What the NCUA FOM Ruling Means for Credit Union Lending

By John Flynn, CEO, Open Lending



Just a couple of days ago, an appellate court ruled in favor of the NCUA’s 2016 expanded field of membership regulations. The American Bankers Association had sued, arguing that the agency was expanding FOMs beyond their statutory authority. The lower court mostly agreed with the NCUA and the appellate court sided even further with the NCUA.


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As a result, part of the 2016 FOM updates that the agency stripped out after the initial ruling are being reinstated, and this is a good thing for credit unions because it will allow you to spread the wealth – literally. Here are the key changes that came out of the latest ruling:

  • Expanded the local community definition to include a Core Based Statistical Area or a Combined Statistical Area up to a cap of 2.5 million people. A CBSA is basically a city and suburbs, while a CSA is a conglomerate of two or more cities with considerable commuting ties with at least one other city in the group.

  • Increased the definition of rural district to include areas with a population of up to one million.

  • The NCUA will have to go back to the lower court and argue its case for how it will prevent discrimination and gerrymandering when approving a CBSA that does not include the urban core.

Following the ruling, NCUA Chairman Rodney Hood said the agency will take a phased approach to implementing the new FOM expansions, but credit unions will eventually have a much greater reach. Plus, the NCUA will be issuing a notice for proposed rule-making for public comment on the last point, the legal validity of which remains in limbo.


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Since NCUA Chairman Hood, a Republican and former CRA officer, and Board Member Todd Harper, a Democrat who previously worked for Rep. Paul Kanjorski (Pa.) and NCUA Chairman Debbie Matz, have joined the NCUA board, announcements and speeches have been made about diversity and serving the underserved markets so it’s likely the agency will be shifting its position on serving financially challenged areas and helping members rehabilitate their credit. For example, with the new FOM regulations, consumers in rural areas tend to have less debt, but they also have slightly lower credit scores than urban areas, according to LendingTree. Rural residents also tend to have a few more dings in their credit reports.

And, likely based on need, people who live in rural areas tend to have higher car loan balances than city dwellers who have greater access to public transportation. Auto loans are credit unions’ bread and butter, so if we can finance them out of bad deals because of a ding or two on their credit reports, we should. Credit unions can provide the products, programs and credit education these borrowers need to boost their scores and earn them access to better pricing.


Open Lending can help you do just that. Through a variety of data sources and analysis, we can help you determine who are the better risks and those whom you can’t lend to immediately, but possibly help them get back on track. And we back auto loans made through our program with our flagship Lenders Protection default insurance to make sure, no matter what happens, your credit union mitigates the financial risk.


As Chairman Hood and Board Member Harper grow their influence at the agency, credit unions should be able to serve more low-income and credit-challenged borrowers. Refinancing their auto loans is a great place to start.

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