The banking industry's recent bluster over the National Credit Union Administration's proposal to ease credit unions' field-of-membership rules overlooks key aspects of the FOM debate: these proposed changes are necessary, they are long overdue and any resulting expansion of membership would be limited.
The National Association of Federal Credit Unions continues to hear from credit unions that the NCUA's current rules specifying who can and cannot be a credit union member unnecessarily inhibit their ability to serve their communities. Today, credit unions serve more than 102.1 million members, and they would like to serve more. But one need only look at recent consolidation in the credit union industry to understand the necessity of updating FOM rules.
Enormous consolidation is challenging consumers' ability to join credit unions. The total number of credit unions has declined 17% more than 1,280 institutions since the second quarter of 2010. Of the institutions no longer in existence since then, 96% had assets of less than $100 million. The consolidation, which is primarily through mergers between credit unions, is due in large part to the constantly growing magnitude of regulatory burden.
Meanwhile, NCUA officials in releasing the November proposal said it was long overdue. It has been over 15 years since the NCUA last tackled the field-of-membership issue. In that time, state laws have allowed broader fields of membership for state-chartered credit unions. Moreover, FOM rules must also keep pace with changes in technology and other changes in the financial services industry.
Banks are also exaggerating the impact of these changes. The NCUA's proposal would more fully implement authority granted to the agency by the Federal Credit Union Act. Such a step has been neglected for far too long. While the NCUA's proposal recognizes new ways that credit unions could validate why a particular area is "well-defined" and "local" when applying for charter changes, this would track similar recognition of these areas by the U.S. Census and the Office of Management and Budget. Accordingly, NCUA is merely recognizing areas that are already codified elsewhere in the federal government. The NCUA is well within its authority to make these changes to remove non-statutory constraints on FOM chartering and expansion.
The proposed changes would allow credit unions to serve many of the consumers who want and need affordable financial services most, including the unbanked and underbanked. Credit unions continue to be committed to serving their members and being good stewards of their members' trust. In all the services and products they provide, credit unions seek to provide value to their members. This proposal would allow them to continue to do that.
It is worth recognizing that bankers' opposition to credit union membership changes is nothing new. Almost since the dawn of credit unions, banks have been opposed to any measure that would allow a change in membership to credit unions. It really doesn't matter the degree of a proposed change; bankers will find reason to take issue with it and continuously gripe that credit unions have an unfair advantage. But frankly, if this were the case, all banks would be credit unions by now.
Ultimately, consumers deserve the ability to choose the financial services provider that will best meet their needs, and to do so fairly and efficiently. The NCUA's proposed FOM changes would simply help make that choice possible.
Carrie Hunt is executive vice president of government affairs and general counsel for the National Association of Federal Credit Unions.