Can't Join a Credit Union? Blame Its Field of Membership

I've seen several comments over the years from readers who are confused over credit unions' connections with organizations that they serve. This can be confusing. Many credit unions have names that make them appear connected with some organization. Examples include Navy Federal Credit Union, Pentagon Federal Credit Union, American Airlines Credit Union and General Electric Credit Union. These credit unions were established to serve these organizations that are in their names, but they are not part of these organizations. They are separate entities.

Another important thing to understand about credit unions is that all are required to have a field of membership (FOM) which defines the groups of people who are eligible for membership. Many credit unions were established with FOMs that were primarily limited to employees of the organizations that they were named after. These are known as select employee group (SEG) based charters. FOMs have often been expanded to include multiple employee groups.

In addition to adding SEGs, many FOMs have expanded to include geographic areas. These are known as community charters, and they typically allow anyone who lives, works, worships or attends school in a specific area to join.

In addition to SEG and Community charters, FOMs can have a "common bond" that includes associations. This allows credit unions to include association memberships in their FOMs. As described in this NYT article, it has allowed some credit unions to open membership to anyone in the nation. I list many of these credit unions in my post, The Big List of Credit Unions Open to Anyone.

As credit unions expanded, many have changed their names so that they don't appear limited to just one organization.

Before credit unions can change their FOMs, they must get approval from their regulators. The NCUA is the primary regulator for federally chartered credit unions. Once a FOM is approved, the credit union is required to abide by it. So if a credit union says that you're not eligible to join, don't expect them to make exceptions. Credit unions can get into trouble with their regulators. One example of this occurred at the Air Force Federal Credit Union. The NCUA cited the credit union for improper membership. According to the NCUA's letter of understanding and agreement:

The Credit Union previously took an overly expansive view of their field of membership that was inconsistent with Section 5 of its charter. As a result, it has accepted share accounts, and extended loans to, individuals otherwise unqualified for membership, which has had a direct effect on the Credit Union's rapid growth and accounts for a significant percentage of its shares and its loan portfolio. These actions have led to our present supervisory concerns about operations and management.

One credit union that has angered some readers is Navy Federal Credit Union. It's the largest credit union in the nation, but it's FOM is primarily limited to active and retired military (see Navy Federal's eligibility checklist for full details). Disabled veterans, who are neither active nor retired from the military, have complained that Navy Federal has not let them join.

The interesting thing about Navy Federal is that its FOM used to include "Navy/Marine Corps receiving disability". This might have been removed when Navy Federal's FOM changed to include all military branches. I'm not sure why disabled veterans are no longer in Navy Federal's FOM. Nevertheless, Navy Federal employees have their hands tied. As I mentioned above, credit unions are required to follow their FOMs. Of course, Navy Federal could go through the process to expand its FOM to include disabled veterans. It seems like it would be a small expansion compared to how other credit union FOMs have expanded.

Navy Federal could have become another PenFed when it acquired USA Federal Credit Union which allowed anyone to join via an association. Before the acquisition, anyone could join USA Fed by joining an association. Many readers joined USA Fed before the acquisition, and they then became Navy Federal members after the acquisition completed. Unfortunately, Navy Federal decided to discontinue this common bond feature. So if you missed this backdoor way to join Navy Federal, you're out of luck.

One final feature that's important to know about credit unions is that once you're a member, you don't have to worry about maintaining your eligibility. As long as you maintain your credit union membership (keeping your share account), you can lose your job, move to another area or end your association membership without affecting your credit union membership.