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One More Reason to Pay Close Attention to Your Bank AccountNCUA Releases New Rules That May Make It Harder To Join Credit Unions
Last week the NCUA released new rules that will impact credit unions' fields of membership (FOMs). The rules specifically deal with associations in FOMs, and they may limit the number of credit unions that can become "all access".
All credit unions are required to have a FOM which defines a common bond for members. When credit unions started, common bonds typically involved employers. This expanded to include community bonds in which anyone who lives or works in an area can qualify. Now many credit unions have FOMs that include members of associations, and those associations can often be joined by anyone.
The issue of association membership in FOMs has been a topic that the NCUA has been looking into for some time. In 2013 the NCUA issued a letter to federal credit unions warning them about advertising that says anyone can become a member.
In the press release for the new rules, the NCUA stated that:
The final rule more clearly defines which associational groups do and do not qualify for membership in federal credit unions.
The text of the new rules is available in this NCUA document.
On the positive side, the NCUA’s new rules list 12 types of associations that the NCUA will automatically approve as satisfying the associational common bond provisions. The following is a list of these groups:
- Alumni associations;
- Religious organizations, including churches or groups of related churches;
- Electric cooperatives;
- Homeowner associations;
- Labor unions;
- Scouting groups;
- Parent teacher associations (PTAs) organized at the local level to serve a single school district;
- Chamber of commerce groups (members only and not employees of members);
- Athletic booster clubs whose members have voting rights;
- Fraternal organizations or civic groups with a mission of community service whose members have voting rights;
- Organizations having a mission based on preserving or furthering the culture of a particular national or ethnic origin; and
- Organizations promoting social interaction or educational initiatives among persons sharing a common occupational profession.
On the negative side, not all members of the above associations will qualify for credit union membership. The rules state "NCUA only approves regular members of an approved group. Honorary, affiliate, or non-regular members do not qualify." In addition, the "NCUA may impose a geographic limitation if it is determined that the applicant credit union does not have the ability to serve a larger group or there are other operational concerns." Thus, the credit union may only allow members of an association who are residents of a specific state. We have already seen this at a few credit unions.
If an association doesn’t fall in the above list, it doesn’t mean it won’t be approved as an association in a credit union’s FOM. However, approval won’t be automatic. The association will be reviewed by the NCUA. If the association has been formed for the primary purpose of expanding a credit union’s membership, the NCUA will not allow the association to be added to the FOM. The NCUA’s new rules increased the number of factors to evaluate an association from seven to eight. The eighth factor ensures the association operates as a separate entity from the credit union.
Even if the association is a standalone entity with a legitimate purpose, the NCUA may not allow an association to be included in a FOM if the association is "based primarily on a client-customer relationship." According to the NCUA, health clubs like the YMCA are an example of an association based primarily on a client-customer relationship."
One thing to keep in mind regarding these new NCUA rules is that these only apply to federal credit unions (those that have "federal" in their names). State-chartered credit unions that are regulated by state regulators are not governed by these rules. However, state regulators may follow the NCUA on regulatory matters. So it may indirectly affect all credit unions.
Currently, my "Big List of Credit Unions Open to Anyone" has 82 credit unions. The vast majority of these have one or more easy-to-join associations in their FOMs. It’s a dynamic list that changes as credit unions change their FOMs by either adding associations or removing them. I’ve recently removed Patelco Credit Union from the list. Patelco used to be open to anyone who was a member of the Community Association for Engaging Youth (CAFE-Y). That association is no longer listed in Patelco’s FOM, and according to a Patelco’s CSR "there is no organization/association that anyone can join to use as a gateway to joining Patelco." Since Patelco isn’t a "federal" credit union, I don’t think the NCUA forced them to make this change. This might be a case in which the California regulator pressured them. So we’ll have to keep an eye on the FOMs of all the credit unions on the "big list".
However, I do think I should be able to buy any institutions CDs-whether or not a member or geographically present. There are non-credit unions that now discriminate based on location. LA customers of a bank are offered a higher CD rate than NY customers. Multi-state banks do it all the time and I hate it.
These rule changes will now help large lazy commercial banks offer even more low rates because the rules will reduce the number of competitors.
Hopefully before the rule goes into full effect, I can join credit unions that have a history of offering high rates. It will be worth paying $5-$30 to join now to be in a position to get higher rates in the future. I know there is no guarantee that the credit unions I join will offer higher rates in the future. However, if I do not join now there is a 100% guarantee I will not be able to join later for a higher rate.
