I recently attended ameeting where a diverse group of credit union officials weretalking with a policymaker. The topic of associational fields of membership came up. During thatdiscussion, and in obvious competitive frustration, the CEO of asmaller credit union said, “If these large credit unions want toabuse the FOM system and accept everyone for membership, there is abusiness model for them and it is called a mutual savings bank. Letthem serve everybody, but tax them.”

Perhaps the comment was genuine, but it sounded like it had beenlifted directly from the bank trade association's propagandaplaybook and was certainly uttered at the wrong time and in thewrong place. However, I did not want to write this essay to scoldthe CEO for his misguided outburst, but to question the very basisof his premise concerning FOMs and unfair competition from largecredit unions.

If he feels that large credit unions are such an unfaircompetitive threat, what does he think about Bank of America,JPMorgan Chase, Wells Fargo and the scores of other mega-banks andlarge regional banks that compete with him every day? Those banksare right in his community and are substantially larger than thelargest credit unions at which he points his finger.

On top of that, the financial services marketplace is full of somany nonbanks and new disruptions like the Apple Pay paymentsplatform it won't matter who your financial institution is or wherethey are located. That fact should have the small credit union CEOshaking in his boots in fright. The marketplace can be mercilessand there are no guarantees. I'm certainly empathetic to hisstruggle; our credit union has more than $1 billion in assets andwe have to hustle every day to match the competition.

Let's get real about FOMs. The vast majority of businesses, evenmembership organizations like COSTCO and REI, don't severely limitwho their customers can be. Credit union FOMs lost their relevancelong ago and today's potential member could care less aboutthem.

If anything, FOMs are an impediment to a consumer selecting thefinancial service provider of his or her choice. And while on thetopic of choice, each credit union's leaders should be able tochoose their institution's mission and scope, too. A credit unionmight choose to stay narrowly focused on one employee group. Or itcould choose to serve one community or several communities. Or itmight choose to reach out to as many potential members from allwalks of life that the credit union could prudently and sustainablyserve, regardless of where the members live. Rather than anexclusive approach, that's an inclusive approach more in tune withcontemporary times and culture.

Also a credit union's FOM has nothing to do with its tax exemptstatus. It is based on the credit union's not-for-profit corporatestructure, organized without capital stock and operating for mutualpurposes. This rationale for the tax-exempt status has beenratified often over the years by lawmakers. The credit union taxtreatment isn't about who we serve, but about how we serve them.Whether the tax exemption endures is a conversation that will beheld periodically regardless of whether or not credit unions haveor don't have restrictive FOMs or wide-open FOMs. Or not FOMs atall.

To my mind, the latter is the best choice.

Charles A. Bruen is president/CEO of the $1.1 billion FirstEntertainment Credit Union in Hollywood, Calif. He can be reachedat [email protected] or 323-845-4445.