Just when it seemed like the battle over the blurring line between banks and credit unions had simmered down, it got hotter in November.
The National Credit Union Administration (NCUA), which oversees credit unions, has proposed a number of rule changes for 2016, including expanded regulations on who can join a credit union.
Community banking officials view the proposed rule changes as additional ways credit unions are looking more and more like banks, without having to pay the corporate taxes traditional banks have to pay. Credit unions, on the other hand, see them as new tools to engage customers who may not have had access to a credit union.
“(T)he NCUA proposal would discard any common bond and would allow credit unions to serve just about all air-breathing mammals,” Independent Community Bankers of America President and CEO Camden R. Fine said in a news release. “Where I come from that should be called a bank, and credit unions are not supposed to be tax-free full commercial banks.”
The proposed rule changes, which wouldn’t take effect until 2016 at the earliest, contain a number of new updates defining the geographic scope of a credit union’s potential customer base. The updates include, in certain circumstances, relaxing the maximum population limit of 2.5 million people in a credit union’s home area and defining a community credit union based on the boundaries of U.S. Congressional districts, a boundary not currently permitted because of how often those boundaries change.
Another proposed change would allow a credit union to move into and serve an adjacent community if it could prove that area is part of the community it already serves. For instance, if a credit union had a charter to serve only Cumberland and Dauphin counties — the Harrisburg area — it could apply to move into adjacent areas such as Dillsburg or the Red Land area in northern York County.
The Pennsylvania Credit Union Association polled a select portion of its members in the summer when the rule changes were being discussed and found “general support” for moves similar to what the NCUA has proposed, according to Rick Wargo, the association’s executive vice president and general counsel. The group plans to get additional feedback from the membership in January, and Wargo said he expects it will support the NCUA’s proposal.
“Not only did the (surveyed) credit unions say they would support it, but they said they’d like to see as much flexibility as possible to serve as many consumers and small businesses as possible,” Wargo said.
Members 1st Federal Credit Union President and CEO Bob Marquette said the new rules would only slightly expand his credit union’s reach. To be eligible to join Members 1st, you or an immediate family member must work at one of approximately 7,000 select employee groups.
Even with only minor expansion opportunities for Members 1st that would come out of the rule changes, Marquette said the rule changes would benefit credit unions and consumers.
“This is nothing more than a choice issue,” Marquette said. “There should be more opportunity in the market. This would just allow more people to join a credit union. It doesn’t mean they have to. This is good for credit unions, and good for Americans.”