How the NCUA's FOM Rule Affects Credit Unions
Last week, the court ruled on a lawsuit regarding the National Credit Union Administration (NCUA) Field of Membership Rule. Of the four provisions being considered by the court, two were upheld and two were overturned.
The provisions declared to exceed the NCUA's statutory authority include those that concern a combined statistical area with fewer than 2.5 million people to be a local community and the increase to 1 million people the population limit for rural districts.
State-chartered credit unions make up 62 percent of Michigan credit unions and 78 percent of the state’s total credit union assets. This is due in part to the provisions permitted in the Michigan Credit Union Act, particularly the provisions allowing for field of membership expansion.
Michigan’s state act was updated in 2003 and more recently in 2016 to permit state-chartered credit unions to better serve Michigan members. Since the update of 2003, our state-chartered credit unions have been able to significantly grow, serving a larger and more diverse population of Michiganders.
These expanded fields of memberships have allowed Michigan’s state-chartered credit unions to become more resilient financial institutions, which in turn, give them more ability to serve their communities.
Much of northern Michigan and all of the Upper Peninsula are considered rural districts. While Michigan’s state charters are expanding their fields of membership to better serve Michigan consumers, federally-chartered credit unions in these regions are now being stifled.
Alongside the Credit Union National Association (CUNA), the Michigan Credit Union League (MCUL) strongly disagrees with the court's decision that aspects of the rule exceed the agency's legal authority. The Field of Membership Rule is not only entirely consistent with the Federal Credit Union Act, but also incorporates current geospatial realities into a modernized supervisory approach reflecting the nature of American consumers' evolving migration trends.
MCUL believes in a strong dual chartering system, and the results of this ruling further signify the need for a modernization of the Federal Credit Union Act. Much like the state-level update of 2003, the League believes that a modernization at the federal level will allow federally-chartered credit unions to grow, thereby benefiting a larger population of consumers.
MCUL supported NCUA’s 2016 Field of Membership Rule in our comments to the agency during its rulemaking process. The League will continue to work in conjunction with CUNA and our member credit unions in an effort to support the NCUA’s appeal.
NCUA is contacting credit unions they believe may be affected by the rule. If the agency has reached out to you, please contact Sarah Stevenson, MCUL’s director of regulatory affairs via email or 734.793.3494.Go to main navigation