Nearly a year and more than 10,000 comment letters after it was introduced, the National Credit Union Administration is expected to vote Thursday on a final rule that would make it easier for consumers to join a credit union.
In an indication of how high-profile the issue has become, NCUA is starting its meeting an hour earlier than usual and making an overflow room available to individuals who can't find space in its 55-seat boardroom.
There appears to be little doubt that NCUA will finalize the contentious proposal, which is widely supported by credit unions who want it to go even further and fiercely opposed by banks, which have threatened to sue the agency.
Supporters claim NCUA's field of membership guidelines, which determine the individuals and groups permitted to join federal credit unions, badly require updating to remain competitive with state charters. Former NCUA Board Chairman Dennis Dollar said the situation has become so bad that his consulting firm is currently handling 17 federal-to-state conversions.
"Every one, without exception, is driven by restrictions at the federal level that they do not have at their state level," Dollar said. "For the federal charter to remain competitive and the dual-chartering system to remain one of the great hallmarks of the credit union industry, NCUA is going to need to move even further than they have proposed in this rule."
But bankers are already prepping for a lawsuit. The Independent Community Bankers of America has said it is mulling a court challenge should NCUA's two-person board finalize the plan.
"Our banks are seeing more and more aggressive competition from credit unions," said Karen Thomas, ICBA's senior vice president of government and public policy, in an interview. "It's the accretion of these changes over time. If this proposal isn't the most significant we've ever seen, it's kind of like the straw that broke the camel's back."
ICBA is already suing NCUA for the overhaul it gave member business lending rules earlier this year, but will wait to see the outcome of the board meeting before deciding whether to file a second suit.
"We want to see what the final rule looks like," Thomas said. "Then, we'll take it from there."
At issue is a proposal the NCUA released last November which would retain the 2.5 million-person population limit on a credit union's field of membership, but loosens several other restrictions.
For example, credit unions are currently barred from serving portions of a core-based statistical area if that population exceeds 2.5 million people. Under the proposed revision, a credit union could opt to serve a section of a CBSA as long as the population of the section in question doesn't exceed the 2.5 million cap.
As defined by the Office of Management and Budget, a core-based statistical area is a region anchored by an urban core of at least 10,000 people surrounded by suburbs that are socioeconomically tied to the core.
In another change that raised concern with bankers, the proposal would allow credit unions to adopt entire congressional districts as well-defined local communities.
According to Thomas and other bank partisans, "credit unions seem to have grown and ballooned beyond all recognition, and the changes NCUA is considering will water down the common bond that is supposed to unite credit union members to the point where it is meaningless."
Credit union supporters, however, claim revising the field of membership rules would allow them to offer their services to more consumers.
"Credit unions, like banks, have been pressing for regulatory relief and this is one of the more burdensome regulations they have to deal with," said Eric Richard, a principal at Washington-based consulting firm CU Counsel PLLC and former general counsel for the Credit Union National Association, in an interview. "It's one banks don't have to deal with, so from the credit union perspective, if this can be loosened up a little bit, that'd very helpful."
Richard said that field of membership rules are about "limiting consumer choice."
"NCUA's attitude, which may be very different from attitudes in the banking industry, is that credit union service is not something to be restricted and doled out on a stingy basis," he said. "It's a good thing people should have access to if possible."