ST. LOUIS — The Missouri Credit Union Association has released its comments on the proposed amendment to the field of membership rule developed in response to a March 24th ruling by the Cole County Circuit Court that struck down the Missouri FOM regulation in its entirety.

In her Aug. 4th comment letter on the proposed rule to Sandra Branson, director, Missouri Division of Credit Unions, Holub asked the division “to be cautious in finalizing this proposed amended rule and carefully test the language of each section to mitigate risk of further litigation. Over the past five years of litigation, we have experienced the result of ambiguous legislative language.”

To emphasize her point of the need for “careful lingual scrutiny,” the MCUA president cited Missouri's credit union law passed in 1998 that indicates “credit unions can expand by adding groups of employees (known as select employee groups or SEGs), organizations or associations. Or, a credit union can expand by adding a geographic area.”

However, she stated, “a reference in our state law to the federal statute regarding the size of SEGs stated that Missouri's law could be no less restrictive than the federal law.”

“Unfortunately, a court challenge was successful in escalating that language to the point that it has been construed to apply to all groups, whether SEGs, associations, or geographic areas,” she continued.

Holub also urged the Division of Credit Unions “to consider whether promulgation of the amended rule, before the disposition of the appeal of the March 24 decision to the Western District Court of Appeals, would exacerbate current and future expansion challenges.”

She wrote that, “No clear guidance exists to address the impact to credit unions that are currently involved in the pending court case. There are several scenarios with no legal precedent to provide guidance, such as how credit unions currently involved in the court case will be affected by a new rule: What happens to all the field of membership expansions that were granted prior to August 24, 2006? Can a credit union currently involved in the court case file under the new regulation, and if so, is the credit union potentially subject to two appeals– one under the prior regulation, and another appeal should the amended regulation be challenged?”

Holub went on to stress that the proposed amended FOM rule “consistently differentiate the state definition of 'geographic area' from the federal definition of 'community'.”

She stated that, “Missouri legislators intended credit unions to expand geographically, and not be restricted by community.”

She gave the example of a credit union that has Cole County in its FOM and would like to add Boone County. Under the proposed amendment rule, she stated, the credit union would have to prove that Cole County and Boone County are one community.

“If they cannot, the Cole County credit union that would like to extend credit union service to the residents of Boonville in Boone County would be unable to do so. This seems like an unnatural and unnecessary restriction on the access of consumers to credit union services. There appears to be no purpose served by this type of restriction.”

She continued to write, “Comments received from Missouri's credit unions reflect that they would prefer to have no restrictions on who has access to credit union service, and allow all consumers the right to choose and benefit from belonging to a credit union; however, that issue can only be addressed by the legislature.”

Holub urged that the proposed rule should clearly state that credit unions may expand geographically, “without the added burden of the concept of community.” Consequently she recommended four areas of the rule be restated.

She also offered that “references to population such as limitations on well-defined areas including cities, counties, etc. to a maximum of 500,000 people or Metropolitan Statistical Areas (MSAs) restricted to a maximum of 1 million people is overly restrictive.” Holub pointed out that if NCUA has approved a FOM expansion for a federal credit union that has a population in excess of 1 million, “state chartered credit unions are put at a disadvantage. We support the dual-chartering system, and feel many elements of the amended rule could devalue the Missouri state charter to the extent that credit unions will seek conversion to federal charter.”

Lastly, Holub referenced the posting of the proposed amended rule in the Missouri Register that states, “This proposed amendment will not cost private entities more than five hundred dollars ($500) in the aggregate.”

Holub asserted “that the cost required to compile documentation and submit the expansion request will cost considerably more than $500 to every credit union each time the credit union applies to expand.”

In conclusion, Holub wrote that MCUA supports “the extraction of the definitions of underserved area and immediate family from the field of membership regulation.” The association commented on those proposed rules individually.

The deadline for comments is Aug. 16.

Instant Insights /

Missouri CU Association Publishes Comments on Proposed Amendments to FOM Rule

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