ALEXANDRIA, Va.–The NCUA board has voted 2-1 to put out for 30-day comment proposed changes to the NCUA Chartering Manual that would allow CU websites and mobile apps to qualify as “service facilities.”
Board Member Todd Harper cast the dissenting vote, saying the proposal “could render the Federal Credit Union Act requirement a near nullity.”
NCUA Chairman Rodney Hood called the proposal on shared service facilities and FOM “good public policy,” saying it will “allow individuals greater access to affordable financial services.”
Hood noted credit unions that participate in shared branching without an ownership interest are unable to expand their FOM to serve certain SEGs and other groups. But CUs with an ownership interest can take those companies/areas into their FOM.
“This only hurts smaller credit unions and marginalized consumers,” said Hood.
Hood further noted the proposal allows an ATM to qualify as a service facility, but the credit union must still have to develop a plan for serving these areas.
‘A Good Start’
“In many cases I believe this rule will allow credit unions to expand into serving underserved areas with ATMs close to their physical locations,” said Hood, repeating a key focus of his as chairman has been financial inclusion.
The NCUA board five years ago considered a similar proposal on whether a website or app should be considered a service facility, but did not move forward.
He called the current proposal a “good start,” and said he wishes other “technological advances” were also being considered.
“This is not new or novel, the reality is consumers are moving more and more to digital applications, more and more consumers consider their digital apps to be their credit union, more and more younger members never stepped into their credit union,” said Hood.
Harper Opposes Proposal
Harper expressed opposition to the proposal.
“Although I support expanding access to affordable financial services for people of modest means and diverse backgrounds, I cannot support this proposal,” said Harper. “In my view, this proposed rule and request for comment do not conform with either the letter or the spirit of the Federal Credit Union Act.”
Harper said one of the FCU Act’s several requirements for adding a group to a multiple common-bond federal credit union is that the credit union must be “within reasonable proximity to the location of the group whenever practicable and consistent with reasonable standards for the safe and sound operation of the credit union.”
The Chartering Manual, continued Harper, interprets the term “reasonable proximity” as requiring the group to be “within reasonable geographic proximity” of the credit union. The Chartering Manual then explains this means that the group “must be within the service area of one of the credit union’s service facilities.”
Leased ATMs Shouldn’t Count
Harper further said the FCU Act’s requirements for adding an underserved area to a multiple common-bond federal credit union is that “the credit union establishes and maintains an office or facility” in the underserved area.
“The Chartering Manual implements this provision of the Act by requiring a credit union adding an underserved area to its field of membership to ‘establish within two years, and maintain, an office or service facility in the community’,” said Harper
Harper said he does not believe a leased ATM, among other proposed structures, creates a sufficient field of membership nexus under the Federal Credit Union Act.
“What is more, a leased ATM would not serve the needs of an under-resourced community well,” said Harper. “The residents of these communities often prefer, and need, more personalized service.”
A ‘Near Nullity’
Harper noted that in 2015 the NCUA board also considered whether a credit union’s transactional website and mobile banking applications should be included in the definition of a service facility, but did not move forward.
“Construing reasonable proximity to include internet access could render the Federal Credit Union Act requirement a near nullity,” said Harper. “Because the internet is widely available, this broader interpretation would allow field of membership expansion, subject to safety and soundness, to anywhere except rural or remote areas without internet access or wireless service. I do not believe that this is what Congress envisioned, and I do not believe that credit union members will be well-served by this approach.”
New NCUA Board Member Kyle Hauptman, participating in his first board meeting, did not offer comment or ask a question of NCUA staff.