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The NCUA Board on Thursday finalized a NAFCU-sought rule to further reform field-of-membership (FOM) rules, and also approved a final rule on voluntary mergers that contained positive changes from its original proposal. NAFCU has pushed NCUA's efforts to modernize FOM in order to allow credit unions to serve more consumers.

"NAFCU and our member credit unions thank Chairman [J. Mark] McWatters and Board Member [Rick] Metsger for recognizing the importance of modernizing FOM rules to give credit unions the opportunity to keep growing and serve even more Americans," said NAFCU President and CEO Dan Berger. "We support the provisions contained in this second FOM rule and will continue to support the agency's first rule that is still being challenged by the bankers. We believe these FOM reforms fall well within the agency's legal authority.

"Despite some positive changes from the proposal, we are still concerned about the potential impact of the agency's final voluntary mergers rule. While we support increased transparency and disclosure, the rule could create unnecessary and troublesome roadblocks for responsible credit union mergers," Berger added.

Field-of-Membership

The FOM II final rule took into account issues raised in the NCUA's lawsuit with the American Bankers Association (ABA) challenging the agency's first FOM rule, which struck down two provisions related to combined statistical areas (CSA) and rural districts.

The final rule becomes effective Sept. 1 and:

• allows credit unions seeking approval to form, expand or convert to a community charter the option to submit a narrative as to why a particular area meets their field of membership;

• maintains the population limit of statistical areas at 2.5 million, while providing that narrative applications subject to a public hearing may exceed the limit; and

• allows the board to permit a credit union to designate an individual portion of a Core-Based Statistical Area as its community no matter the metropolitan division boundaries within the area.                                 

McWatters explicitly acknowledged the federal court's recent decision in the FOM I suit, and said the new rule in no way attempts to contravene it. The board also indicated that the FOM II rule will provide more flexibility, consumer choice and public input.

Voluntary Mergers

The final voluntary mergers rule was significantly revised from its proposal, based on stakeholder feedback, but NAFCU remains concerned about increasing credit unions' regulatory burden. The final rule becomes effective Oct. 1 and:

• extends the required time in advance of a vote to a minimum of 45 days;

• requires merging credit unions to disclose merger-related compensation increases above $10,000 or 15 percent of compensation, whichever is greater, for certain employees and officials of the merging credit union;

• clarifies the contents and format of members' notices; and

• establishes a portal for members of the merging credit unions to provide comments about the proposed merger to the NCUA on its website.

Also during Thursday's meeting the NCUA Board received an update on the agency's Enterprise Solution Modernization Program as it moves forward with additional initiatives to streamline the agency's processes, technology and infrastructure.

The board further discussed changes made by S. 2155 and the NCUA's subsequent rule to exclude loans made on 1-to-4 unit family dwellings from credit unions' member business loan cap. That change became effective June 5.