COMMENT PERIOD ENDS NEXT WEEK ON IMPORTANT SERVICE FACILITY RULE WITH SIGNIFICANT FOM RAMIFICATIONS
Thursday, February 4, 2021
Next Wednesday, February 9, is the last day to submit an official comment on NCUA’s proposed rule on the definition of a service facility for field of membership purposes.
As we have outlined in a previous Client Update when the rule was proposed, this is a very significant – if not about a decade behind the times – regulation that essentially allows a federal credit union to utilize a shared branch (if they are a part of a shared branching network either through an ownership interest or participation agreement) or an ATM as a service facility to meet the reasonable proximity requirement for serving SEGs, associations, and underserved areas.
While ATMs matured in the 1980s and shared branching truly came of age in the 1990s, NCUA has finally come around to recognizing that these are legitimate service facilities and a means by which federal credit unions can meet NCUA’s reasonable proximity requirements (which have historically required a service facility to be situated within 25 miles of a SEG or association and actually inside the boundaries of an underserved area) that currently require the expense of brick and mortar or leased space.
Since a growing number of members access their credit union through a smart phone in their pocket, a tablet under their arm or a laptop on their desk, it is a sign of how behind the times NCUA is that they are just now in 2021 recognizing participation in shared branching and ATMs as service facilities.
The definition of service facility should absolutely be much broader to include the digital access that is the primary means by which more and more members are served by their credit unions.
This proposed rule is important to all SEG-based credit unions because it will expand their ability to take in more SEGs and associations without having to serve with bricks and mortar if it is not located within reasonable proximity of an existing branch, again, historically considered to be within 25 miles. The proposed rule removes the current outdated requirement that a credit union must have an ownership interest in shared branching in order to qualify as a service facility and states that if the credit union is an owner or participant of shared branching and there is a shared branch within 25 miles, it meets the reasonable proximity criteria. Likewise, if the credit union is a member of an ATM network and an ATM is within 25 miles, it would also qualify as a service facility to be considered by NCUA as a means to meet the reasonable proximity requirements.
Even if a federal SEG-based credit union has to use a shared branch and ATM combination to bring in a valuable SEG or expand into a qualified underserved area, this is a much more flexible and reasonably priced option than building, buying, or leasing a branch.
State chartered SEG-based credit unions should also be supportive because, with most states having federal parity provisions, this expansion should be transported into those states that try to stay competitive with (and even ahead of) NCUA in their charter viability on FOM.
We strongly encourage any and all of our clients who want to see FOM become more flexible and the ability to serve expanded SEGs, associations, and underserved areas to offer a comment letter to NCUA in support of this proposed rule on or before next ednesday, February 9.
To give you a template to work from that you can cut and paste into a comment letter you can then edit to become your own, we offer the following:
On behalf of ABC Federal Credit Union, we would like to express our support for the recently proposed NCUA rule on service facilities. We consider this a long overdue modernization of NCUA’s approach to defining service facilities and commend the agency for taking this step to better recognize the realities of today’s financial service delivery marketplace.
Although COVID has accelerated the trend toward more digital delivery of financial services, credit union members have increased their usage of technological channels to access their accounts, make deposits, apply for loans, make transfers, utilize bill payment services, and make transactions of all types.
Credit union members are coming to the branch less and less and utilizing digital means for service more and more. We are pleased that NCUA, as a safety and soundness regulator, is now moving in the direction that does not always require a bricks and mortar solution to being able to serve a new employer group, association, or underserved area.
Shared branching has been in place for credit unions for thirty years and has matured into an accepted and recognized delivery mechanism for credit union services. ATMs have been part of the financial mainstream for almost fifty years.
Although both still require a member to physically go to a shared branch or an ATM when a growing number of members are conducting their credit union business through a smart phone, tablet, or laptop, this proposed rule is a good step in the right direction of recognizing what credit union members are looking for in their evaluation of the standard of service today.
Hopefully, in the near future, NCUA will move to the logical and timely next step of recognizing digital means as qualifying as service facilities. It is certainly justifiable and a full reflection of today’s constantly changing technological marketplace for financial services.
Until then, this proposal is a positive step. We support it wholeheartedly and encourage the NCUA Board to finalize the rule at its earliest convenience. Credit unions will be able to better serve more members with lower cost financial services and offer the credit union advantage as not-for-profit financial cooperatives with a more reasonable approach to defining what is a service facility.
Thank you for the opportunity to express our views. Please let us know if you have any questions.
You do not (and should not) need to use this comment letter template verbatim. Feel free to adapt it into your own words, change the order, and include your own observations. You want to make it your letter. But even a cut and paste of the entire wording above is better than no comment at all.
Hopefully, the above can get you started and enable you to put together a meaningful comment letter in short order.
You may submit written comments, identified by RIN 3133–AF23, by any of the following methods. Credit unions are requested to send comments by one method only. However, we recommend that you send copies of your official comment letter to both the Secretary of the NCUA Board as specified below and also to each of the NCUA Board members as a cc. This maximizes the readership at NCUA of your support for this proposal.
- Federal e-Rulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
- Fax: (703) 518–6319. Include ‘‘[Your Name]—Comments on Proposed
Rule: Field of Membership—Shared Facility Requirements’’ in the
transmittal.
- Mail: Address to Melane Conyers-Ausbrooks, Secretary of Board,
National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314–3428.
You can (and we believe you should) cc at the same Alexandria, Virginia address above the following:
Honorable Todd Harper
Chairman, NCUA Board
Honorable Kyle Hauptman
Vice-Chairman, NCUA Board
Honorable Rodney Hood
Member, NCUA Board
The following link can take you to the proposed rule page on the NCUA website. You can find out more about the rule, as well as all other proposed NCUA rules out for comment and that have had comment periods over the past two years, through this link.
Please notice that all comment letters are public record and are posted under the comments section on this NCUA webpage.
If you would like to view the entire service facility rule before you construct your own comment letter, the following link will take you to the proposed rule as shown in the Federal Register.
https://www.govinfo.gov/content/pkg/FR-2021-01-11/pdf/2020-28277.pdf
Please let us know if we can help you further as you consider and, hopefully, let your voice be heard on this important proposed rule.
We must keep NCUA moving forward on field of membership issues for credit unions to remain competitive as they attempt to grow and build the scale necessary to hang with their often much larger marketplace competitors.
If NCUA does not see a strong support base among credit unions for their efforts in making their FOM rules more flexible and usable, it is possible that the fear of banker opposition (if unchecked by strong credit union support) could make them more and more hesitant to propose this type of regulation.
Until next time.