Seeking New Business Models for the New Economy

The need to follow the members and their new expectations has taken credit unions in many innovative directions during the past year.

 

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Changing the Charter

The need to "follow the members" and their new expectations has taken credit unions in many innovative directions during the past year. The most publicized activities have been the changes in regulatory charter. Over the past three years, over 150 credit unions have converted from federal to state charters. As a result, NCUA, NAFCU and CUNA all have major legislative proposals or studies underway to reform the federal charter.

Transitioning to Communities

An important factor in many of the charter conversions was greater freedom in choosing which markets to offer credit union membership. HR 1151, the Credit Union Membership Act, was intended to resolve the issue of field of membership for federal credit unions. In fact, NCUA's review process has become more uncertain, time consuming and bureaucratic. There is one exception. The community charter authority was not redefined by 1151. More and more federal credit unions have opted to choose a community field of membership. For example, Network FCU was granted a charter for all residents of Clark County, Nev., with a population of 1.2 million. In September, San Francisco FCU was granted a charter for the city of San Francisco.

For decades, many state-chartered credit unions have had more flexible field of membership authority than is possible under the federal charter. In fact the first credit unions formed in the Northeastern states were primarily community-based organizations. So it is consistent with credit union tradition that Hawaiian Telco FCU, originally serving the telephone employees in Oahu, was granted approval by NCUA to serve the 875,000 residents of Hawaii's most populous island.

The views of what should constitute a credit union's market is one of the major changes in attitude that is occurring. Increasingly, critics and the regulatory community are realizing that credit unions were formed to serve members-not to be a part of an employee benefit package.

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November 20, 2000


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