WASHINGTON (Reuters) - Credit unions will be able to reach more consumers with their not-for-profit business model under rules passed by the industry's regulator on Thursday, U.S. officials said.
The proposal eases 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), on Thursday approved a plan that relaxes membership restrictions - an action welcomed by the industry.
"This comprehensive rule expands consumer access to credit and provides them a safe place to invest their life savings," NCUA Board Chairman Rick Metsger said in a statement.
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."
Regulators approved easing geographic limits on credit union membership and allowing more contractors to join employer-affiliated lenders, among other reforms.
One reform also encourages 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.
With around $1 trillion in total assets, they have only about two thirds of the total holdings of JPMorgan Chase & Co <JPM.N>, 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.
(Reporting By Patrick Rucker; Editing by Bernard Orr and Andrew Hay)