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Credit Unions Get a Win with Finalized FOM Rule
Friday, October 28, 2016 6:50 AM

NCUA Board
Seated at table are (L-R) NCUA Board Member J. Mark McWatters and Board Chairman Rick Metsger.

The National Credit Union Administration board on Thursday voted in favor of changes to modernize the credit union field of membership (FOM) rule that have long been advocated for by the CUNA/leagues system. The board also issued a new proposed rule for Chartering and Fields of Membership. 

“What we are doing today is using the Credit Union Membership Act to bring the administration of the law into the 21st Century,” said NCUA Board Chairman Rick Metsger "The rules are a logical and natural evolution of existing laws.”

The NCUA received 11,380 comments on the proposed rules, with commenters generally supporting them by a ratio of about three to one.

Mike Schenk, CUNA vice president of economics and statistics, and four members of CUNA’s Examination and Supervision Subcommittee all presented comprehensive testimony on important budget and transparency issues on behalf of CUNA.

CUNA President/CEO Jim Nussle released the following statement: “We appreciate the work NCUA has done to modernize credit union field of membership. As a result of advocacy efforts by CUNA, the leagues, and credit unions, the final rule provides more flexibility in the definition of communities. This will facilitate consumer and small business access to credit unions and make it easier for credit unions to serve their members. We commend NCUA for the inclusive and transparent process it undertook and for listening to stakeholder comments aimed at improving the final rule." 

Cornerstone CEO Dick Ensweiler praised the move and the many voices who contributed to making it possible. "The tremendous efforts of credit unions, leagues, and CUNA, along with the transparent considerations of the NCUA board, have resulted in a much-improved system for credit union members and communities who will now be better served. I applaud the many credit unions leaders who submitted their comment letters in support of these changes. The outcome of NCUA's deliberations proves how strong the credit union system is when we all work together."

Cornerstone's Suzanne Yashewski, SVP regulatory compliance counsel, will be speaking to the industry on the new FOM changes (and other compliance issues) at CUNA's Community Credit Union Conference in November.

Briefly, the final rule will implement changes in policy affecting:

  • The definition of a local community, a rural district and an underserved area
  • The expansion of options for a multiple common bond credit union to add potential members
  • The expansion of options available to single common bond credit unions based on a trade, industry or profession
  • The process for applying to expand membership in a federal credit union

The rule will be effective 60 days after publication in the Federal Register

Nussle later released an additional statement after learning of the banking industry's vocal objections: "The new field of membership rule and the new proposed rule are fully consistent with the Federal Credit Union Act and the Administrative Procedures Act. They are also fully consistent with the intent of the Credit Union Membership Access Act, which I voted for in 1998 when I was in Congress. Our friends in the banking industry appear to be ready to launch another quixotic legal challenge to NCUA’s actions. CUNA is prepared to defend this rule, and we will take all necessary measures to do so.”

For a complete comparison of changes to the FOM rule, click here.

Chartering and Fields of Membership – Proposed Rule
The NCUA Board also voted to issue a new proposed FOM rule to create a well-defined local community and offers the opportunity to consider alternative approaches to defining the community common bond. Because of limitations under the Administrative Procedure Act, the Board was unable to include these proposed revisions in Thursday's final rule. Stakeholders will have the opportunity to comment on the new proposal for 30 days after publication in the Federal Register.

Supplemental Capital – Board Briefing
NCUA staff identified in their board briefing discussion relative to Supplemental Capital that it is possible to allow supplemental capital to toward meeting the risk-based net worth requirement. Staff identified at least 12 existing rules that the agency would have to review and modify to deal with adding opportunities for adding supplemental capital and cautioned that supplemental capital is not the same as secondary capital; the two terms should not be used interchangeably. It was announced that the board may review an Advanced Notice of Proposed Rulemaking as early as January 2017.

Review the NCUA board briefing presentation.