WASHINGTON (Reuters) - Credit unions will be able to more easily expand into markets dominated by banks after a reform vote on Thursday, industry officials say, as regulators clear the way for the not-for-profits lenders.
The proposal would ease restrictions on who may join credit unions: member-owned lenders that typically form around a common employer, hometown or other shared class.
The industry regulator, the National Credit Union Administration (NCUA), is due to vote Thursday morning and industry leaders foresee a decision in their favor.
"We expect the NCUA to ease unnecessary regulatory restrictions," said Carrie Hunt, a lobbyist for the National Association of Federal Credit Unions, a leading trade group.
In regulatory jargon, credit unions may only form around a "well-defined local community" but proponents of reform say technology has helped widen the meaning of that term.
"The internet has changed everything for lenders," said Ryan Donovan, lobbyist with the Credit Union National Association. "This only modernizes some arcane requirements."
The details of the reform will be outlined at a NCUA board meeting but the regulator has proposed easing geographic limits on credit union membership and allowing more contractors to join employer-affiliated lenders.
One proposal would also encourage credit union expansion into poor and rural communities by easing tests for whether those regions are underserved by other creditors.
The roughly 6,000 credit unions in the United States are a relatively small part of the national financial system.
Their roughly $1 trillion in total assets is only about 2/3 of the total holdings of JPMorgan Chase & Co (N:JPM), one of the nation's largest banks.
Leading bank industry trade groups, though, have opposed plans to allow credit union expansion.
Congress always intended to limit the power of credit unions and keep them tethered to small groups of people with a strong, common bond, according to the American Bankers Association.
"Unfortunately, the NCUA proposal totally ignores two key phrases, 'well-defined' and 'local', out of its statute in order to drastically expand credit union powers," the bank trade group wrote lawmakers early this year.