Removing Barriers Blog

Why the Field of Membership Rule Matters to State-Chartered CUs
Posted January 29, 2016 by CUNA Advocacy

Many have asked why the recent NCUA Field of Membership proposal matters to state chartered credit unions.  Here at CUNA we believe that all credit unions, whether federal or state-chartered, should be concerned about the proposal and voice their opinion to the NCUA accordingly.  Consider the following:

  • A vibrant dual chartering system is essential to both federal and state chartered credit unions, because it creates incentives for NCUA and state regulators to move toward allowing broader operating authority and impose fewer unnecessary constraints on operations. 

  • Tension between federal and state charters is important for the dual chartering system to remain viable. Innovation in each charter is more likely when there is competition between the two (as long as it does not compromise safety and soundness of course).
  • It is not uncommon for credit unions to switch between state and federal charters several times.  Having maximum flexibility under either forum is beneficial to all credit unions.

  • Charter choice provides a check and balance on the respective regulator’s authority and processes.  Federal and state regulators must challenge themselves to constantly improve.

  • Charter choice allows credit unions to make the best decisions for members based on available powers, geographic concerns, accessibility of regulators, regulator philosophy, and costs.

  • Remember the lessons of UBIT, which posed the real possibility that state-chartered credit unions might need to convert to a federal charter to avoid the tax burden.  There are many unknowns that may necessitate the need to convert to a federal charter.

So be sure to visit our FOM resource page which contains our Field of Membership Comment Letter Writing Guide as well as numerous other resources on the proposal.  We thank you for your help and support on this crucial issue for ALL credit unions.