Strengthening the bonds of credit unions

As a direct membership organization, providing extreme member service is at the core of what we do. Our advocacy efforts are guided by what our credit unions are seeing on the ground and we fight for policies that allow them to meet their members’ needs. The NCUA’s newly proposed rule to modernize field of membership and chartering requirements – with language to address survivorship issues – is just one example of our advocacy in action.

This proposed rule contains more than a dozen changes to the Chartering and Field of Membership Manual that will enhance consumer access to financial services while reducing duplicative and unnecessary paperwork and administrative requirements. Simply put: These changes make it easier for credit unions to serve more Americans in need of safe, affordable financial services.

Within the proposal is also a NAFCU-sought provision to amend the rules to encompass a broader range of blood and legal relatives that are eligible for membership after the primary member has passed away. This change may seem modest, but it reinforces the “people first” mission of credit unions.

The common bond requirement of credit union fields of membership is a unique attribute of the industry. Members feel connected to the mission of their credit union, as their institution strives to serve their needs – and the needs of the entire community – as best they can. Once you join a credit union, your membership is for life.

That lifelong membership means your credit union has likely helped you reach financial milestones, from buying a house to saving for retirement and opening accounts for your children. But what happens to that long-established relationship when you’ve passed?

While immediate family members qualify for membership during your lifetime, that qualification only continues for a surviving spouse. Other immediate family members such as children, often named as beneficiaries on the member’s accounts, can cease to be eligible to join the credit union at exactly the moment they acquire title to the funds held there, depending on field of membership restrictions.

This also complicates situations in non-blood related relationships. If a member has a friend or caregiver entitled to funds through their estate or payable-on-death designation, these individuals face similar problems.

Out of necessity, these now-ineligible non-members are forced to withdraw funds from the credit union and deposit them at another institution – often not a credit union. In fact, NAFCU was initially made aware of this issue by a member credit union, who noted that 64 percent of the funds in those accounts were removed from its credit union altogether. Adding another layer of concern for this institution, the average age of its membership is about 50 years old.

This is just one credit union anecdote, but trends across the industry show an aging membership and an accelerated transfer of shares out of member accounts, and why we at NAFCU jumped into action and swiftly shared these very real concerns with the NCUA and asked them to act quickly to update their regulations to solve this unnecessary problem.

We have called on the NCUA to modernize outdated field of membership rules for years to allow credit unions to remain competitive and thrive in their communities. NCUA Board members have acknowledged the need for regulation to be effective but not excessive, and the board’s recent rulemakings show a shift toward principles-based regulation.

We at NAFCU pride ourselves on extreme member service – no matter the perceived size or impact of an issue – because we understand the importance of clear regulatory guidance and expectations for credit unions as they go above and beyond to provide America’s families with safe and affordable financial products and services.

The proposed survivorship revision shows compassion to families in their greatest time of need. This small but meaningful change is sure to strengthen the bonds of credit unions and their members, who now have peace of mind knowing their family will continue to be well served by the institution that has been there throughout their life in times of need.