Field of membership is an important aspect of life for credit unions. Membership affects many parts of how unions operate. In this episode of With Flying Colors, Mark Treichel and Rick Mumm talk about Field of Membership, Low Income Designations, and underserved areas. Rick dives into the different nuances of field of membership, by-law changes, mergers, and credit union designations. Looking for more? Then tune in for even greater insights from Mark and Rick.
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Field Of Membership & More With Expert Rick Mumm
I'm joined by Rick Mumm to talk about the field of membership and all things CURE-related. CURE stands for Credit Union Resources and Expansion. Rick, before we jump in for people who are meeting you here for the first time, could you share a little bit about who you are and your career experience at NCUA?
Thank you, Mark. I was with NCUA before I retired after about 34 and a half years. Right around 25 of those years, I worked in CURE or its predecessor offices in the division of insurance. I started out in the division of insurance in region six, working in field of membership. I have well over 25 years of experience in field of membership in region six then region five and then when they moved the divisions of insurance out of the regions into the central office for the whole nation through the central office.
Do you remember what year was it that field of membership was centralized at NCUA?
It was the end of 2010. In 2010, all the regions were rolled into the Central Office, the first of 2011.
I should remember that because at that juncture, I was the Regional Director in Albany, New York and the field of membership came up through me through that point in time. It then was centralized with the concept of creating synergies by putting it all in one place. You and I go back way back. We started at NCUA within 1 month or 2 of each other. We went through new examiner training back when we were on G Street, levels 1 through 5.
From all the people at NCUA that I know, I have known you as long as about anybody. You outlasted me there by a little bit more than a year, I believe with your 35 years. Again, you and I go way back, we learned the nuts and bolts of how to do exams and training there. It's great to have an opportunity to pick your brain on the field of membership and all things related to the NCUA Office of Credit Union Resources and Expansion (CURE).
That's true. You were my director of insurance for a short period of time when you were the Director of Special Actions in region six.
They gave me double duty there for a while. That's when I started to learn a little bit about field of membership. I learned at that time that I should rely on experts like you to get the job done as opposed to trying to learn it because it's so nuanced. It's one of those items that's more of an art than a science. That was my first foray when I was acting as your supervisor for a very short period of time. We had a lot of fun back then.
Let's talk about all the things related to different fields of membership and the things that CURE does. The first thing that would make sense to talk about would be a field of membership. As it relates to what you are doing now, you have talked about being retired, you are now consulting. Let's talk about the field of membership and maybe a little bit about your consulting business. We will then walk through different services you might offer.
Building membership encompasses a wide range of everything that a credit union needs to do to be able to reach out and serve its members.
The field of membership encompasses a wide range of areas. It includes new charters, adding groups whether it's an occupational or associational and communities, you have both narrative and statistical communities. You have previously approved communities. There are underserved areas, Trade Industry & Profession (TIPS) which is a form of a single common bond based on an occupation trade or profession. Field of membership also includes conversions to and from federal charter to and from federal or private insurance. It encompasses a wide range of everything that a credit union needs to do to be able to reach out and serve its members and how it will serve its members.
Of all those different nuances of types of field of membership, the TIPs, the trade industry and professions, why do you think there are not a lot of trade industry and profession credit unions? On the flip side of that, when you retired from NCUA and were the last working in the field of membership, what was the most frequent type of field of membership that would come across your desk?
Trade industry and profession, there's not a lot of them. They are very specialized and it gets to be a lot of legal nuances on how to define a trade industry or profession. When I was there, I did one trade TIP and that took over a year to get it approved because general counsel is trying to define the trade in the most succinct you could. The vast majority of all TIPs are industry TIPs, which are like airline, police, health care are easier to define but those take a while to get approved also.
To come up with a new TIP to get it approved takes a while to get through all the legal side of it. Once it's approved, on the industry side, anybody can apply for the same TIP. The first one is the pioneer and gets all the arrows. When TIP gets approved then anybody else can pick it up. Healthcare TIPS are very popular. As an example, other credit unions will get the healthcare TIPs but then healthcare tips are only good for occupation.
You can go around to any of the healthcare providers but if there's a healthcare association that you also want to serve, you can’t because a TIP is occupational, it's not associational. It's limiting in that respect so a lot of credit unions have not tried a adopt a TIP like you would have thought they would. That's my thought on that.
This is one of those subtle nuances in that. You are an expert and know the stuff backward and forwards because a TIP has to be linked to occupation and can't have those associations someone might not want to convert when they realize that because they already have some associations in their field of membership that they don't want to give up. Am I interpreting that right?
That's correct. This is a long time ago, I remember credit unions converted to serve the insurance industry. After they converted, they would have been serving the insurance industry. They came back in and wanted to add some association that dealt with insurance agents or whatever. We had to tell them, "You can't because that's an association and we can't mix and match." That does not fit for a TIP.
Which type of field or membership gets requested the most by credit unions at this time?
