The Missouri Credit Union Association (MCUA) filed a comment letter with the National Credit Union Administration (NCUA) on June 30, 2014, addressing the agency’s field of membership (FOM) proposed rule. The proposed rule would amend the associational common bond provisions of NCUA’s chartering and field of membership manual. The amendments would add a threshold requirement for approval of new associations, expand the totality of circumstances test used to analyze new associations and add a category of preapproved associations. The proposal also discusses how NCUA reviews current associations to ensure they continue to operate in the manner they did when originally approved by NCUA.
MCUA supports aspects of the rule because it gives credit unions a measure of regulatory relief by detailing current practices and adding categories of associations that can be added to a credit union’s FOM without agency approval. MCUA would support the threshold requirement as a quick means to analyze an association to see if it is appropriate for application to NCUA, but not as a method used to exclude an association that would otherwise pass NCUA’s totality of circumstances test. MCUA also supports the additional separateness factor in the totality of the circumstances test because it in itself is indicative of an association that would meet all of the other factors of the totality of circumstances test.
MCUA remains concerned with what NCUA terms “quality assurance reviews” of approved associations. NCUA has indicated that these reviews are triggered by public complaint that an association does not have a “sufficient associational common bond,” which essentially means it is no longer operating as it did when approved by NCUA. MCUA thinks that, absent egregious practices, an association should be grandfathered and not be subject to review. If NCUA insists on these reviews, the agency should detail the ways an association can remedy deficiencies and formalize an appeals process that credit unions can use if NCUA determines that an association will be forcefully removed from an FOM.
NCUA has indicated that it is open to adding new groups to its pre-approved list of associations, and suggests the agency develop a method for adding pre-approved groups on an ongoing basis and not solely as part of the cumbersome notice and comment process.
With a few improvements, the proposal could be positive for credit unions—especially if it allows NCUA to defend its interpretation of the Federal Credit Union Act’s FOM requirements.