The American Bankers Association quickly filed a lawsuit on Wednesday against the National Credit Union Administration right after the administration published its Field of Membership final rule in the Federal Register.
The ABA’s action “challenges provisions of a Final Rule that expand the universe of members eligible to join a single federally-chartered credit union well beyond the limits established by Congress,” according to the filing.
“Because federal credit unions are exempt from federal taxes and most state taxes, restrictions on the size of federal credit unions are essential to prevent credit unions from obtaining an unfair competitive advantage over banks and other financial institutions that do not enjoy tax-exempt status,” the filing stated.
The final rule’s summery in the Federal Register stated, “The NCUA Board is comprehensively amending its chartering and field of membership rules to maximize access to federal credit union services to the extent permitted by law, and to organize the rules in a more efficient framework.”
The amendments will implement changes in policy affecting:
- The definition of a local community, a rural district, and an underserved area
- The chartering and expansion of a multiple common bond credit union
- The expansion of a single common bond credit union that serves a trade, industry or profession
- The process for applying to charter, or to expand, a federal credit union
The rule is set to go into effect on Feb. 6, 2017.
However, the ABA doesn’t agree with the changes and is looking to overturn the rule.
According to the ABA, the rule disregards Congress’ explicit instruction that community credit unions serve only a single, well-defined local community.
Instead, the ABA stated the rule declares that large regions including millions of residents and cutting across multiple states are single “local” communities.
“NCUA’s rule ignores statutory requirements at the expense of taxpayers, small banks and the communities those banks serve,” said Rob Nichols, ABA president and CEO. “ABA has successfully sued NCUA three times on past occasions in which the agency exceeded its congressional authority, and we look forward to challenging their latest violation of the law in federal court.”
The National Association of Federal Credit Unions stands behind the rule, noting that NCUA’s decision to issue this final rule is the first meaningful update to the agency’s FOM rules over the past decade.
“If the banks had put this much effort and money into policing themselves, maybe they could have helped avoid the financial crisis they caused that harmed consumers and our country’s economy,” said NAFCU President and CEO Dan Berger.
“NCUA’s field of membership rule is well within the agency’s legal authority and is in keeping with the Federal Credit Union Act,” Berger noted. “This suit is another outrageous effort by the banking trade group to distort the truth and continue to stymie credit unions’ ability to provide consumers with the choice of a financial institution that puts them first,” Berger continued. “NAFCU will remain steadfast in its support of this rule.”