NCUA Approves Expanded FOM Rules
The National Credit Union Administration (NCUA) adopted regulations that will significantly expand the chartering and field of membership (FOM) opportunities for federal credit unions.
In a comment letter opposing the proposed rule, ICBA had cautioned the NCUA that the rule went too far and undermines the concept of the common bond. This is the third NCUA action since January 1999 expanding the membership rules for federally-chartered credit unions.
The changes will make it easier for credit unions to convert to community charters, and will re-define a "community" as any metropolitan statistical area (MSA) or political jurisdiction, virtually regardless of size. This step will promote the growth of bank-like credit unions, without requiring the corresponding obligations of CRA and taxes.
The revised rule will also make it easier for credit unions to qualify for an "associational common bond." A credit union could serve all members of a national association provided there is a credit union within reasonable proximity to the association's headquarters.
Another change will add a fifth definition of "occupational common bond" to include designations based on employment in a trade, industry or profession (TIP), at any number of corporations or other legal entities, based on a "common bond" of producing similar products, providing similar services, or sharing the same profession or trade. This would allow, for example, a nationwide credit union for lawyers or doctors, regardless of their location.
With credit union membership circles ever expanding, the credit union mission to 'serve people of modest means' appears to be taking a back seat to unbridled desire for growth and expansion. This undermines the concept of the "common bond" and calls into question the justification for a separate credit union charter. It also threatens small traditional credit unions that follow the true common bond concept. Their customers will be easy prey for the large predator credit unions.