Posts tagged ‘Field of Membership’

Why passage of BDD legislation is a big deal

Good morning folks! As many of you undoubtedly know by now, last Thursday, Governor Cuomo approved legislation permitting credit unions to participate in the Banking Development District (BDD) Program. Here are some initial takeaways.

  • Now comes the hard part. Now that credit unions have the ability to participate in the program, it is incumbent on the industry to take advantage of this opportunity. Here is a link to information about the BDD Program. The Association is, of course, more than willing to help with the process.
  • A win is a win is a win. If the definition of insanity is doing the same thing over and over again and expecting different results, then many credit union lobbyists are pretty close to insane. The BDD Program began in 1996 and credit unions have been arguing for inclusion ever since.   However, persistence gets results and ultimately, the better argument wins the day, even in Albany. It just takes a while.
  • Passage of this bill is an important step toward allowing all municipalities to put deposits in credit unions. Its enactment further undermines the argument that credit unions can’t be trusted with public funds or somehow don’t deserve to play on the same field as banks.
  • Last but not least, this is an important win for New York consumers. Governor Cuomo’s Department of Financial Services originally proposed extending the BDD program to credit unions a few years ago out of frustration that not enough banks were participating in the program. It also recognized that maximizing the number of potential financial partners for local communities in need of economic development was a good thing for New York consumers. The Department was right to propose the bill and the need for struggling communities to access financial partnerships has, if anything, increased in the last few years.

Another big win for CU Field of Membership Case

Credit unions got one step closer to solidifying the decision of the Court of Appeals for the DC Circuit upholding most of NCUA’s 2016 Field of Membership regulations when that same court on Thursday rejected a motion by the bankers requesting that the entire court reconsider the decision en banc. En banc is a motion requesting that an entire circuit court, and not just a three judge panel, reconsider a decision.

The rejection of this motion means that the bankers now must decide whether or not to request that the Supreme Court hear an appeal of a case. My guess is that they will file a petition. After all, if it’s fourth and ten with two minutes left on the clock and your team is down by three points, there is no down side to going for a first down. Also left to be decided is that portion of the decision requiring the NCUA to amend its regulations to prevent racial gerrymandering of credit union service areas.

On that note, have a great Monday!

December 16, 2019 at 7:54 am Leave a comment

What Yesterday’s Ruling Means for CUs

Yesterday’s decision  by the Court of Appeals for the District of Columbia represents the most important legal victory ever achieved by credit unions. If it is upheld on appeal, not only does it give federal credit unions the flexibility they need to continue to grow, it creates an analytical framework, which, if adopted by other courts, empowers NCUA to move aggressively to protect the economic viability of the industry going forward.

In making its ruling the Court explained: “We review the rule not as armchair bankers or geographers, but rather as lay judges cognizant that Congress expressly delegated certain policy choices to the NCUA. After considering the Act’s text, purpose, and legislative history, we hold the agency’s policy choices “entirely appropriate.”

First, the ruling is important because it will allow community-chartered FCUs to grow more easily. Since the passage of the Credit Union Membership Access Act of 1998, the growth of community credit unions has been constrained by the requirement that credit union communities be well defined and “local”. In a string of decisions, the banking industry has used this language to stifle credit union expansion, culminating in field of membership restrictions so restrictive that NCUA basically deprived itself of any discretion when reviewing applications for community expansions.

NCUA relies primarily on geographic determinations devised by the OMB in analyzing community charter expansion requests. As explained by the Court, a Core Based Statistical Area comprises at least one urban cluster, or core, of 10,000 or more people and adjacent counties with substantial commuting ties to that core. Think of NYC and its surrounding suburbs. A Combined Statistical Area is a conglomerate of two or more adjoining Core Based Statistical Areas, each of which has substantial commuting ties with at least one other Core Based Statistical Area in the group. Think of the DC area.

In 2016, the NCUA recognized that its existing FOM requirements were too restrictive. It passed a series of amendments to its chartering manual that redefined the definition of a “local community”. Under these changes, a local community is one that encompasses the whole or a portion of a Combined Statistical Area so long as it does not exceed 2.5 million people. Regardless of how many people lived in the CBSA.  Secondly, NCUA concluded that a Core Based Statistical Area could house a credit union community without also serving the area’s urban center. It also allowed a community to stretch over  Finally, the NCUA also changed the definition of what constitutes a rural district.

The banks argued that in 2016 NCUA abused its discretion by giving itself the power to authorize local communities which could conceivably stretch from Maryland to Pennsylvania. They argued, and the lower court agreed, that any area larger than a county was not local.

In contrast, in its ruling, the Court held that NCUA has “vast discretion” to define what a “local” community is and that “local” does not mean small. It explained that “The NCUA sensibly reads the term “local” to mean simply that the community, regardless of shape or size, should be neither “broad” nor “general.”

