As Prepared for Delivery on November 18, 2021
Thank you for the presentation, Elizabeth.
This rule is significant. And it will make a tremendous difference for multiple common-bond credit unions. For smaller credit unions, this rule will help them incorporate select employee groups and associations into their field of memberships by allowing participation in shared branching to meet the service facilities requirement and to satisfy the reasonable proximity requirement. The previous ownership interest requirement in shared branching has kept some credit unions, especially smaller credit unions that cannot afford an ownership interest, from being able to have this tool in their toolbox.
The service facility requirement should really be about service to the member-owner. When you go to a restaurant, do you care if the restaurant is owned or leased when you order an entrée? It’s not a consideration for the customer. So, I’m glad we will be treating owned and leased service facilities the same way. This is a win for smaller multiple common-bond credit unions and gives them a level playing field to compete.
I also believe this rule is critical for serving Americans in underserved areas. While I would have preferred that a service facility to be broader including allowing a mobile device to count as a service facility, we took into account the public comments on this rulemaking, and although it’s not in the legislative text in the Credit Union Membership Access Act, we also did consider Senate Report 105-193 that accompanied the Credit Union Membership Access Act regarding automatic teller machines for underserved areas expansion in relation to what really is a service facility.
Today’s pending action does not make an ATM a service facility for the purposes of serving an underserved area. The final rule allows shared facilities, other than ATMs, to count as service facilities for underserved areas, provided the federal credit union’s agreement with the shared branching network allows for the shared location to receive share deposits, accept loan applications, and disburse loan proceeds. Shared facilities which permit a federal credit union to offer these services may be service facilities in underserved areas, regardless of whether the federal credit union has an ownership interest in the entity providing the shared facility.
In a practical sense, if a credit union installed a kiosk, this will count as an electronic service facility for an underserved area expansion if the credit union is able to demonstrate its ability to fully serve the underserved area. I think this is a critical component that is often missed during the debate of this rule, so it is worth repeating: credit unions just cannot install a kiosk and call it a day. They also must demonstrate their ability to serve these potential new member-owners.
Serving the underserved has been a hallmark of my time on the NCUA Board. This rule will increase credit union access in rural, minority, disabled, and tribal communities, among other communities, where currently all that may exist is a pernicious and predatory payday lender. And speaking of rural communities, the Board has always taken the view that the “reasonable proximity” requirement has a geographic component, but as there is no statutory constraint on the specific distance, the Board has declined to establish a parameter not required by the Act. In other words, despite some misconceptions in the past, there is no specific mileage limit or test to determine reasonable proximity to a service facility. In reality, reasonable proximity is different in a rural area than in a city center because people generally have to travel greater distances in rural areas to run errands and to conduct their daily business, so this is important for credit unions — and our examiners — to hear.
And while this rule is significant and enhances the value of the federal charter, I do wish we were going further to consider other technological advances in what constitutes a service facility. The pandemic has changed the way we all do business. In fact, today’s Board meeting is being conducted virtually, so these technological advances are not new or novel for the Board to consider. The reality is that consumers are moving more and more to digital banking formats. And we should be considering that many credit union members consider mobile apps to be their respective credit union. I’ve heard from many young members who never step foot into their local credit unions. For these members, virtually all of their banking is done digitally. So, I do hope that at some point in the future, we can do more in what constitutes a service facility to embrace some of these digital platforms and to ensure that credit unions maintain their relevance in today’s dynamic marketplace with the advances in fintech.
Earlier this week, I read in the credit union trade press that credit unions have fallen behind banks in consumer satisfaction for the third year in a row. What’s on earth has changed in the last three years? As I previously have mentioned, more and more credit union members are making their phones the primary place they achieve their financial services. And up until now, banks’ mobile applications and internet banking offerings have generally been more robust than credit unions when considering technology in the aggregate. While I generally don’t tell credit unions how to run their day-to-day business affairs, I do hope that credit unions can gather around the movement’s cooperative spirit and credit union service organizations, in particular, to enhance credit unions mobile applications and digital banking offerings on their own accord in the days ahead.
And one day in the future, it is my great hope this Board can allow for mobile applications and digital delivery systems to meet service facility requirements. If we have learned anything since the onset of the COVID-19 pandemic, members are again using mobile and internet banking at a higher rate than branches. In fact, the foot traffic shows that. In my view, the regulator must respond to changes in technology just like credit unions are having to do.
Elizabeth, I do have just one question: How will the agency continue to look at other technologies, and how will we expand our view of technologies when considering electronic facilities other than ATMs based on the rule before us today?