The NCUA should definitely appeal the court’s decision. The law provides deference for the NCUA’s ability to write the rules governing field-of-membership for credit unions. Judge Friedrich admitted that defining a ”rural district” was subjective, but then went ahead and superseded NCUA’s judgment. States like South Dakota that are predominantly rural – and completely so as compared to coastal metropolises – should be eligible for field-of-membership by a single credit union, with the judgment to do so being up to the NCUA.
Marvin Umholtz, president and CEO of Umholtz Strategic Planning & Consulting Services in Olympia, Wash
Marvin Umholtz, president and CEO, Umholtz Strategic Planning and Consulting Services, Olympia, Wash.
NCUA Board Chairman J. Mark McWatters gets to make the ultimate call on whether or not to appeal U.S. District Court Judge Dabney Friedrich’s ruling. However, every time the NCUA board gets accused of overreaching in the courts, as it might again appealing this FOM decision, the NCUA runs the very real risk of being found “guilty as charged” – and in a very public way.

I have long considered the common bond and field-of-membership limitations in the Federal Credit Union Act, and especially as interpreted by the NCUA’s often-confusing rules, to be counter-productive anachronisms that should have been totally repealed long ago.

In this day and age, how crazy is it anyway to limit, via statute and rule, who any entity’s customers can be or where they can be located? That sounds dangerously like a fair lending violation in the making, too. “Excluding” rather than “including,” doesn’t make for good marketing messaging either.

An outright repeal of the statutory FOM limitations would take political guts, but until that political capital is invested in fundamental statutory change, the heartburn of banker vs. credit union FOM expansion lawsuits will continue unabated.

If the credit union industry truly believes the institutions’ mission is not linked to credit unions remaining tiny and limited in scope, then it should stand tall and tackle this ugly FOM beast at its roots – by overhauling the statutes and relevant rules.
Geoff Bacino, Bacino & Associates
Geoff Bacino, former NCUA board member and current partner, ‎Bacino & Associates
The rule put forth by the NCUA board was an effective use of their regulatory authority. I would suggest a two-pronged approach -- an appeal and a re-write of the rule. This provides a second option if the appeal is not successful. The general counsel’s office at NCUA continues to do an excellent job of interpreting the law.
Michael Bell, Howard & Howard
Michael M. Bell, legal & business attorney at Howard & Howard Attorneys, Royal Oak, Mich.
There are certainly risks with an appeal (more could be taken away) but there are also risks of not appealing. In this instance I think an appeal would be wise. I also think that additional and unrelated FOM reforms should be made by NCUA.
John McKechnie
John McKechnie, former NCUA and CUNA staffer, now senior partner of the public policy and advocacy firm Total Spectrum, Washington DC
There are good arguments both in favor and against an appeal. For credit unions, the bottom line should be: “What can NCUA do to expand consumer access?” If that means an appeal, fine. If it means re-writing the rejected rules to make them fit, that’s fine too.
Phil Tschudy, media & reputation strategist, CUNA Mutual Group
Phil Tschudy, media & reputation strategist, CUNA Mutual Group
CUNA Mutual Group is still reviewing the decision. As we have done throughout our history, we will continue to work collaboratively and partner with the credit union trade associations to defend the credit union movement. Our recent efforts with CUNA and NAFCU to file an amicus brief in support of NCUA’s new field of membership rule is a clear example of that teamwork. While the decision was mixed, we collectively brought the best legal talent to the table in defense of this rule, and it once again demonstrates the power of the credit union movement.
Tony Ferris, CEO of Rochdale Paragon Group
Tony Ferris, CEO of consulting firm Rochdale Paragon Group, Overland Park, Kan., and CEO of apogee iQ, Rochdale Paragon's governance, risk management and compliance software company
The biggest issue from our perspective on the FOM issue is one of strategic risk. The industry’s strategic risk. In this case, we may very well go back and win the battle but lose the war. The industry is diverse in thought and need when it comes to the FOM issue. The issue is real but also may carry very real strategic risk to the industry down the road. Global decisions toward expansion of reach and authorities give rise to arguments of what a credit union really is and whether it is a model worth being protected versus lumped into banking in general. The risk of unintended consequences [is] not easy and today’s need/desire may create risks later that the industry will ultimately have to pay.
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