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NCUA Releases New Rules That May Make It Harder To Join Credit Unions


NCUA 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:

  1. Alumni associations;
  2. Religious organizations, including churches or groups of related churches;
  3. Electric cooperatives;
  4. Homeowner associations;
  5. Labor unions;
  6. Scouting groups;
  7. Parent teacher associations (PTAs) organized at the local level to serve a single school district;
  8. Chamber of commerce groups (members only and not employees of members);
  9. Athletic booster clubs whose members have voting rights;
  10. Fraternal organizations or civic groups with a mission of community service whose members have voting rights;
  11. Organizations having a mission based on preserving or furthering the culture of a particular national or ethnic origin; and
  12. 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".

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FDIC Man (anonymous)   |     |   Comment #1
It's a good idea for the NCUA to show some initiative by attempting to eliminate some of the more transparent schemes for evading credit union membership rules. Banks have been railing for years against the increasingly lax restrictions on credit union membership. They've also been using this issue to bolster their arguments for the taxation of credit unions. Although I've occasionally benefited from obtaining access to credit unions through some sketchy organizational loophole, I will happily forego such easy access to help preserve the existence of credit unions.
Anonymous   |     |   Comment #2
How much effect will this have on us?  I join credit unions around the country all the time.
FDIC Man (anonymous)   |     |   Comment #8
Page 10 of the NCUA document referred to above states that: "NCUA proposed to grandfather in existing FCU members who attained FCU membership by virtue of their membership in an association currently part of an FCU’s FOM. " So, assuming you wouldn't have qualified for membership under the revised criteria, you're probably grandfathered in.
Anonymous   |     |   Comment #3
When do these rules become effective?
FDIC Man (anonymous)   |     |   Comment #33
The rules become effective 60 days after publication which seems to have been on April 30, 2015. However, I would expect most affected credit unions to begin complying with the rules immediately.
Anonymous   |     |   Comment #4
I'm not sure if this is good news or bad news. On one hand it's convenient to join a credit union that's nationally available. On the other hand I've found that some credit unions with a  restrictive membership requirement offer better deposit rates than others. Basically, you can't have it all.
Anonymous   |     |   Comment #5
Can one lose their current membership in a credit union because of these rules. 
Anonymous   |     |   Comment #12
See Comment #8.
Anonymous   |     |   Comment #6
These new rules certainly make sense and are long overdue. I have joined credit unions by joining organizations I have very little interest in or knowledge about. I did it to obtain an interest rate higher than I could obtain in my geographic area.

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.  
FDIC Man (anonymous)   |     |   Comment #9
Wait until he credit unions have had an opportunity to assimilated these new rules. In 2013, the NCUA stated that membership in the American Consumer Council (ACC) was appropriate to meet the credit union fields of membership requirement under  the associational common bond provision. About fifty credit unions already have the ACC in their fields of membership, so I expect more credit unions to take a cue from that ruling and affiliate with the ACC or similar organizations.
Anonymous   |     |   Comment #7
This is bad news not good news for savers that are searching for the highest rate CD's to survive in this zero interest rate economy.
Anonymous   |     |   Comment #10
This is clearly very bad news.  Ken, please help us.  Please publish a "short list" of credit unions you believe, based on your knowledge and experience, it would be wise for serious savers to join.  I agree with others that RIGHT NOW is the time to join such credit unions.  But I do not know which ones to join.

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.
Anonymous   |     |   Comment #11
I agree with #10 that this is very bad and I hope it is possible for Ken to help us with a list.  Meanwhile, though, a little self help might be in order given these most unfortunate circumstances.  I want to contribute a few names, and I hope others will join in if you know of any "must join" credit unions.  Here is what I can offer:

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.
Anonymous   |     |   Comment #13
Thanks.  I agree with your short list, but I'm almost certain Alliant is state chartered and therefore exempt from this catastrophe unless, as Ken mentioned in his write up, the states adopt the new Federal rules.

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!! 
me1004   |     |   Comment #20
Yes, Alliant is an Illinois-chartered credit union.
Anonymous   |     |   Comment #14
Wonder if family members will still be able to join when the rules change? 
FDIC Man (anonymous)   |     |   Comment #18
They still qualify as "persons [who] by virtue of their close relationship to a common bond group may be included, at the
[credit union's] option, in the field of membership." See the NCUA's "Chartering and Field of Membership Manual" which is available online.
terrifiedinatlanta (anonymous)   |     |   Comment #15
The entire nation must be in a panic over this!  I just had my hair done and mentioned it to the hairdresser.  Needless to say, she was beside herself.