I would say underserved areas are getting a lot of interest from multiple common bond credit unions because they right now are the only ones that can add an underserved area. That's one of the proposed changes the agency liked - that all the charter types be able to add underserved areas but it's limited to multiple common bonds but that's a very popular field of membership addition.
There are some community expansions because many credit unions have already expanded their community way back when. The board changed the definition of community and how big they can so some community credit unions have gone back and tried to expand what they have already had. Before I left, conversions from Fed to State, that seems like a steady stream.
You mentioned, the agency would like to have low-income designations be available for all types of fields of membership, which would require a change to the Federal Credit Union Act. That's one of those topics that the trade groups, the Credit Union National Association or CUNA and the National Association of Federal Credit Unions or NAFCU are all on the same page.
All three of NCUA and the two major trade groups would also like to see that happen. It's not always that NCUA and the trade groups are on the same page. They can be at times but in this instance, they are on the same page. Anything else relative to low-income designations and the services you might offer relative to it?
Low-income designation and underserved are two different things.
So clarify that?
An underserved area is a designation of whether it qualifies through the CDFI or Community Development Financial Institutions. They determine the criteria if an area qualifies as underserved or not and then it is the actual serving of the underserved area is a community-based type field of membership. It's at the census tract level. A lot of underserved areas are based on census tracts.
Low-income, that is an NCUA designation. That's based on the credit unions' field of membership and if more than 50% plus 1 of their members meet the low-income designation of median family income is under 80% of the national median net family income. You can get the low-income designation, which then affords you some benefits. There's no limit on business loans. You can take more non-member deposits that give you access to some grants, loans and also help you to get certified as a CDFI credit union through the CDFI, which then gives you access to whatever programs they have for their institutions.
Any credit union can merge into any credit union, regardless if their field of memberships are compatible or not.
That helps clarify and a follow up on that and the low-income designation also provides the opportunity to get secondary capital. That's a big addition. There are a lot of credit unions out there taking advantage of that.
For the underserved, you have to apply for it whereas for the low-income designation, NCUA after each exam credit unions provide their membership information during exams and that gets uploaded to the system. NCUA runs that member information through geo-coding software and if it shows that you qualify as low-income but do not have the designation, you will get a letter asking if you want the designation. A credit union can request it at any time, if they don't have it. The agency will reach out to the credit unions and see if you want the designation.
If the agency does that as part of the exam and then sends a letter saying, "The results reveal that you qualify for low-income designation.
Not only do you get the letter saying you automatically qualify if you no longer qualify but you will also get a letter saying you no longer qualify and then you have five years to fix that or to qualify. I can help with that if you get that letter or also if you want the designation but during the exam, you don't qualify but you want the designation. I can help discuss ways and look at your member data to see how close are you and suggest possible ways that you can get your percent up over 50% so you do qualify.
I got it. NCUA and the exam process can qualify you but there are other methods and ways to measure it that you can help credit unions potentially achieve the low-income designation when the NCUA does not automatically anoint that. You also assist in merger packages, I believe. Could you talk through that a little bit?
Merging is very popular since we started more than half of the credit unions are gone because when we started there were over 12,000 and now there’s one under 5,000.
Those numbers are roughly correct.
There are a couple of processes when you go through a merger. The region processes all the mergers but the field of membership has to go to CURE to be reviewed before the region will process the merger. You send in a merger package to the region and then the region will send that merger to CURE to say, "Are these fields of memberships compatible?" CURE will come back and say yes or no and if the answer is yes then the region processes the merger packet and it goes from there.
If the answer is no if you don't want to merge, you have to conform to the field of memberships for most credit unions so you can still merge or you say, "This was a nice idea but we can't conform them for whatever reason and we would rather not." I can help with determining if the field of memberships is compatible and how to get them compatible if they are not upfront before the mergers are submitted to the region and once you have gone through that process, I can also assist in putting together the actual merger application and sending it to the region.
When we are talking mergers, this would be with the surviving credit union being a Federal charter because if a Federal was going to merge into a State Charter, it's the state field of membership rules that would rule.
That's correct. Thank you for that clarification. If the continuing is Federal then the memberships have to conform. If they are continuing as a state then from the Federal side, they are still going to have to meet whatever various states, whatever requirements they may or may not have.
One other category of mergers you did not mention is emergency mergers. This would be a scenario where the compatibility issues that you raised are negated by it being "an emergency," which essentially is the merging credit union is in danger of insolvency and because of that the NCUA has the ability to merge incompatible or not compatible fields of membership. The theory is that that reduces the cost of the insurance fund. Is that a type of merger that you also work on?
I could if they want assistance. If it is an emergency merger like you said, in their field of memberships, all compatibility rules are waived. As you said, it's a way to reduce the overall insurance costs to the fund. They waive that requirement so any credit union can merge into any credit union, regardless of whether their field of memberships are compatible or not.
Also on an emergency merger, those are dictated or helped along by the region or the exam staff because they are in danger of insolvency.
