The NCUA's proposed ban on home-based credit unions has generatedquite the debate in our CU Times LinkedIn group.

Part of the proposed rule, which would go into effect two yearsafter the final rule's effective date, would prohibit federalcredit unions from operating out of homes, or even storing recordsthere.

Video CUTs from NCUA Dec. 12Meeting:
Matz Says 'No' to Home-Based CUs
Fryzel Says 'No' to Home-Based CURestrictions
Metsger Explains His Positions

Daniel Morrisey, treasurer/CEO at the $2.1 million Queen ofPeace Arlington Federal Credit Union in Virginia, doesn't feel anoutright ban is justified as it can mean the difference betweenmembers having a credit union and no credit union at all.

“I also am especially concerned that this outright ban wouldalso apply to short-term use of a home in a disaster recoverysituation or some kind of short-term space issue,” wroteMorrisey.

“Many years ago, during a several month 'issue' with oursponsor, our credit union operated out of our living room, diningroom and garage – until satisfactory arrangements could be made toget space again from our sponsor.”

Dean Birge, vice president of finance at the $546 million SantaClara County Federal Credit Union in San Jose, Calif., agreed withmany who felt the NCUA is over reacting and that a balance must bestruck.

“If records storage and information security is a concern,then this can be raised as a 'safety and soundness' or 'bestpractices issue' in the examination report,” said Birge. “Is thisthe most pressing issue for the NCUA to be addressing?”

Carolyn Warden, business systems analyst at Alabama-based coreprocessor EPL, shared her perspective of when she was a young NCUAexaminer. One home-based credit union bought a fixer-upper house tomake it their office and she was worried about the credit unionturning almost 5% of interest earning assets into a fixedasset.

“This examiner was wrong,” said Warden. “That CU grew bigger andstronger. Same education field of membership, same location, 30years later, exponentially larger and a positive resource in itscommunity. Home-based CUs need to make the strategic decision ifthey want to be perceived as someone's hobby or an insuredfinancial institution. It's past time to decide. Credit unionsshould be about the members' needs. Not the examiners' fears ofbathroom germs!”

Join the CreditUnion Times LinkedIn group and get in on the discussions.