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).
FDIC Man (anonymous)   |     |   Comment #19
You're probably grandfathered in as a member. Furthermore, under the  “once a member, always a member” provision of the Federal Credit Union Act, you can't lose your membership by leaving the association you joined under.
Anonymous   |     |   Comment #16



FDIC Man (anonymous)   |     |   Comment #17
I can't speak to the associations. However, members of various branches of the military continue to qualify for credit union membership because they share a common bond based on employment in a trade, industry, or profession. A number of persons, by virtue of their close relationship to a common bond group, may be included in the credit union's field of membership. This includes retirees and immediate family members. For more details, refer to the NCUA's "Chartering and Field of Membership Manual" which is available online.
Anonymous   |     |   Comment #21
Ken, Please help us!  How bad is this news?  What can we do to protect ourselves?  What can be done to protect us?  Thanks very much!
lou   |     |   Comment #23
posting to subscribe to this thread
paoli2   |     |   Comment #24
Why are so many turning blue over this?  Don't the credit unions have to send us a letter to let us know if we are disqualified for some reason?  We belong to more than one and got in by joining and paying for the organization they said we had to join.  With Navy, it was easy since DP was a Navy guy and they accepted his paperwork for proof.  So should we be concerned about this new thing?  Has anyone who is a member gotten a notice from any credit union about this?  Thanks.
Anonymous   |     |   Comment #26
You're OK regarding credit unions where you're already a member.  They will not eject you.

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. 
ChrisCD   |     |   Comment #25
I agree with Lou that banks shouldn't be crying, and if a bank felt credit unions had it so good, they are free to convert.  On the other hand, although it was great to be able to gain access to credit unions all over the US, that really is not a CUs purpose.  It was a loop hole, albeit a nice one, but a loop hole, none the less.  Ken does have a link in the post of credit unions currently open to anyone, but be careful about joining and not paying attention to the small print.  Many require a certain number of transactions or minimum balances to avoid monthly fees.  Being a member of 25 or so credit unions could certainly become a time management nightmare.

The banks have been complaining about this for years and using it as a reason for credit unions to lose their tax exempt status.
Anonymous   |     |   Comment #27
I will not point a finger at any particular poster here, since there is no way to be sure.  Suffice it to say the banks have to be licking their chops following such a rule revision as this.  They can, I'm certain, scarcely contain their glee.  Some of the posts here appear to be offered by banking people who never had a lot of use for credit unions to begin with.  Those posters could not care less regarding any harm this does to savers in general, or to Ken's readers in particular.  Banks and bankers care only about themselves and their profits.

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.
Anonymous   |     |   Comment #28
Why is it the best?
Anonymous   |     |   Comment #29
Banks charge a lot more fees than credit unions do.  There is a reason for this.  They have to make enough to pay for the high salaries that the bank executives make.  
lou   |     |   Comment #30
Comment #23 which I wrote was deleted because I pretty much said the same thing as #27 but I used more colorful language. Yes, there is a poster who seems to relish this new rule and also likes coming to this board to rub salt in the wound for reasons only known to him.

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.
Anonymous   |     |   Comment #31
Exactly.  There is no question in my mind the larger banks and the government are aligned on this.  I always blamed the Republicans, especially following events of 2008 when they came so vigorously to the aid of the entire financial industry.  It was disgusting.

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.
Anonymous   |     |   Comment #32
This is one of the most valuable items posted here in a long while.  I want to add my voice to a few others requesting a list of "must join" credit unions.  I'm perfectly willing to join now, since my opportunity in the near future might cease to exist.  But I do not know which credit unions to join.

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.
FDIC Man (anonymous)   |     |   Comment #34
Without knowing his or her financial requirements and location, there's no objective way to recommend a credit union for anyone  However, I believe that  some of the concern expressed here may be premature. The NCUA isn't threatening to slam the door on the use of membership associations as a gateway to credit union membership. It's merely cracking down on credit unions that are offering membership by, in effect, soliciting contributions to charities or non profits that aren't member driven. In other words, making a contribution does not give the contributor a voice in the the organization's affairs or even access to information about the organization's activities. For example, before it was acquired by Navy Federal, USAFed in San Diego was offering memberships in exchange for a one time cash contribution to an in house charitable subsidiary that served as nothing but a conduit for funneling money to local charities. That's in stark contrast to Pentagon Federal which allows membership through the National Military Family Organization, a longstanding charitable organization with well documented membership records. So, rather than assuming that all is lost, I believe it would be prudent to wait for the new NCUA rules to go into effect and see what happens. However, I doubt if most current "open access" credit unions will be required to restrict their fields of membership.
Anonymous   |     |   Comment #38
At one time, I could give you a list.  But now, it seems the government has put such a restraint on the credit unions on paying a decent rate on savings, that it just may be that no good list exists anymore.  Another thank you to the Banks that have put their political pressure on the government to put a lid on credit union practices.
ChrisCD   |     |   Comment #35
I took a look at Ken's Big list, and our database.   Here are ones that I have seen offer competitive rates over the years.  Although for some of them, it has been a while. 

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)
paoli2   |     |   Comment #36
Paranoia can be a big help in finances.  A few years back before I had considered joining credit unions, I read some info on DA that perked my concerns about banking and relying on them mainly for CDs.  I picked out four of the best ones I researched on DA and got memberships in them and also got CDs we needed.  We have been very satisfied with my choices and after reading this latest news, I am so glad I got us memberships when I did.  It can be very beneficial for us to make DA the "first" stop of our day (if we can) so we can keep up with what is going on in the financial world.  Thanks many times over, Ken!
Anonymous   |     |   Comment #37
Good and valuable list.  Thumbs up and thank you!
Bozo   |     |   Comment #39
I still find Alliant a good place to park my money. Savings rates are competitive (although not stellar), and CD rates are also competitive, though they have slipped somewhat.

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.