FR 2020-28277

The National Credit Union Administration (NCUA) is proposing changes to its rules that could significantly influence how federal credit unions operate, particularly in their capacity to expand services to wider groups and underserved areas. This proposal is aimed at modernizing the definition of what constitutes a "service facility," which is crucial for federal credit unions looking to broaden their reach. The amendment suggests including shared branches, ATMs, and electronic facilities as service facilities, even if the credit union does not own them. This would facilitate credit unions in extending their services without the necessity of having ownership in shared networks.

Summary of the Document

The proposed rule emphasizes the changing landscape of financial services, where shared facilities, like ATMs and electronic branches, play a critical role in extending services to members. By not requiring ownership of these shared facilities, federal credit unions can potentially serve more groups and expand into underserved areas more easily. Furthermore, the NCUA is opening a discussion about whether credit union websites and mobile banking apps should count as service facilities, recognizing the growing reliance on digital financial services.

Significant Issues and Concerns

One concern is the potential regulatory burden this proposal might place on federal credit unions, particularly those that decide to expand their field of membership (FOM). While the document argues it won't significantly impact smaller credit unions financially, the lack of a detailed cost-benefit analysis leaves this assertion somewhat speculative. The legal and technical complexity of the document also makes it challenging for laypersons to understand fully, possibly leading to misunderstandings or misinterpretations of the proposed changes.

Another issue lies in the competitive dynamics the proposal might exacerbate. By removing ownership requirements, there's potential for larger credit unions to leverage their better resources to utilize shared branching networks more flexibly, which could crowd out smaller credit unions.

Impact on the Public and Stakeholders

For the general public, this proposal might mean easier access to credit union services without the need for physical proximity to a credit union branch. The inclusion of shared facilities could enhance service delivery and accessibility, especially in underserved regions where traditional banking services are limited.

For credit unions, particularly the multiple common bond federal credit unions (MCB FCUs), the proposal represents a double-edged sword. On one hand, it offers opportunities for expansion without the heavy investment traditionally required. On the other, smaller credit unions might find themselves at a disadvantage if they cannot swiftly adapt to the new structural advantages this proposal affords to larger entities.

Credit union customers can potentially benefit from improved service accessibility and convenience. However, with the introduction of potentially more shared facilities like ATMs and electronic services, there are concerns about privacy and security that the proposal does not explicitly address.

Conclusion

Overall, while this proposal reflects a necessary adaptation to modern technological and business realities, it also raises significant considerations regarding competition, regulatory burden, and consumer protection. As the NCUA opens the floor to public comments, stakeholders across the spectrum will be keen to weigh in on how these changes should be implemented to ensure fair competition, enhanced service delivery, and robust consumer protections in the financial services landscape.

The proposed rule from the National Credit Union Administration (NCUA), as featured in the Federal Register, contains several references to financial metrics and potential economic impacts, especially focusing on multiple common bond federal credit unions (MCB FCUs) with assets less than a certain amount.

Economic Impact on Small Entities

The NCUA has taken steps in the proposal to assess its economic implications, particularly concerning small federally insured credit unions (FICUs) with assets below $100 million. Importantly, a regulatory flexibility analysis is not mandated if the rule does not have a significant economic impact on a substantial number of small entities, defined here as those FICUs with assets under the $100 million threshold.

Participation in Shared Branching Networks

As of September 2020, there are 1,373 MCB FCUs, with 974 having assets less than $100 million. Of these, 286 MCB FCUs are already participating in a shared branching network. This leaves 688 MCB FCUs that are under the $100 million mark without current participation in such networks. The proposal suggests a possible additional incentive for these credit unions to join shared branching networks since doing so could facilitate expanding their field of membership to additional groups or underserved areas.

Financial Implications

From a financial perspective, these changes suggest that the 688 MCB FCUs could find new opportunities for growth by taking advantage of shared facilities without the obligation of ownership. While the proposal implies beneficial economic outcomes by potentially increasing membership access, it also hints that new administrative or operational costs might arise, particularly if these credit unions decide to expand their reach through shared ATMs or electronic facilities.

Issues Relating to Financial Implications

One identified issue is whether the removal of ownership requirements for shared facilities would level the playing field for small credit unions or disproportionately benefit larger institutions with more resources to adapt quickly. This could lead to some competitive disparities within the credit union sector. Moreover, while the proposal suggests potential growth opportunities, it does not delve into the costs or logistical challenges associated with including ATMs as service facilities, particularly in underserved areas.

In summary, while the proposal does not necessitate significant financial allocations or spending from the government, it creates a framework where smaller credit unions might strategically reposition themselves financially. This could foster growth but might also necessitate careful consideration of the economic impacts, both positive and negative, of such expansions on small entities.