Banking groups criticize CU membership proposal

Banking groups are pushing back against a National Credit Union Administration proposal allowing credit unions serving more than one group to add underserved areas outside of their existing membership region..The Federal Credit Union Act currently only permits multiple common bond FCUs to add underserved areas to their field of membership if the area covers the outer borders of states immediately contiguous to those in which the CU maintains its headquarters. "Permitting multiple common bond credit unions to add underserved areas that include rural districts will usher in a new wave of super-regional credit unions, whose geographic footprint will cover thousands of miles," wrote Independent Community Bankers of America Regulatory Counsel Michael Emancipator in a May 30 letter to the National Credit Union Administration. .The proposal, introduced in February, would also exempt business loans made by CUs to members in underserved areas from the CU member business lending cap; and expand the definition of an underserved area to include New Markets Tax Credit areas and any region more than 10 miles from the nearest branch of a financial institution..The American Bankers Association criticized the proposal in a May 30 letter. "The proposal, contrary to Congressional intent, would authorize significant field-of-membership expansion while undermining FCUs' physical presence in local communities and undercutting the common bond requirement among membership," the ABA stated. .According to the ABA, the continued easing of membership criteria "has rendered the common bond among credit union members virtually meaningless." The NCUA's frequent easing of requirements has allowed CUs to enlarge geographical boundaries and prioritize expansion at the expense of its previous core mission, according to the ABA. Last year, 16 CUs announced back acquisitions, higher than the 11 in 2021.."Guardrails to unrestricted growth are also important in preventing credit unions from obtaining an unfair competitive advantage over banks," the ABA stated. "Unlike credit unions, banks face more stringent legal and regulatory requirements and do not enjoy tax-exempt status."