Navy Federal Credit Union (NFCU) recently unveiled its new
Military Banking Facilities (MBF) as part of a Department of Defense (DoD)
initiative to provide financial services to military personnel overseas. NFCU
is branding its MBFs as “community banks,” which has drawn criticism from
community banking advocates who note the institution’s tax-exempt status and
concerns about regulatory oversight.
Navy Federal announced it will operate 60 MBFs and 272 ATMs
already in existence on designated DoD military installations in Europe and the
Pacific region. MBFs provide servicemembers with access to foreign currency,
local ATMs, bill pay services, savings accounts, checking accounts and other
financial services.
“The Overseas Military Banking Program fits our core values at
Navy Federal and is consistent with our primary mission of supporting active duty
military members and their families,” NFCU Chief Operating Officer Kara Cardona
said in a press release. “Serving these families through this important DoD
program is directly aligned with our mission.”
NFCU explained in its release that Navy Federal will operate its
MBFs overseas as separate entities and that they will be co-branded as
“Community Bank, Operated by Navy Federal Credit Union.”
The Independent Community Bankers of America (ICBA) President
and CEO Rebeca Romero Rainey issued a statement urging federal agencies to
order NFCU to cease and desist referring to its MBFs as community banks.
“Although credit unions may like to present themselves as
banks, federal agencies should ward off any attempts to conflate a bank with a
credit union, which would likely result in confusion among servicemembers,”
Romero Rainey said. “Imitation is the sincerest form of flattery, but Navy
Federal — which has been subject to multiple congressional inquiries
following CNN’s reporting of racial disparities in the lender’s
mortgage approval rates — appears to be trying to mask the fact that it is a
global financial institution that does not pay taxes or meet the same level of
regulatory standards as real community banks.”
She also described the program as a “new breed of
institution — not quite bank, not quite credit union,” which does not seem to
have a clear regulatory agency to subject it to federal fair lending laws or
provide federal insurance for deposits from military service members.
Romero Rainey stressed that there are key differences
between credit unions and community banks that ICBA believes should be
addressed by federal regulators.
“They remain exempt from taxation and the Community
Reinvestment Act,” Romero Rainey said. “This has become particularly relevant
amid the rising wave of credit unions using their taxpayer-funded subsidies to
purchase tax-paying community banks. If credit unions want to call themselves
banks, they should switch charters — and pay taxes like real community banks.”