Beyond its immediate operational impact, the ruling could have important consequences for future debates over what NCUA can do and why. For example, the latest line of attack on the industry is that NCUA has allowed credit unions to grow too big and that these credit unions have grown too detached from their core mission. The Court takes this argument head on: “We recognize that there may be some tension between the Act’s principal purposes: A credit union with exceedingly close ties among its members is unlikely to have a large enough customer base to thrive economically. To the extent that such tension exists, the Act leaves to the NCUA to strike a reasonable balance. Congress was well aware that a viable credit union might serve a relatively large geographical area”.

The decision is not a complete victory for the industry. Most importantly, the Court ruled that NCUA had to do a better job of explaining why credit unions should no longer be required to serve the core population centers of Core Based Statistical Areas. Furthermore, it cautioned that communities could be designed to discriminate by gerrymandering around minority communities.

Finally,, the Court also repeatedly cautioned that not every single community that might be approved under these regulations will automatically pass the legal smell test. Expect the bankers to go back to court the second they see a credit union authorized to go forward with a large expansion.

But even these negative qualifiers come with silver linings. For instance, the Court is so confident that the NCUA can justify its decision to no longer mandate that credit unions serve e core areas, it is allowing the regulation to remain in effect as NCUA works to respond to this ruling. Furthermore, banker litigation is as inevitable as is the change in seasons. While they may continue to challenge large community expansions and individual agency determinations under these new regulations, the ruling means that credit unions can start making plans for expansion with much less uncertainty.

One final note of caution. The battle has been won but the war is not over. The bankers will undoubtedly attempt to get the Supreme Court to hear this case. If they succeed in doing so, the industry, of course, runs the risk that the Court will rule against NCUA just as it did in 1998.

August 21, 2019 at 12:01 pm 2 comments

Get Ready To Publicly Defend Your Community FOM

Happy Summer People. Yours truly is back after spending some time in God’s country (a/k/a Long Island) and going to the Harry Styles concert with my 15-year-old daughter. I have to admit I liked it.

I also took some time to read though the results of last Thursday’s NCUA board meeting. And I think the material is important and/or dense enough to be broken up into two blogs. Today I will be doing an overview of some field of membership changes the board approved and tomorrow I will be talking about additional requirements imposed on merging credit unions. State credit unions will be particularly interested. How’s that for a cliff hanger?

Under the new FOM regulations, there are limited circumstances under which credit unions can use a narrative approach to explain why an area should be considered part of a well-defined local community even though it falls outside pre-recognized government boundaries in a very helpful move the NCUA has outlined 13 criteria which credit unions should use in developing the narrative. Now remember, don’t think that your credit union has to satisfy each criterion in order to get approved for a community charter expansion but the more you can address the areas of concern to NCUA, the better off you will be.

The biggest change NCUA has approved is a requirement to mandate public hearings any time a credit union is using a narrative approach to expand beyond 2.5 million people. Under this approach, interested parties will be authorized to provide written comments on the proposed expansion and there will be a public hearing limited to no more than seven people. For those of you interested in finding out more about this new requirement, you can find it in the amendments to § V.A.2 of the Chartering Manual in the Final Rule.

This is just one man’s opinion. But because one of the most common areas of attack by the bankers is that NCUA abuses its discretion in approving community charter expansions creating a mechanism for a detailed public record and hearing process actually makes sense.

Who Said You Can’t Go Home Again Or Meet The New Boss, Same As The Old Boss

Is it just me or does anyone find it the slightest bit troubling that the NCUA Board is of so little interest to so many people that individuals are re-nominated for second acts?

Whether you are a fan of Pete Townsend or Thomas Wolfe, NCUA continues to show that it welcomes people back with open arms. Last week, as I’m sure many of you already know, the Trump Administration nominated Rodney Hood to serve as the Democrat on the pre-member board which currently only has two members. If he is approved by the Senate, board member Rich Metsger can finally get on with his life. His term would expire August 2, 2023.

What I am most interested in learning more about is whether Mr. Hood is willing to take a second look at NCUA’s pending risk based capital regulations for credit unions with 100 million or more in assets.

On that note, enjoy your day.

June 25, 2018 at 9:19 am Leave a comment

Gone Fishing!

Image result for gone fishing pictureYour faithful blogger has headed South for Spring Break. I’ll be back again next Monday with my thoughts on the state budget, the recent  court decision limiting NCUA’s field of membership expansion and some thoughts on why CRA Reform could become a big issue for credit unions.


April 2, 2018 at 8:37 am Leave a comment

Proposed Legislation Would Deal Fatal Blow To The Industry

This is one of those blogs where I have to remind you all that the opinions I express, are mine and mine alone.

Why do I feel the need to make that qualifier today? Because in my opinion, the credit union industry faces it’s most credible legislative threat to its long-term existence than it has in at least the decade I have been involved in the industry.

The proposal to which I am referring (§9 H.R. 3280) would subject the NCUA to the congressional budget process. Why is this such a pernicious threat? Because through the budget process, the Banker’s Association, aided and abetted by their allies in Congress, would gradually strip the NCUA of needed resources and use the appropriations process to stifle needed regulatory reforms. For example, an agency subject to the congressional appropriations process would be much less likely to champion Field of Membership improvements that help credit unions serve more members.

