WASHINGTON — America’s Credit Unions is backing a National Credit Union Administration proposal that would ease restrictions on which associations can qualify for credit union membership, arguing the change would expand consumer access to financial services while providing regulatory relief to federal credit unions.
In a comment letter submitted to the NCUA as part of its Deregulation Project, America’s Credit Unions said it supports the agency’s determination that the Federal Credit Union Act does not require an automatic prohibition on associational groups whose members must purchase a product or service as a condition of membership. Instead, the trade group said the NCUA should evaluate such groups based on the “entirety of the circumstances” surrounding their operations and purpose.
The proposal would amend the agency’s chartering and field-of-membership rules to clarify that a mandatory purchase requirement does not automatically disqualify an association from qualifying for a common-bond field of membership, provided the client-customer relationship is incidental to the organization’s broader activities and mission.
‘Consistent’ With FCU Act
America’s Credit Unions said the change is consistent with both the Federal Credit Union Act and the Credit Union Membership Access Act of 1998, which directed the NCUA to administer field-of-membership provisions in a way that promotes access to financial services, encourages competition and protects the safety and soundness of the credit union system.
The trade group told NCUA:
- That current field-of-membership rules impose restrictions beyond what Congress intended by implying that associations requiring the purchase of a product or service are automatically ineligible, regardless of other factors. Such restrictions limit the number of consumers who can access affordable credit union services and reduce competition in local financial services markets, according to the letter.
- That the proposed rule would align NCUA policy with the agency’s longstanding “totality of the circumstances” approach to evaluating associational common bonds. The organization noted that prior agency legal opinions and board decisions have recognized that no single factor should determine eligibility.
- That the rule would expand eligibility for associations that may currently be excluded solely because membership requires a product or service purchase. It pointed to the NCUA’s example of a fraternal organization that requires members to purchase insurance, arguing that such groups often have broader missions and activities that extend beyond the customer relationship.
- That the proposal would also provide additional flexibility for both single common-bond and multiple common-bond federal credit unions seeking to add associational groups to their fields of membership. America’s Credit Unions said institutions of all asset sizes, including smaller credit unions, would benefit from a clearer path to serving such groups.
‘Reduces Confusion’
The trade association further argued that the proposal would reduce confusion and unnecessary application denials by directing NCUA staff to evaluate the full scope of an organization’s structure and activities rather than focusing on a single characteristic. The change would advance Congress’ goals of increasing consumer access to cooperative financial services and fostering competition, it said.
America’s Credit Unions expressed support for the factors the NCUA has proposed for determining whether a client-customer relationship is incidental to an association’s purpose. The organization said the factors appropriately focus on a group’s mission and operations rather than a single membership requirement and would continue to exclude organizations whose primary purpose is a customer relationship, such as retail loyalty programs.
Additional Guidance Urged
At the same time, the group urged the NCUA to issue additional guidance and examples to help credit unions apply the rule consistently. Specifically, America’s Credit Unions recommended that the agency provide examples of qualifying and non-qualifying associations, explain how different eligibility indicators will be weighed and clarify how mandatory purchase requirements will be evaluated in practice.
The organization said such guidance would reduce uncertainty for credit unions preparing field-of-membership applications, promote consistency among NCUA staff and regions and reduce the need for appeals. It also offered to assist the agency in developing examples and guidance based on the types of associations credit unions most frequently seek to serve.
The letter was signed by James C. Akin, head of regulatory advocacy for America’s Credit Unions.
