Thank you Mike, Regina and Lynn for your presentation today and your briefings on the issue. I also want to recognize three other members of your task force who are not here today, Mike Sadowsky from Region 1, Joe Ostrowidzki from Region 3, and Bob LeConte from Region 5. I know your group has spent a lot of time studying the issue and taking our ideas and working them into this proposal, and I appreciate and applaud your committee’s hard work.
In my ten months on the NCUA Board, there is not one issue about which I have heard more, or have found more differing opinions, than that of field of membership. This is an issue that the credit union community has raised with me since my first day on the job.
During my visits with the credit union community across the country, not a meeting goes by without someone raising a field of membership issue, which is often followed by a healthy debate. I have studied the issue of field of membership carefully and will be supporting this proposed rule being issued for a 60-day comment period.
I believe that this proposal incorporates NCUA’s four years of experience in implementing the Credit Union Membership Access Act as well as the marketplace changes that have taken place since passage of the law. I believe this proposal is fully consistent with the letter of the law and provides federal credit unions with responsible growth opportunities.
As far as the details of the proposed policy, I just want to address a couple of issues.
First, I want to address the issue of the elimination of overlap protection to the greatest extent possible. It is my understanding that the Field of Membership Taskforce has found no empirical evidence to indicate that overlaps have an adverse impact on credit unions. In fact, past reports to the NCUA Board have indicated that overlaps do not harm credit unions. It is my opinion that overlaps will obviously provide members with more choices and those choices will ultimately strengthen credit unions and the credit union system because of the increase in competition.
Secondly, I strongly endorse the proposed definition of service facility for adding a group to a multiple group credit union. As we march further into the 21st century, alternative methods of providing credit union service will be established. The use of wholly owned ATMs and shared branch networks recognizes the changing financial marketplace. As the marketplace changes, we here at NCUA need to change with it. I want to point out that this proposed definition of service facility would not be applicable for those credit unions adding underserved areas. The statute is clear that for those credit unions wishing to add an underserved area, that they need to have a physical branch location within that area. I wholeheartedly support this statutory requirement.
Finally, I am very pleased with the new definition of what constitutes a local community. The Board addresses this issue at almost every board meeting. This new definition is consistent with what I have found at my time here at NCUA; that is, a single city or county, by its very nature, is a local community because the area has the same political governance, taxing authority, governmental services, school systems, media and trade area. These are the same factors we look at to determine if an area is a local community and it simply makes sense to carve out this presumption. We have had vast experience in reviewing local communities that are in multiple jurisdictions. I applaud the Field of Membership Task Force’s work on studying the definition of metropolitan statistical areas and providing us a workable proposal. The third portion of the definition of local community resulted from our historical experience. The proposal is stating that an area comprised of multiple political jurisdictions that are not part of a single MSA with up to 500,000 residents may be a local community. This revised definition of local community has taken into account our experience over the last 4 years, is clearly consistent with the Credit Union Membership Access Act and is similar to how other federal agencies define equivalent terms.
Before closing, Mrs. Johnson asked the following three questions of the staff presenting.
1) The first question addresses the trade, industry or profession occupational common bond credit union. Can you go into a little detail on how the geographic limitation will be applied in a trade, industry, or profession occupational common bond credit union?
Staff response: For example, if there is a hospital credit union in Fairfax county and they decided they wanted to just serve the nurses in Fairfax county, they would have Fairfax county as their geographic limitation. If they start to look around and decide that Alexandria would also be a good fit for their credit union and there are nurses in Alexandria, they could come in for a housekeeping amendment and have the geographic limitation be Fairfax County and Alexandria. The geographic limitation would correspond to where their members are and where they readily have service.
2) Although we are raising the economic advisability number, if a group less than 3,000 wants to form their own credit union they still can under this proposal, correct?
Staff response: Yes, that’s correct. As a matter of fact, in my review of the credit unions we have chartered over the past year and a half, we did charter one last year that had 2,500 primary potential members. You look at those on a case by case basis. Just because the group is 3,000 doesn’t mean they can’t be chartered as a credit union.
Thank you. I just wanted to make sure that we made it clear that if a group with less than 3000 members wanted to form their own credit union, they could still do so.
3) Under this proposal by allowing a state charter converting to a federal charter to retain groups obtained through a state’s emergency field of membership provision, aren’t we really just providing them with the same benefit that a federal credit union has when it converts its federal charter?
Staff response: Yes, the provision allowing a state charter converting to a federal charter to keep its group or community added through a state emergency provision only provides these converting credit unions with the same right federal charters have. Federal charters can keep their groups or communities added through federal emergency provisions when they convert to different federal charter types.
Mrs. Johnson proceeded with the following closing statement:
I believe we are issuing a well-balanced proposal that remains within the confines of the law, is consistent with the Credit Union Membership Access Act, and maintains safety and soundness considerations. I encourage interested parties to review this proposal and express your views on the proposed changes.