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NASHVILLE, Tenn. – After seven years of making field-of-membership expansion decisions based on policy procedures, the Tennessee Department of Financial Institutions is hopeful it will have a set of codified rules in hand by the end of the year. The state has had a Credit Union Act on its books since the 1920s, but the statute has never included specific details addressing FOM expansion. Instead, Assistant Commissioner Pat Murphy, in charge of the credit union division said in 1995 the DFI implemented policy procedures because “it needed a standard to operate off of.” The policy procedures are being used by DFI as the template for the codified rules. Former DFI Commissioner Bill Houston, who retired in June, began the process of drafting the proposed rules because, “We felt a rule would be more defensible from a legal standpoint in the decisions we make concerning field-of-membership expansions,” explained current Commissioner Fred Lawson. The proposed rules give SCCUs “as a minimum, at least as much flexibility as federal credit unions in the regulation of fields-of-membership subject to regulation by the Commissioner for the purpose of maintaining the credit union’s safety and soundness,” the proposed rules read. The DFI published the proposed rules in the Tennessee Administrative register on Aug. 15 for 30 days. At press time, the DFI had not received any petition for a hearing within that time. The rules will go before a state government oversight committee comprised of members of the state House and Senate, and they will have the opportunity to comment on the rules and evaluate them for any financial impact on the state. Lawson said he doesn’t expect there to be any changes made to the rules, and Tennessee Credit Union League President Tom Gaines said the state Attorney General has already given the rules a constitutional review. If no changes are made, the rules will become effective 105 days from the publication date – approximately the beginning of December. The DFI’s codification of the FOM expansion rules has been a work in progress for a number of years. The project was put on hold in the late 1990′s until H.R. 1151 was passed, although Lawson stressed that the AT&T Family FCU lawsuit case and the DFI’s work were totally separate. “We wanted to see how the AT&T lawsuit played out,” he said. State-chartered CUs account for about two-thirds of all CUs in Tennessee. Gaines said mergers have come in sprints and have mostly been between smaller CUs. Although most of the codified rules reflect the DFI’s previous policies on FOM expansion, one area SCCUs can expect to see noticeable changes concerns FOM overlaps. Until now when credit unions merged, the surviving credit union got the membership of the other CU, but each SEG of the merging CU had to notify DFI they wanted to be part of the surviving CU. Now the surviving CU automatically gets the merged CU’s SEGs. “Before, the policy tended to protect the domain of the credit union, now it’s protecting citizens’ interests,” Gaines said. “The proposed rule isn’t anti-credit unions’ domain, it’s just shifting the focus on the wishes of citizens.” -

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