The National Credit Union Administration approved a plan that would expand credit union access to millions more Americans by allowing remote workers to qualify for membership based on their employer's market.
The agency said the "paid from" proposal and other changes to its chartering and field-of-membership regulations would bring federal charters more in line with state charters. The agency has also proposed allowing more of a deceased credit union member's surviving family members to qualify for membership, and added a simplified application process for de novo community credit unions.
At the board's monthly meeting Thursday, NCUA Chairman Todd Harper said the current federal charter "lags significantly" behind the state charter, and 91 of the 100 largest potential fields of membership in the system are state charters. Roughly 3.3 million more people would be eligible to join a credit union under this proposal, Harper said.
"Ultimately, it's Congress's decision whether to amend the Federal Credit Union Act's field-of-membership requirements to achieve greater parity with the rules in many states," Harper said. "However, where we can within our existing rules and the law's current requirements, the NCUA board should take appropriate and tailored action to simplify, streamline and strengthen federal chartering options."
But Robert Flock, vice president in the office of strategic engagement for the American Bankers Association, said regardless of the NCUA's intentions, this proposed rule blurs the distinction between credit unions and banks.
"Further relaxing field-of-membership requirements renders the common bond that ties credit union members together meaningless," Flock said. "And without that common bond, credit unions are indistinguishable from tax-paying community banks, which are also committed to expanding access to financial services in underserved and low-income communities."
The NCUA's proposal would also simplify the application requirements for community-based credit unions by providing a standard form for business and marketing plans. The proposal would also expand the community-based field-of-membership affinities — relationships between a person and their geographic market — to recognize the growth of telecommuting.
"So instead of live, work or worship, the rule would include 'paid from,' so that if I worked for a company that was based in Boston, but I lived in Vermont and worked remotely, I could join that Boston-based community credit union," said Mark Treichel, a former NCUA executive director who now runs Credit Union Exam Solutions.
It is hard to estimate the reach of the changes, but that particular addition to community charters is "material" and will become more important over time, Treichel said.
Sam Brownell, founder of the consultancy CU Collaborate, agreed that aspect of the rule could have the biggest impact on consumers and credit unions.
"That would be a huge win for consumers' access to credit unions and allow more credit unions to provide their services to communities that banks seem to be leaving," Brownell said.
In another loosening of membership restrictions, the NCUA proposed allowing everyone in the immediate family or household of a credit union member who dies to join the credit union in the six months following that person's death. Under the current rule, only the spouse of a member who dies is eligible for membership.
"This is a very thoughtful change, as it would allow loved ones to maintain a relationship with a credit union that they may only discover when death of a loved one results in a wind-down of affairs at the credit union," Treichel said.
The proposed changes to address the survivorship issue is a "compassionate move" to ensure no credit union member's family has unnecessary burdens to manage when a loved one passes away, said Dan Berger, president and CEO of the National Association of Federally-Insured Credit Unions.
To ease a backlog in field-of-membership applications, the NCUA has also asked to implement a template for this process. The proposal includes a technical clarification on the process for the NCUA to review and approve a new charter as well as the new organization's management and officials.
NCUA Vice Chairman Kyle Hauptman said the chartering process is one of his main three priorities, and so he is in favor of policies that make it more likely that a community or group can charter a new, viable credit union.
"Anything that clarifies field of membership also clarifies things for groups seeking a de novo charter," Hauptman said.
Jason Stverak, deputy chief advocacy officer for the Credit Union National Association, said that getting credit union services to more communities across the country is important to CUNA, state leagues and credit unions. He added that CUNA needs to review the proposal in detail.
The unanimous vote on Thursday allows for a 90-day comment period to begin once agency officials publish the rule in the Federal Register.
NCUA board member Rodney Hood called the proposal a step in the right direction.
"But we have much more to build upon in this rule and from previous field of membership rulemakings," Hood said.
Ken McCarthy-Reporter, Credit Union Journal
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