By Jason Stverak
Once again, America’s largest banking trade groups are sounding the alarm over a proposal from the National Credit Union Administration (NCUA) that would modestly modernize field-of-membership requirements for federal credit unions.
According to recent comments from the American Bankers Association (ABA), the NCUA’s proposal would somehow erode statutory limits on credit union membership and expand credit unions beyond congressional intent. The reality is quite different.
The NCUA’s proposed rule is not a radical expansion of credit union membership. It is a practical, common-sense modernization designed to ensure that legitimate associations are evaluated based on their true purpose and structure rather than being automatically disqualified because membership may involve the purchase of a product or service. The proposal would replace an inflexible bright-line test with a more holistic review of whether a genuine associational common bond exists.
Thoughtful Regulatory Reform
For defense credit unions, military families, veterans, and underserved communities, this is exactly the kind of thoughtful regulatory reform that promotes financial inclusion while remaining faithful to the Federal Credit Union Act.
The banking industry’s criticism rests on a familiar narrative. Bank lobbyists argue that every field-of-membership clarification somehow represents another step toward eliminating the common bond requirement altogether. They claim that even narrow adjustments create a slippery slope that weakens the distinction between banks and credit unions.
Yet history tells a different story.
For decades, credit unions have operated under one of the most restrictive chartering frameworks in financial services. Federal credit unions must demonstrate a legitimate common bond among members. They are subject to extensive regulatory oversight. They remain not-for-profit financial cooperatives owned by their members, not shareholders seeking quarterly profits.
Nothing in the NCUA proposal changes those fundamental facts.
Operating Differently
Instead, the agency is recognizing that modern associations often operate differently than they did decades ago. In today’s economy, many organizations provide educational resources, certifications, professional development opportunities, networking platforms, or other services as part of their membership structure. The mere existence of a product or service requirement should not automatically disqualify an otherwise legitimate association from consideration.
The NCUA proposal simply allows regulators to evaluate the totality of circumstances. It asks whether an association exists primarily to foster a common purpose among members or whether it is merely a commercial relationship disguised as an association. That is a reasonable regulatory question and one that experienced NCUA staff are fully capable of answering.
The ABA argues that this approach introduces discretion and uncertainty. But effective regulation often requires judgment. Regulators evaluate facts and circumstances every day in areas ranging from safety and soundness to consumer protection and compliance. The idea that NCUA examiners cannot distinguish between a genuine association and a commercial customer list underestimates both the agency’s expertise and the safeguards already embedded within the field-of-membership process.
The Larger Concern
More importantly, the banking industry’s objections reveal a larger concern: competition.
Credit unions continue to earn the trust of consumers because they focus on service rather than shareholder returns. They frequently offer lower loan rates, higher savings yields, fewer fees, and personalized financial guidance. Military and veteran-focused credit unions in particular have built generations of trust by serving communities that many large financial institutions overlook.
When banks complain that credit unions may gain access to additional eligible members, what they are often expressing is concern that consumers will have another choice.
Competition should not be feared. It should be welcomed.
The NCUA proposal does not grant credit unions unlimited growth authority. It does not eliminate common bond requirements. It does not convert credit unions into banks. It merely ensures that worthy associations are not denied access to cooperative financial services because of an overly rigid interpretation of a regulatory standard developed for a different era.
Particular Significance
For defense credit unions, the stakes are particularly significant.
Military communities are increasingly mobile, geographically dispersed, and digitally connected. Veterans transition across states and careers. Military spouses move frequently. Reservists and National Guard members balance civilian and military responsibilities. Associations supporting these populations often have complex membership structures that do not fit neatly into outdated regulatory categories.
A modernized field-of-membership framework helps ensure that these communities can continue accessing mission-focused financial institutions that understand their unique needs.
That aligns directly with Congress’s longstanding objective of promoting access to affordable financial services through cooperative ownership.
What’s Worth Remembering
It is also worth remembering that the NCUA proposal comes at a time when the agency is pursuing a broader effort to reduce unnecessary regulatory burden and modernize outdated rules. Across multiple initiatives, the agency has sought to eliminate prescriptive requirements that no longer serve members or institutions effectively while preserving safety and soundness protections.
That approach deserves support.
Credit unions face increasing compliance costs, technological demands, cybersecurity threats, and competition from nonbank financial providers. Regulators should be focused on ensuring institutions can serve members effectively, not preserving unnecessary barriers that no longer reflect economic reality.
The banking industry’s argument ultimately boils down to this: because credit unions have succeeded in serving consumers, regulators should make it harder for eligible consumers to join them.
That is not a compelling public policy argument.
NCUA’s Real Responsibility
The NCUA’s responsibility is not to protect banks from competition. Its responsibility is to administer the Federal Credit Union Act faithfully, promote safety and soundness, and ensure that consumers have access to cooperative financial services.
This proposal accomplishes those objectives.
The Defense Credit Union Council strongly supports regulatory reforms that expand responsible access to financial services while maintaining the integrity of the credit union charter. The NCUA’s proposed field-of-membership modernization strikes exactly that balance. It preserves the common bond principle, provides regulators with appropriate flexibility, and recognizes the realities of how associations operate in the modern economy.
Rather than resisting every effort to modernize credit union regulation, banking trade groups should focus on competing for consumers through better products, better service, and stronger value.
Credit unions have been doing exactly that for more than a century.
NCUA Deserves Credit
The NCUA deserves credit for advancing a proposal that reflects today’s realities while remaining grounded in the cooperative principles that have always defined the credit union movement. For military families, veterans, and millions of Americans seeking affordable financial services, that is a step in the right direction.
Jason Stverak is chief advocacy officer with the Defense Credit Union Council.
