It’s been a long and litigious road for credit unions to reach implementation this week of an expanded field of membership rule. But much has changed in the three years since the rule was first proposed, and not all CUs are prepared to take advantage of it.
The new rule was passed by the NCUA in 2016 and quickly challenged by the American Bankers Association. In the end the U.S. Supreme Court declined to hear the case this summer, allowing a lower court approval ruling to stand.
As Diane McLaughlin writes in this week’s issue, credit unions were in growth mode last year and this spring. That included mergers, deposit and asset growth, and investments in technology and digital banking.
But then came the pandemic, and everything changed. At first chaos reigned: Would there be a run on deposits? What would the Fed do? Would Wall Street stand up to this latest test? How bad would it be?
Thankfully the apocalyptic scenarios envisioned did not occur – or have not yet come to pass, it’s still 2020, after all. Financial institutions – and the rest of us – have had seven months to adjust to life in the time of COVID. And the country’s banking industry largely stood up to the strain, avoiding a complete economic meltdown.
Still, credit unions may not have membership expansion top of mind at the moment. And indeed the new rule may not have an outsize impact in our small and generally well-populated state.
Among other changes, the rule allows credit unions to expand how it defines membership eligibility to include a broader and less populated rural area while excluding a nearby urban area. The thought process there is those in the urban core have multiple banking options, while those in the boonies may only have one – or none.
There’s very little of the boonies left in Massachusetts. No disrespect to our Northern neighbors, but smaller credit unions in New Hampshire, Vermont and Maine may be better positioned for expansion under the new rule. If they can make it work – smaller credit unions, the ones most in need of growth, may not have the bandwidth or resources to take advantage of the new rule.
Most of Massachusetts’ credit unions will have to find new paths to growth, and indeed some have, investing in digital banking technology just in time for all the branches to shut down, and opening membership to include family members of those in the CU’s standing field of membership.
Those who can take advantage of and succeed with the new rule aren’t lining their own pockets; they are bringing more resources to underserved populations. That’s something to be applauded regardless of which institution has its name on the door.
