field of membership and banker influence FCUA Mary dunn We have to hand it to the bank trade groups when it comes to sheer tenacity in opposing credit union growth. Along the lines of a current commercial, if you are a bank trade group, that is just what you do.

Undeniably, credit unions rightly question NCUA policies on a regular basis – which makes charges that the NCUA is an “industry cheerleader” laughable.

However, as last year indicated, the NCUA has had some rough times with Congress, and the bank groups' continuing tactics to discredit the agency build on concerns about its ability to implement the Federal Credit Union Act. Also, the bank groups' efforts can delay final application of important changes such as the NCUA's pending field of membership proposal, particularly if they decide to challenge it in court.

That is why each of the banker misstatements regarding the FCUA must be carefully corrected, and the focus of deliberations on the FOM proposal must be directed to what the FCUA actually says, not on what the bank groups want it to mean. At the same time, the legal basis of each element of any new final FOM rule must be fully articulated by the NCUA and justified based on reasonable analyses of the FOM provisions in the FCUA, 12 USC 1759.

For example, as they have in the past, the bank groups tried to establish a statutory connection between credit unions' federal tax exemption and limited fields of membership in a Jan. 20, 2016 letter to Congress on the NCUA's FOM proposal. The findings Congress included with the Credit Union Membership Access Act refute this. FOM, Congress said, is a “meaningful affinity and bond among members,” to “promote thrift and credit.”

Moreover, it said, “Credit unions … are exempt from Federal and most state taxes because they are member-owned, democratically operated, not-for-profit organizations … and because they have the specified mission of meeting the credit and savings needs of consumers, especially persons of modest means.”

The bank groups' letter also told Congress that the NCUA's proposed approach “totally ignores two key phrases, well-defined and local, out of its statute in order to drastically expand credit union powers.” As the banker groups claim, the FCUA identifies community credit unions as credit unions that draw their members from well-defined local communities, neighborhoods or rural districts.

Yet the bankers themselves selectively ignore FCUA provisions that are equally significant. First, the FCUA directs only the NCUA to define the term, “well-defined local community, neighborhood, or rural district.” Moreover, the FCUA specifically states it is the NCUA's definition that is to be used in the agency's FOM rule and in approving FOM applications.

Congress could have defined WDLC or caused the NCUA to use some other agency's definition, but it did not. These provisions mean that Congress wanted the NCUA to apply its experience as a regulator and to develop the definition of WDLC that is appropriate under the law and grounded in the credit union context.

While the FCUA does limit FOM in important ways – and the NCUA's discretion on FOM has significant boundaries – the FCUA's language and legislative history do not support the severe restrictions the bank groups seek.

Yet, while it is essential to evaluate each of the bank groups' claims in light of the FCUA, so too every change in the agency's proposal must be supported by the FCUA and that support articulated by the NCUA so that the final rule can withstand review and scrutiny, which will surely come.

The comment period on the FOM proposal closed Feb. 8, but it is not too late to talk to your member of Congress and to the NCUA.

The banks' tenacity can lead to success unless their arguments can be discredited. Bold improvements in FOM are needed, but the key is underscoring how the NCUA's proposed changes are true to the FCUA.

Mary Mitchell Dunn is partner for CU Counsel. She can be reached at 202-508-3795 or mdunn917@icloud.com.

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Explaining How FOM Fits Under the FCUA is Essential

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