Field of Membership

Background

As member-owned, not-for-profit cooperative financial institutions, credit unions provide local communities with key financial products and services. Unlike for-profit financial institutions, which operate with the purpose of maximizing shareholder profits, credit unions operate with the objective of returning benefits to their members in the form of lower interest rates on loans and higher returns on savings and deposits. 

In order to benefit from the advantages of a credit union membership, individuals must be eligible to join a credit union. Usually, this means a person falls within a credit union's (FOM). A federal credit union's FOM may include individuals who share a common bond of occupation, association, or community. But if a person does not directly qualify for membership, they may still be eligible to join because of a close relationship with someone who does qualify.

2016 FOM Rule

In 2016, the NCUA Board finalized a new FOM rule, which represented the most comprehensive field-of-membership reform initiative that the credit union industry has seen in more than 10 years. The final rule contained many NAFCU-sought changes that would help federal credit unions reach potential members who want and need affordable financial services as well as provide much needed regulatory relief by streamlining the FOM process for community, multiple common bond and trade, industry or profession (TIP) charters alike.

The final rule incorporated most of the provisions from the 2015 proposal, including:

  • Revised definitions of well-defined local community to include CSAs and portions of a CBSA;
  • Expansion of options for a multiple common bond credit union to add potential members;
  • Expansion of options available to single common bond credit unions based on a trade, industry or profession; and
  • A streamlined process for applying to expand membership in a federal credit union.

Download NAFCU's Final Regulation summary and analysis of the 2016 final FOM rule to learn more. The final rule took effect in February 2017; however, portions of the rule were invalidated as a result of the U.S. District Court for the District of Columbia’s decision in American Bankers Association v. National Credit Union Administration.

2018 FOM Rule

Additionally, in 2016, the NCUA issued a proposal, separate from the 2016 final FOM rule discussed above, to amend its chartering and FOM rules. In general, the proposal would expand FOM options for federal credit unions and correct certain discrepancies in the final rule. The 2016 proposal contained additional NAFCU-sought changes, including:

  • Raising the population cap for well-defined communities to 10 million;
  • Allowing federal credit unions that seek community charter expansions to present a narrative-based rationale; and
  • Permitting a credit union to designate a portion of a CBSA as its community without regard to metropolitan division boundaries.

On June 28, 2018, the NCUA published a final FOM rule for community charter credit unions following its 2016 proposal to amend the agency’s Chartering and Field of Membership Manual. The final rule provides that community charter applicants may submit narrative documentation to establish common interests or interaction among residents to demonstrate that a proposed area qualifies as a well-defined local community. A narrative application may be used in lieu of the presumptive community model. Narrative applications would have no population limit, but where the proposed community exceeds a population of 2.5 million people, the NCUA will hold a public hearing.

The rule took effect September 1, 2018. NAFCU published a Final Regulation that covers key aspects of the new rule.

Litigation

In December 2016, the American Bankers Association (ABA) sued the NCUA over its 2016 final FOM rule. The ABA challenged four aspects of the NCUA’s rule related to community charter expansion. In June 2017, NAFCU filed an amicus brief supporting the NCUA's rule, which was the first meaningful update to the agency's FOM rules over the past decade.

On March 29, 2018, the U.S. District Court for the District of Columbia held that the NCUA lost the following challenges:

  • Treating any portion of a Combined Statistical Area (no more than 2.5 million people) as a presumptive, statistical community.
  • Increasing the population limit for rural districts to 1 million people.

The other aspects of the rule—adjacent area expansions and the treatment of CBSAs—were upheld. The NCUA has since appealed the ruling.

In August 2019, the U.S. Court of Appeals for the D.C. Circuit remanded the case with instructions to rule in favor of NCUA on the two provisions originally struck down by the U.S. District Court for the District of Columbia. The D.C. Circuit also asked for additional explanation of the NCUA's decision to eliminate the urban-core requirement for local communities based on CBSAs. After reviewing the D.C. Circuit’s ruling, the ABA asked for a hearing in front of the full D.C. Circuit.

In December 2019, the U.S. Court of Appeals for the D.C. Circuit denied a rehearing en banc, providing a victory for the NCUA and the 2016 FOM rule. In March 2020, the ABA petitioned the U.S. Supreme Court to hear the case but that petition was denied in June 2020.

Resources

In addition to the NAFCU resources on field of membership reform, NCUA offers the following resources on their website:

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