I am hoping credit unions find ways to legally get around these new rules., especially the ones who have been aggressive in offering higher rates. I also hope I am not kicked out of the credit unions I joined under the old rules.
I'm at a loss to know what next will be done to harm savers. Thought the existing very low interest rates, for so long, were already quite draconian. This thing with the credit unions is (at least for me) right out of left field. I never saw it coming. Who knows what they will do to us going forward. How they must hate us.
Alliant Credit Union is quite possibly the best credit union in the USA. I cannot imagine being forbidden to join and I would be lost were I not a member.
Justice Federal Credit Union is not all that easy to join but they have offered good special rates in the past. While not super easy to join, I believe anyone can join at least for today.
Agriculture Federal Credit Union is another good one. They offer some pretty sweet deals from time to time. Join if you're not already a member.
That's my short list. In general I would say try to join credit unions in or nearby to Washington, DC. That's where all the money is because that's where all our money is going, so rates in that region tend to be a bit higher.
Good luck to all. We savers are gonna need it, because clearly we are on the target list of some really powerful people.
I can offer one name:
Northwest Federal Credit Union used to have some pretty good deals for savers. There have not been many in recent years. Still, it might be a good credit union to join . . . while you still can!!
[credit union's] option, in the field of membership." See the NCUA's "Chartering and Field of Membership Manual" which is available online.
I am afraid that even if I am allowed to stay in my credit union, I may not be properly covered from an insurance perspective since I don't really belong to any special assocation at this time (joined one on a one time basis at the time I originally joined but they don't make you continue it once you are a member).
RETIRED NAVY (NAVY FEDERAL) OR PENTAGON OR ANDREWS OR....
WHAT ABOUT THOSE ASSOCIATIONS
AND WHAT ABOUT FAMILY MEMBERS WHOES PARENTS ARE MEMBERS
Concern you read here is forward looking. Ken, over the years, has posted great deals for credit unions not local to his readers. Yet many of us found ways regardless to gain entry and benefit from the (CD) deals Ken posted. With this change of rules, gaining entry in such circumstances could become much more challenging, if not impossible. The outcome will be, in effect and at the bottom line, still lower interest on our savings. Of course that's exactly the outcome desired by the government and the big banks (same thing, really). They have found another way to harm us, to try to force us from the safety of insured savings into their stock market casino. It's all quite despicable, but just more of the same when you consider how many years we already have been suffering with below normal interest rates.
The banks have been complaining about this for years and using it as a reason for credit unions to lose their tax exempt status.
I'm a member of circa twenty credit unions. I have no problems whatsoever keeping up my memberships, something I've been doing for many years and something which has helped me make extra money more than once! So, speaking from my personal experience across a number of years, I disagree with the warnings expressed in the post to which I am responding.
I'm not going to write a tutorial here telling you how to do what I'm doing. But I will give you the cornerstone of my strategy, which can be expressed quite concisely:
Join Alliant Credit Union
As someone else already has written, it is the best credit union in America.
Anyway, I suppose there are people out there who would like nothing more than to crush the credit union industry to expand the monopolies a few banks seem to enjoy at the expense of the consumer. You can expect banks to do everything possible to eliminate competition so they can offer miniscule deposit rates to increase their profits. No surprise there.
Following the election of President Obama I was buoyed at the thought he, and his Democrats, would finally once and for all eviscerate the selfish and grasping banks and the "big money" folks in general, returning power to us the "little people". Well, I was an idiot and could not have been more in error. Obama and his Democrats aligned with the "big boys" every bit as much as Bush had . . . if not more.
Now we have this latest assault, as reported here by Ken, still under Obama and still aimed squarely to bolster and enrich the big banks and to undermine the prospects of savers like us. This entire thing is so discouraging. Regardless which political party is in charge, the situation is obviously hopeless.
Finally, thanks to those posters who have offered suggestions regarding which credit unions are the best. While such suggestions do not carry the weight they would coming from the author of this website, we are obviously facing extremely difficult circumstances going forward. So any suggestions are most welcome and are sincerely appreciated. Thank you.
I would think with an Excel spreadsheet, you could manage what ever details are necessary.
Alliant, Agriculture, Apple, California CU, Digital, GTE, Justice, Melrose, NASA, Pen Air, Pentagon, Self-Help, University, Velocity, and Xcel.
I'm sure others will have their favorites, too. :O)
The selling point for me is the customer service. They actually answer their phones. If you want to transfer money from savings to checking, you can do it over the phone.
If you have a question about your account, you can actually speak to a human being.
I know it sounds silly, but that's important to me.