WASHINGTON — The American Bankers Association has filed a lawsuit against the National Credit Union Administration after the regulator finalized a rule that would unlawfully expand fields of membership for credit unions. The lawsuit, filed today in the United States District Court for the District of Columbia, will seek to overturn the NCUA rule.
The rule disregards Congress’ explicit instruction that community credit unions serve only a single, well-defined local community. Instead, it declares that large regions including millions of residents and cutting across multiple states are single “local” communities. The rule also allows credit unions to selectively serve only parts of the local community, and to serve areas adjacent to the local community. NCUA’s rule is part of a continuing effort by the agency to expand the size of federal credit unions, as shown by a separate NCUA proposal that would quadruple the population limit on community fields of membership to 10 million, which goes well beyond congressional limits. ABA’s lawsuit challenges NCUA’s final rule as contrary to statutory constraints that limit credit unions’ field of membership in order to ensure a “meaningful affinity and bond among members.”
“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.”
Nichols noted that the impact of NCUA’s action affects not only banks, but also all taxpayers.
“The final rule risks further increasing the industry’s tax exemption, which is already worth more than $27 billion over the next ten years,” Nichols said. “Congress set appropriate limits on credit union activities in return for a tax-exempt status that no other trillion-dollar industry enjoys.”
This action by the NCUA board comes on the heels of the agency’s decision to substantially loosen the business lending cap on credit unions. The move has already prompted legal action by the Independent Community Bankers of America – – a lawsuit ABA supports. The association plans to file a detailed amicus brief in support of ICBA’s litigation in this area.