The National Association of Federal Credit Unions (NAFCU) expressed their concerns surrounding credit unions’ efforts in rural communities and limitations they face due to regulatory restrictions prior to the Senate Banking Subcommittee hearing called “The State of Rural Banking: Challenges and Consequences” held Wednesday.
In a letter to the Senate Banking Subcommittee members, the NAFCU voiced their support for changes to be initiated to help better serve rural communities that are facing many challenges when seeking financial services.
“Credit unions are proud of their record of working in rural communities to provide the best financial services possible, but often face obstacles in form of regulatory restrictions that prevent them from doing more,” the letter stated. “NAFCU believes a more flexible definition of a rural district would increase availability of financial services to rural communities that might otherwise not have access to financial services.”
The NAFCU noted that limitations in National Credit Union Administration (NCUA) regulations prevent them from providing better financial services options, by allowing credit unions of certain charters to add rural districts to their field.
“While we appreciate NCUA’s efforts to allow credit unions to better serve rural communities, the NCUA definition of rural districts does limit the effectiveness of the regulation,” the NAFCU explained.
Currently, NCUA restricts the definition of rural districts to:
- A district that has well-defined, contiguous geographic boundaries
- More than 50 percent of the district’s population resides in census blocks or other geographic areas that are designated as rural by the United States Census Bureau
- Does not exceed certain other population thresholds. The district’s population cannot exceed either (a) the greater of 250,000 or 3 percent of the population of the state in which the majority of the district is located, or (b) if the district has well-defined contiguous geographic boundaries, it does not have a population density in excess of 100 people per square mile, and the total population of the district does not exceed the greater of 250,000 or 3 percent of the population of the state in which the majority of the district is located.
In addition, the NAFCU’s letter also addressed regulatory burdens such as the new mortgage lending regulations from the Consumer Financial Protection Bureau (CFPB) like the qualified mortgage (QM) rule, in particular. In addition, the NAFCU pointed out that the CFPB “does not always accurately identify all the rural areas across our nation.”
The association believes that the Financial Regulatory Improvement Act (FRIA) will help mitigate the impact of these regulatory burdens and remedy these issues.
“NAFCU believes that passing provisions such as these into law will be a significant step in addressing some of the major challenges facing the financial services industry in rural communities,” the letter concluded.