BIRMINGHAM, Ala.—NCUA’s FOM proposal provides more growth opportunities for CUs, asserts one former NCUA chairman who believes the agency could have been more aggressive with changes to the existing rule.
Dennis Dollar, principal at Dollar Associates, said the proposal—if made a final rule in its current form—will only slow the migration of federally insured credit unions to more growth-friendly state charters.
“I don't think, as proposed, that the rule will make very many—if any—state charters seriously consider converting to the federal charter,” said Dollar. “However, it may hold a few federals that really want a reason to stay with the federal charter for at least a few years. Most states have parity laws, however, and will track these changes at a minimum. Many states will, as they have for a number of years, go beyond the federal criteria. Ultimately, a statutory fix is needed to keep the federal charter competitive. But until then NCUA should try to modernize their rules as much as possible within the law. While this proposal could go much further under the law, it is a positive step and NCUA is to be commended for treating the issue seriously."
Dollar told CUToday.info that it is obvious the NCUA board and staff put a great deal of time into the proposal.
“They are treating FOM as the crucial issue for credit union diversification and long-term financial stability that it is,” said Dollar. “There are some quite positive aspects of this proposal, such as the more reasonable community definitions and the modernized approach to reasonable proximity for SEGs in this tech-based era.”
Credit unions, however, will be disappointed that NCUA left in place the arbitrary population caps for MSA communities and, even though the agency increased those caps for rural districts, said Dollar. “They could have gone further under the statute in these areas and several others, such as allowing reasonable proximity for physical presence in an underserved area.”
Dollar stated that overall, the proposal is well within what the law allows.
“In fact, in my view, they could have been more aggressive and still stayed well within the law's provisions,” said Dollar. “For example, there is no statutory requirement for population caps on community charters as there were none from the 1999 rules through the 2003 rules, until they were added in 2010. The 1999 FOM rules, without population caps, were challenged in court and NCUA prevailed.”
Since the FOM rules have not been modernized since 2003, and no consideration given to the changing marketplace and demographics of credit union service areas, “this is an important issue and the NCUA board deserves commendation for addressing it,” concluded Dollar.