- Key takeaway: The proposal would allow the National Credit Union Administration to approve some associations whose members are required to purchase a product or service, a change that critics say could expand credit unions' reach and market share in the financial services industry.
- Expert Quote: "In practice, such a shift invites pressure to reinterpret statutory limits in ways that may not be apparent in individual cases but are significant in the aggregate." — Robert Flock, senior vice president of strategic engagement, American Bankers Association.
- What's at stake: Comments on the proposed changes were due June 8.
WASHINGTON — Banks are pushing back against a National Credit Union Administration proposal they say would further expand credit union membership beyond limits envisioned by Congress.
The proposal would amend the agency's common-bond provisions governing chartering and field-of-membership requirements, allowing the NCUA to approve some associations whose members are required to purchase a product or service as a condition of membership. The comment period on the proposal ended June 8.
In a comment letter, the American Bankers Association said the change would further erode the statutory common-bond requirements that define and limit credit union membership. While the proposal "is narrow in isolation," the ABA argued that it reflects a series of incremental changes that, taken together, could significantly expand credit union membership.
"A discretionary inquiry introduces uncertainty and increases the risk that the associational common bond requirement will be stretched over time," Robert Flock, senior vice president of strategic engagement at the American Bankers Association, wrote. "In practice, such a shift invites pressure to reinterpret statutory limits in ways that may not be apparent in individual cases but are significant in the aggregate."
"As those limitations are relaxed, the rationale for that differential treatment becomes increasingly difficult to sustain," the ABA wrote. "Preserving statutory limits on credit union membership requires avoiding incremental rule changes that collectively expand membership beyond congressional intent."
The ABA
"Because this proposal implicates core statutory limits on federal credit union membership and may establish precedent for future expansion, ABA urges NCUA to proceed cautiously and preserve clear, administrable boundaries around the associational common bond," the bank trade group's letter said.
Credit union trade groups, meanwhile, welcomed
"By directing the NCUA to weigh the full set of circumstances surrounding a group's operation, the rule would allow eligible associations to qualify on the merits and reduces the likelihood that a single feature of an association's structure will foreclose eligibility without regard to the association's overall purpose," James Akin, head of regulatory advocacy for America's Credit Unions, wrote.
America's Credit Unions also requested that the NCUA provide guidance and examples to help credit unions distinguish between qualifying and disqualifying client-customer relationships.
