Bankers vs Credit Unions: The Field of Membership Face-off


by Robert McGarvey For CULIANCE

A lot is at stake as credit unions and bankers face-off over the NCUA’s new field of membership (FoM) rules – and the American Bankers Association has already filed suit to derail the proposal. The outcome of this fight may mean a lot to credit unions, also to residents of rural America, and possibly to community banks.

And just possibly, there is another way of looking at this conflict wherein everybody can win – except maybe the money center banks. More on that innovative perspective – from a credit union CEO – later.

There are multiple wrinkles in the FoM changes, but most eyes are on the new NCUA rule allowing credit unions to apply for an expanded field of membership into adjacent rural areas – where population doesn’t exceed one million residents. That would include all of these states – Alaska, North Dakota, South Dakota, Vermont and Wyoming.

Large chunks of many other states would also be impacted – for instance, Maine, New Mexico, Nevada, even Arizona (where Phoenix and Tucson are the most populated areas in the state – the rest of the state is pretty rural).

Therefore, the  obvious winners under the new rules – if they survive the legal challenge – are rural residents.

Big banks do not give a hoot about these regions or about credit unions, for that matter. Marvin Umholtz, a longtime expert in credit unions and financial services, said, “Historically these mega-banks have been characterized as not viewing the credit union industry as a major competitive threat compared to the many other regulatory and marketplace challenges those huge institutions face. That appears to still be true today.”

But community banks view the FoM changes as goring their ox – and it is the community bankers who are up in arms and are behind the ABA suit.

ABA President and CEO, Rob Nichols explained his group’s opposition this way, “We’re deeply concerned about NCUA’s decision to go beyond its statutory authority to move credit unions even further away from the common bonds that define their missions.”

NCUA, for its part, defended the expansion as rooted in its consumer friendly commitment, “This comprehensive rule expands consumer access to credit and provides them a safe place to invest their life savings,” said NCUA Board Chairman, Rick Metsger.

Metsger is right. In much of rural America, there isn’t exactly a stampede of bankers.

Paul Stull, CEO of the Credit Union Association of New Mexico, pointedly said, “It is hard to understand why banks oppose growing fields of membership, especially in rural and underserved areas when they have been busy closing branches.”

Stull added, “Credit unions are the primary source of access to financial services in rural communities like New Mexico, and in many other states. Banks have shuttered branches in these rural communities because they don’t produce enough profit, leaving residents without access to basic financial services which requires them to drive many miles for access.”

In addition, for what it’s worth, Sarah Snell Cooke, a longtime executive with Credit Union Times, said she thought NCUA would prevail in court even though – or maybe because – in 2008, NCUA suffered an embarrassing loss in court over its granting of a community charter to Members 1st Federal Credit Union in Mechanicsburg, PA.  Said Cooke, “After the previous problems, I can’t imagine they wouldn’t really, really protect themselves.”

Pat Keefe, a long term observer of credit union – bank conflicts, also expressed optimism: “[there] are good signs for the agency’s position. On the other hand: we’ve all been surprised before by the courts.”

Even so, maybe the smartest way forward is to bury the enmity and for credit unions and community banks to join together to provide rural America the financial services they sorely need. That’s the big idea put forth by Edward Lopes, CEO of Liberty Bay Credit Union in Massachusetts. Lopes elaborated that just maybe peace – not discord – is the smarter way forward for credit unions and community banks.  “In our experience, many community banks welcome the addition to the market that community credit unions represent.  As opposed to large, aggressive financial institutions, we both tend to follow complementary business models.   We tend to become directly and significantly involved in community matters.  There is a growing body of evidence that credit unions and community banks should work more closely rather than participate in antagonism campaigns.”

Lopes does not say it – but it also is true that both community banks and credit unions face continuing business survival threats from the big money-center banks.

So maybe they should just work together to bring a new, better kind of banking to underserved, rural communities and, in doing so, everybody wins.

Except the money center banks.

In an atmosphere of prevailing enmities, it may not be entirely realistic however, it nonetheless is an idea worth pondering because it just may be the way to preserve small financial institutions – be they credit unions or community banks – and also to bring financial services to presently, underserved communities. That’s win-win-win.

In that vein, Cooke said, “I find that doing what’s right for your customers/members is the path to success rather than constantly attacking your competitors. And credit unions are wise to do the same.”




Author: The Credit Union Exchange

CULIANCE is a CUSO that draws its strength from inclusion not size. As an alliance of credit unions, we believe that together credit unions can accomplish so much more than they can alone. We’re devoted to the purpose and the potential of the credit union community, and are continually pursuing ways to engage, support, and inspire it. Our state-of-the-art, affordable products and services are developed to ensure you meet the demands of an ever-changing, dynamic financial services industry so that you can better compete and help improve your members’ lives. For more information, please visit or call (877) 570-2824.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s