That makes sense. The in danger of insolvency which the definition has broadened over time to the point where you can be maybe 24 or 36 months away from insolvency and be considered with trends and different things. There's an analysis that can get done that would show it. You are right that that's something that the region would be pretty closely involved with. That's a great point. Let's segue out of mergers into bylaws. There are standard bylaws and non-standard bylaws. Relative to bylaws is that something that you do work on for credit unions?
I will help credit unions with bylaws and do bylaw amendments. Before I left, I was the main bylaw expert in CURE. The last version of the bylaws that the board passed that went into effect in 2020, I was an integral part in the writing of the bylaws. It came out of my committee that I was part of back in 2013, there were discussions with the industries on what they wanted in the bylaws. I was part of that and our group wrote the bylaws.
When the board finally revisited it, they took those same bylaws, dusted them off and added a few changes and that's what was approved.
Credit unions have the opportunity to change their bylaws, but it has to be a meaningful change to be considered by NCUA.
There are a lot of good bylaw amendments out there that people want but everyone has their own writing style and writing preferences. Every time there was a new regional director or whatever, the region would have to change to each regional directors writing preference. It's no different with boards or credit unions. They don't like the language in the bylaws all the time but they don't realize is the bylaws is regulation of the NCUA.
The board has allowed credit unions the opportunity to change their bylaw or change that part of the regulation but it has to be a meaningful change. Not just, "We don't like a comma here. There should not be one. We want to make it more generic." The wording or substance changes are not allowed and are not going to get approved. I can go through and help credit unions, let them know, "That's a non-substance change or wording that you want. That's not likely to get approved," versus, "Here's an amendment that you want that is legitimate and would have a much better chance of getting approved."
I would call that changing happy to glad that's not something that you are going to get into a bylaw and would not get approved. Any other things that you are doing out there for credit unions at this juncture?
New charters. Somebody reached out to do a new charter. I can assist in that or at least start and look at what you have to see if you have a chance to be chartered and get over the preliminary questions before you go in and spend years and find out you are never going to get chartered. I can assist with that. Something else would be sharing insurance questions. I have not done anything with that yet but that's a possibility if someone wants some guidance or to go over how share insurance works with their staff or something. That's something I'm willing to do.
That would be like training on share insurance. With the background you have and you are new to this consulting thing because you retired but you have got a lot of expertise. What would you say differentiates you from what others might be able to offer in this arena?
I have been on working in the field of membership since the early-'90s. When a large community was considered to be 50,000 people and it had to be approved by the NCUA board. Now you have communities that if you can prove it, there is no population limit. I grew up in field of membership. As an analyst, I process groups whereas now, groups are processed online. I processed the first TIP in the agency when we got that ability in 1999. I processed the first underserved application that our region six did. It was one of the first processed in the nation.
I have talked to board members and board member assistance and briefed them. I have been in board meetings. I have reviewed hundreds if not thousands of packages. I know what to look for, what works and what does not work. I can better focus on, "What should and should not be in the package?" You are not wasting a lot of time, throwing a lot of mud in a package where half of it is not even relevant and you continually go back and forth with CURE to get what there needs to be.
I know what CURE's looking for, what holds things up, what does not and can and be able to say, "You can do that but you are going to add, another 2, 3 months onto the package," or "We can do this and they will get approved a lot faster." I helped with a conversion from State to Fed and they were wanting to include a lot of groups as part of their multiple common bonds. I told them, "You can do that but it's a lot more efficient if you convert with two groups and then everything else after that so that the application gets approved. It goes through much faster than having to go and sift through all of these groups."
I know little tricks and what to look for versus other consultants. Nobody else has worked for NCUA or not in the capacity of processing actual packages and seeing them when they come in and they are lousy and you have to clean it up to make it acceptable. I know what a clean package looks like that won't need a whole lot of cleaning up or changes for it to be approved.
I think that's what makes me a little different than some of the other ones is they may have processed a lot of packages but they have never sat on the other side and reviewed a package that came in and had to make sure that the package was good and conformed with NCUA requirements before it could get approved.
You have walked the walk, it's 25 years of doing the field of membership. You have forgotten more things about the field of membership than I have ever known but it sounds like you can put an efficient package together because of what's going to fly when it goes in. That's going to help with the timeline and putting a lean and mean package in because of credit union being able to take advantage of your 25 years of experience on this. Rick, this was great. I want to thank you for being my guest. Lastly, if a credit union wants to reach out to you and get in touch with you about the services you provide, how would you like them to do that?
They can send me an email to Info@RCUServices.com. That's the best way.
I listened to a lot of different podcasts and one of my favorites at the end of the show, they have followed up questions that were derived from previous episodes. It's possible that something that I or Rick said will trigger a question that you have to drill down into one of the topics we talked about. If you have such a question, I would like you to reach out to me and provide that and perhaps we can do a follow-up show on that question. You can reach me to do that at my email address, which is CUExamSolutions@MarkTreichel.com or you can track me down via my website, which is www.MarkTreichel.com. That's it for now. I hope you would join me again next time.