North Dakota's 18 state-chartered credit unions say they operate under one of the strictest field-of-membership statutes in the nation, and a bill currently under consideration could ease their constraints.
Currently, only residents who live within 75 miles of a credit union's home office — or similar proximity to a branch — can be a member of an "open charter" state-chartered credit union in North Dakota. And while many other states allow people who live, work, worship or attend school within a credit union's market to become a member, North Dakota limits the pool to only those who live there.
The state-chartered credit unions are asking for parity with federally-chartered credit unions that operate in the state, said Jeff Olson, president and CEO of the Dakota Credit Union Association, the trade group that represents credit unions in North Dakota and South Dakota.
"We're just trying to protect the turf a little bit, and to protect the turf we feel we have to expand our field of business," Olson said.
To do that, the group is supporting the state's Senate Bill 2266, which would allow an individual to join a credit union if they live, work or attend school in the credit union's community. It would also expand the membership radius to allow credit unions to serve more rural communities and banking deserts.
Olson said this is the first state bill that credit unions in North Dakota have sponsored since legislation allowing them to accept public deposits passed in 1983.
Other states have made
Across the financial services sector, stakeholders are working to ensure their charters, institutions, and industries have the flexibility to meet members' service, access and technological expectations, said Brian Knight, president and CEO of the National Association of State Credit Union Supervisors.
"At the federal level, the NCUA has made interpretive changes to federal credit union rules and sought statutory changes to ensure the federal charter remains vibrant. North Dakota joins several states where industry stakeholders are evaluating the potential modifications needed to ensure the state's credit union act keeps pace with the evolving financial service sector," Knight said.
Western Cooperative Credit Union, a $437 million-asset credit union in Williston, North Dakota, operates in a rural area, and some of its smaller community branches are permitted to cover only a 50-mile radius, said Melanie Stillwell, its president and CEO.
Many people commute more than 50 miles to their place of work, she said. The bill would expand the area to a 250-mile radius.
"They may work in the credit union community, however, their address is outside of the 50-mile radius," she said. "If the word 'work' was in the FOM rules, they could join our credit union."
Another issue at play is that many workers are coming into North Dakota to work in the oil field, Stillwell said. They may still have an out-of-state address yet spend their days in the communities where they work.
Western Cooperative had 18,174 members at the end of the third quarter, a 2% decrease compared with a year earlier, according to call report data from the National Credit Union Administration.
Another option would be to convert to a federal charter, but that's not a solution that appeals to every credit union.
Stillwell said Western Cooperative was specifically chartered as an agricultural credit union to serve farmers and ranchers. The local regulators understand North Dakota agriculture, she said.
"The federal regulators are not attuned to local North Dakota agriculture the way our state regulators are," Stillwell said.
Olson agreed and said the bill would preserve local oversight and control. There are clear advantages to being a state chartered credit union and having the North Dakota Department of Financial Institutions as a credit union's primary regulator, he said.
The DFI has been "neutral" on the proposed changes, likely because it also works with the state's banks, who are opposed to the legislation, Olson said.
Rick Clayburgh, president and CEO of the North Dakota Bankers Association, said the group is against expansion of the field of membership because it serves no public benefit. If the bill passes, the legislature would create an "unfair level of competition" with an entity that does not face the same level of regulatory oversight as community banks do, Clayburgh said.
"To ensure credit unions are following their mission, maybe the legislature should adopt a North Dakota version of the Community Reinvestment Act," he said.
The CRA pushes banks to meet the needs of their low and moderate-income communities, but credit unions have no such mandate. Banking trade groups, including the American Bankers Association, have
But Olson said he's still hopeful the state's banks will come around and offer their support to the bill.
"I met with them and said, 'Look, we need this. You don't want us converting to federal credit unions.' But they just didn't see that. They have such hatred for us," Olson said.
