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Rethinking Fields of Membership

Fields of membership have evolved over the years, in part as a response to political, legal, and social changes affecting the credit union system. This report reviews debates related to those changes and draws on insights from them to present a case for reimagining fields of membership.

  • Andrew Turner Professor at University of Wisconsin Law School

Executive Summary

Why do credit unions have field of membership requirements? What are they intended to do? Fields of membership are purported to be central to the credit union system, yet no one agrees about whether and how they mark credit unions as credit unions.

What is the research about? 

This report argues that tensions over fields of membership result from underappreciated and long-unresolved questions about the purpose behind them. Changes to field of membership rules and regulations have paved the way for a technically competent but controversial and (ultimately) antiquated system.

Fields of membership first grew out of efforts to guarantee credit unions’ financial security—not necessarily to reflect or advance cooperative values. The credit union system would not have survived changes in the US economy and society without deliberate and continual reinvention of the field of membership requirement. Some reasons include:

  • Traditional fields of membership are susceptible to risk concentration.
  • Traditional fields of membership have been weakened by member instability as the social bonds between members have shifted away from communities or employment.
  • Changes in finance and financial technology have reduced the loyalty and social connection on which traditional fields of membership depend.

Financial technology is accelerating the transition from banking as a relationship-oriented business to a service-oriented business, and fields of membership may need related adjustments to remain a viable element of the credit union identity. Additionally, the “common bond guarantee” is lessening in importance in an era with modern credit scoring.

The report concludes by arguing that the credit union system should reimagine fields of membership, offering a proposal to focus on shared values over structures, eliminate multiple common bond credit unions, and lobby for a reformed chartering system.

What are the credit union implications? 

Although central to the credit union identity, fields of membership present an ongoing source of tension and conflict because there is no consensus on why they exist anymore. Traditional field of membership designations—community, association, occupation—no longer correspond to modern citizens’ identities or their understandings of the groups to which they belong. The result is an uneasy détente, where the common bond and field of membership concepts continue to be stretched and flexed to the point where they have no real relationship to their original purpose or meaning—even though they do have profound implications for the growth and success of credit unions moving forward.

Credit unions should advocate for a rethinking of the field of membership requirement. A reformed chartering system could recognize three common bond types: a relationship-based common bond, an identity-based common bond, and a membership-based common bond. For the latter, imagine the common bond resulting from the relationship with the credit union. Rather than being a precondition for membership, attachment to the common bond becomes a result or outcome of membership. Overall, these ideas are not less restrictive than current rules but differently restrictive. Approaching chartering with these rules would allow a much more nuanced and realistic understanding of credit unions, one that reflects current economy and society.

Filene thanks its members and Inner Circle sponsors for helping support this research from the Center for Performance & Operational Excellence.

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