Consumer access to credit unions is in jeopardy
November 4, 1996

Because of lawsuits filed by banks, employees of small companies cannot join a credit union in many circumstances unless their company was part of the credit union when it was chartered.

This means that unless a small company has enough employees to start its own credit union — and the majority do not —those employees do not have the choice of conducting their financial business at a federally chartered credit union.

This restriction does not apply to state-chartered credit unions. In Indiana, 80 percent of credit unions are federally chartered. If a credit union is federally chartered, it must use the word “federal” in its name, such as “XYZ Federal Credit Union.” A state-chartered credit union's title would read “XYZ Credit Union.”

Credit unions can, however, continue to serve all current members.

The National Credit Union Administration, the federal regulatory agency that oversees federally chartered credit unions, began 14 years ago allowing credit unions to accept small employee groups into their fields of membership. Those groups each have their own common bond.

That policy was a response to changes in the American economy, such as the closing of manufacturing plants, which left credit unions that were tied to only one employee group more susceptible to going out of business if that company ceased to exist. The field-of-membership expansions have helped make sure people continue to have access to a not-for-profit, member-owned cooperative, their credit union.

Credit unions believe banks are trying to benefit themselves by restricting as many people as possible from having a credit union choice available to them. They believe this is simply a strategy to eliminate competition so banks can earn more profits.

If credit unions are not allowed to serve members of small employee groups added to their fields of membership, thousands will be forced to drop groups they currently serve, thereby taking credit union access away from consumers. They'll have nowhere to turn but to banks, where they'll pay higher fees and interest rates on loans and receive lower returns on their savings.

And, since the majority of jobs created today are in small business, many Americans may be deprived of credit union services because no credit union will be able to accept them into its field of membership.

Credit unions are taking steps to resolve the matter in court and with Congress.

In Indiana, 137 credit unions serve multiple employee groups.

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