Supporters of this bill would tell you that NCUA is being treated no differently than other independent agencies that House Republicans are proposing should be subject to its oversight. This argument has a certain facial appeal. After all, a strong argument can be made that independent agencies like the CFPB are unconstitutional. But in reality, this proposal has nothing to do with constitutional niceties. Unlike the CFPB, a multi-member board already oversees NCUA’s operations.

Our trade associations are right on the money to sound the alarm about this legislation. It must be defeated or the industry as we know it will, over time, cease to exist. On that note, I will see you tomorrow.

September 12, 2017 at 8:30 am 1 comment

Pending Legislation Impacts Credit Unions


With the Legislature entering its last couple of days, bills are now passing with the conveyor belt rapidity that typically marks the end of New York’s Legislative Sessions.  Here are some of the issues to keep an eye on as the session winds down.

S. 2089/A.3510 would allow state charters to serve  multiple common bonds within a credit union’s field of membership. For instance, Acne Credit Union has a Select Employee Group of employees who work for the ABC manufacturing company in the Village of Pleasantville.  If this bill passes, it could seek the Department of Financial Service’s  approval  to add the residents of Pleasantville to its field of membership.  Contrary to some of the information that has been floated in opposition to the bill, no one could be served under this bill who isn’t already eligible to be a credit union member:  it simply increases the number of credit unions a member is eligible to join.

Another bill of interest to credit unions -S.5145/A.7341 – was already passed by the Legislature earlier this week.  It authorizes financial institutions to raffle off prizes to members who agree to open up savings accounts or buy certificates of deposit.  As I’ve mentioned in a previous post, this bill is a great way to encourage people to save their money rather than just throwing it away for the joy of tearing up losing lottery tickets.

One bill that your HR person should keep an eye on  is S.5872.  While existing state and federal law already outlaws pay discrimination based on an employee’s sex, state law does permit pay differentials to be based on any other lawful factor other than sex.  Legislation advocated for by the Governor since his State-of-the-State Address in January would narrow this exception, permitting pay differentials between employees of different sexes to exist only on the basis of  “a bona fide factor other than sex, such as education, training, or experience.” Under the bill whatever factor used by the employer would have “to be job-related with respect to the position in question” and  “consistent with business necessity.”  Finally, not even this exception would apply when the employee “demonstrates (A) that an employer uses a particular employment practice that causes a disparate impact on the basis of sex, (B) that an alternative employment practice exists that would serve the same business purpose and not produce such differential, and (C) that the employer has refused to adopt such alternative practice.”

Although much of this language mirrors existing federal requirements,  by seeking to clarify the parameters of an employer’s discretion regarding pay issues the bill would present new challenges.  In addition, by authorizing a successful plaintiff to collect damages up to three times an employee’s lost wages for “willful violations,” the bill is designed to make sure that there is no shortage of legal aid  for employees who may not be able to afford an attorney.

By tomorrow morning we should know if the Legislature acted on most of these bills, so stay tuned and remember although it can be pretty gruesome watching sausage being made, if it’s made properly it tastes great.



June 20, 2013 at 6:45 am Leave a comment

Big Changes Require Bigger Ideas

This week’s Census Bureau Survey detailing the economic plight confronting Americans serves as a fresh reminder to our Banking brethren of why credit unions are needed.  A conversation I had with a member of the industry demonstrates why we have to advocate for fundamental changes to our structure if credit unions are going to be able to continue to carry out our core responsibilities. 

According to the Census Bureau, household income is declining, and as reported by the Wall Street Journal, “is now roughly in line with what it was in 1996.”  In fact, the poverty rate is at its highest point in the 52 years the Census Bureau has been taking yearly snapshots of the economy and the American household.  Nor is this a new phenomenon: the earnings of a working full-time male are lower now, adjusted for inflation, than in 1978.  For more and more Americans, the American economy has morphed from a ladder into a treadmill.

I was filing these articles when I got a phone call from one of the true believers in our Movement; a CEO who wants to offer financial products precisely to the types of people for whom these statistics are not an abstraction but an everyday reality.  She is frustrated because it is getting more and more difficult to get the people most in need of financial services to come in the doors and to cost effectively provide them services.  The CEO has found that more and more people are using prepaid cards and check cashers to get through the day.

The problems she points to are not unique to her credit union or asset size, but instead reflect the fact that credit unions were structured in a 20th century world with a large manufacturing base and rural communities cut off from the centers of commerce.  It was logical to categorize members by employee groups and distinct communities.  Now that people change jobs several times in a career and the internet connects communities all over the world these categories are increasingly outdated and restrictive.

If credit unions are going to prosper in the more unstable and unpredictable economy of the coming decades, the industry needs to think big and push for changes on both the state and federal level that give us the flexibility to work with people irrespective of where they live or work.

For instance, federal law now allows federal charters to provide check cashing services to nonmembers within their fields of membership. Why not dream of the day when we can provide mortgages to persons outside of the communities in which we are chartered or who don’t belong to our employee group and work to make this a reality?   I know that none of these changes will happen quickly, but that’s all the more reason to get started right away.  The American worker needs us more than ever but can only wait so long for these changes to be made.

September 16, 2011 at 7:00 am 1 comment

Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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