NCUA Board Approves Final Field of Membership Rule at July Board Meeting

The National Credit Union Administration board on Thursday approved a final Field of Membership rule that had been delayed as a result of a lawsuit filed by the American Bankers Association.

The board unanimously agreed to allow a credit union to file an application to designate a Combined Statistical Area, or a contiguous portion of it, as a well-defined local community. To qualify, that area would be required to have a population of under 2.5 million people.

The rule also adds an explicit provision addressing the potential for discrimination in the field of membership process.

The American Bankers Association had filed suit challenging the rule, which was placed on hold as the lawsuit was considered by the various levels of federal courts. The U.S. Supreme Court recently refused to consider an appeal filed by the bankers, allowing the NCUA to adopt the rule.

NCUA Chairman Rodney Hood said that the rule will allow credit unions to better serve underserved areas.

Board member Todd Harper said that many credit unions have been in limbo while the rule was placed on hold. He said that while the rule requires credit unions to demonstrate that they are not redlining areas out of fields of membership, the agency lags in examining consumer protection.

Board member J. Mark McWatters agreed that the NCUA needs to be more diligent in protecting consumers.

“Treating consumers inappropriately is not only wrong and in violation of the law, it’s bad for credit union business and undermines the agency’s safety and soundness mandate,” he said later in the meeting, as the board discussed its budget. “As such, it’s imperative that we provide the agency’s consumer protection staff with the resources necessary to continue to proactively safeguard credit union consumers.”.

McWatters said that the overall Field of Membership rule will have a huge impact on the credit union industry as it tries to expand into underserved areas.

“Without question, this rule serves as a most significant consumer protection safeguard by helping to transform financial deserts into communities of financial choice, all within the FCUA [Federal Credit Union Act] and without safety and soundness risk,” he said.

In briefing the NCUA board on agency spending for the year, CFO Eugene Schied said that as a result of the coronavirus crisis, the agency’s travel budget is likely to be about 50% lower than anticipated. He said that employee pay and benefit expenses are projected to be 2% higher than expected.

Schied said that other expenses may increase slightly as a result of the pandemic, citing remote communications and software as examples of expenses that might increase.

Harper said that while credit unions may now be flush with cash, as the impact of the pandemic continues to be absorbed, some credit unions may have liquidity issues. As a result, Harper said, Congress should extend the temporary changes made to the agency’s Central Liquidity Facility.

The board also adopted a proposed rule intended to ease the transition to the Current Expected Credit Loss Standard. Board members said they oppose making credit unions comply with CECL, which will require financial institutions to recognize the expected lifetime losses at the time a loan or financial instrument is recorded. The effective date of CECL has been pushed back until January 2023 for credit unions.

Hood said he has contacted the Financial Accounting Standards Board and asked for a credit union exemption, saying that “the compliance costs overwhelmingly exceed the benefits.”

McWatters agreed, saying, “The projected compliance cost for credit unions and other community financial institutions in administering CECL was excessively and disproportionately burdensome given the size, complexity, and risk presented by these financial institutions.”

The board also approved a proposed rule governing the assessment of an annual operating fee assessed federal credit unions. The proposed rule would ensure that assets from pandemic-related programs, such as the Paycheck Protection Program, would be exempt from the annual fee process.


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