An Idea Whose Time Has Come: Modernizing Field of Membership Is Good for American Consumers

On Oct. 27, the NCUA Board unanimously voted to modernize NCUA’s field-of-membership rules and to issue a proposed rule with additional changes. This Thanksgiving, consumers across the nation can give thanks that in the coming year they will have enhanced access to not-for-profit consumer cooperatives for their financial services.

I’ve been concerned with the need to update our field-of-membership rules for some time. This is an area I believe can be improved both in regulation and in law. We can modernize our rules, and Congress could update the Federal Credit Union Act to help federal credit unions continue to serve more Americans.

When I first proposed field-of-membership reform, I knew it had to be my top regulatory priority because:

  • It impacts almost all credit unions and, more importantly, almost all Americans;
  • It provides enhanced ability for consumers and their member-owned credit unions— not Washington—to define their local communities and rural districts;
  • It facilitates the growth that many smalland medium-sized credit unions need in order provide services to their members in today’s increasingly complex financial marketplace; and
  • It provides meaningful regulatory relief for both community chartered credit unions and select employee group-based credit unions.

NCUA’s field-of-membership rules had not been updated substantially in almost two decades. Federal rules have not kept up with changes in state charters, and there is a noticeable lack of balance in the dual chartering system. State charters are increasingly more flexible than federal charters, giving many state-chartered credit unions opportunities to serve their members and their communities in ways that federal credit unions both lack and need to serve their members adequately. As our friends at the National Association of State Credit Union Supervisors have pointed out, this is an area where competition between the charters produces innovation that improves both charter types and creates opportunities for consumers across the nation.

Taken individually, no one change made to our field-of-membership regulations is monumental by itself; there is no one “silver bullet” that solves everyone’s strategic issues. Instead, the modernized rule establishes a wider menu of options, each of which will solve some strategic issues and provide enhanced membership tools.

Collectively, these changes will make a big difference. All are logical, incremental improvements that reflect changes in how we define our local communities, as well as technological changes that accommodate an ever-evolving financial marketplace where consumers increasingly desire to obtain financial services online, through a shared branch, an ATM or a mobile device.

For the First Time

Let me give you just a few examples of the changes made to the existing regulations. For the first time, community chartered federal credit unions will be able to:

  • Serve up to 2.5 million people in a combined statistical area, as defined by the Office of Management and Budget and based on data from the U.S. Census Bureau. Under the old rules, federal credit unions could only serve single political jurisdictions of any size and core-based statistical areas with populations less than 2.5 million and could not serve combined statistical areas at all; and
  • Apply for a field of membership based on a portion of a core-based statistical area, without being required to serve the “core” of that area.

Additionally, the final rule increases the rural district cap from 250,000 (or 3 percent of a state’s population) to a new 1 million population cap as long as the rural district does not expand beyond the home state of the credit union and adjoining states.

Turning to some of the changes for select employee group federal credit unions, for the first time these charter types will be able to:

  • Propose alternative methods using data from federal banking regulators for multi-select employee group federal credit unions to demonstrate that an area is underserved, to enhance their ability to serve underserved areas;
  • Serve independent contractors with strong dependency relationships (both multi-select employee group and trade, industry or professional federal charters);
  • Serve entire industrial parks, office buildings and shopping malls with a single application to NCUA, as long as the number of employees is less than 3,000; and
  • Use a new streamlined paperwork approach to add select employee groups with between 3,000 and 5,000 members.

There are many more positive changes for community and select employee group-based credit unions that are too numerous to discuss here. A more detailed overview of the changes is available online at

In addition, our staff is making continual improvements in the processes and procedures we use to process field-of-membership requests. We will roll out additional changes as they are ready, as part of my on-going Continual Quality Improvement initiative at the agency.

Changes Are Legal and Beneficial

With this final rule, the agency is properly exercising the authority Congress deliberately and explicitly gave it in Title I of the Credit Union Membership Access Act to prescribe by regulation the definition of terms used in the act. It is also furthering the overriding goal of the Federal Credit Union Act, which is to enhance access by American consumers to not-for-profit cooperative credit unions to “promote thrift” and create “a source of credit for provident or productive purposes.”

Consumers should have options in the financial marketplace. They vote with their feet and wallets. I’ve always believed that there should be at least one credit union option available to every American. Our final field-of-membership rule achieves the goal I set to enable credit unions to serve their communities better, while keeping safety and soundness always in mind.

To the best of my knowledge, no credit union has ever failed because its field of membership was too large, but some credit unions have failed because their field of membership was too small. They were unable to find volunteers for their supervisory committee or their board, or they did not have the ability to generate loans or meet the demands of their members for new products and services. Thus, this final rule will strengthen the safety and soundness of the entire credit union system.

What’s Next?

At last month’s Board meeting, we also proposed a separate field-of-membership rule to increase the population cap for community charters and make a number of other changes that were recommended to us, but which we are required under the Administrative Procedure Act to put out for public comment. This proposal gives stakeholders an additional opportunity to provide their input on ways we can improve our field-of-membership rules further.

The changes we have adopted are the largest expansion of field of membership since the 1998 passage of the Credit Union Membership Access Act and are consistent with discretion Congress provided the agency in that law. They will significantly enhance the ability of consumers to obtain financial services from our national system of cooperative credit.

Our work is not yet done. In our final rule, we addressed a wide range of field-of-membership problems and issues we heard about from stakeholders, and we issued a new proposed rule to modernize our rules further. However, some solutions cannot be addressed by regulation and must be addressed by changing the existing statute. While we can recommend changes, Congress has the ultimate responsibility to set the law and keep it current.

In the meantime, the agency will continue to use the discretion Congress has given it to modernize its rules within the confines of statute.

— Rick Metsger

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