| A federal judge has struck down two provisions in a National Credit Union Administration rule that makes it easier for credit unions to further expand their membership. The ruling will be seen as a partial victory for the banking industry, which strongly opposed the rule.
The judge struck down one provision in the rule that automatically qualified a combined statistical area or a contiguous portion of it with fewer than 2.5 million people to be a local community. The judge also struck down another provision that would have increased population limits for rural districts to one million people.
“Because the rule automatically qualifies areas larger than states as rural districts even though the term commonly referred to areas smaller than a county, the NCUA’s definitional decision is unreasonable and manifestly contrary to the statute,” Judge Dabney Friedrich said in her ruling.
The American Bankers Association appeared to be pleased with the decision.
“It never made sense that an entire region could be declared a ‘local community’ or that an entire state could be declared a ‘rural district,’ and today’s ruling recognizes that fact,” ABA President and CEO Rob Nichols said in a statement. “Today’s decision also affirms what we have known for years — NCUA won’t hesitate to push the boundaries of reason for the credit union industry even at the expense of taxpayers, small banks and the communities those banks serve.”
The National Association of Federally-Insured Credit Unions and the Credit Union National Association also were somewhat pleased with the court’s decision, as the ABA had sought to block the rule in its entirety.
“Our organizations are pleased the court upheld components of the NCUA’s field-of-membership rule; however, we strongly disagree with the court’s decision that aspects of the rule exceed the agency’s legal authority,” NAFCU President and CEO Dan Berger, CUNA President and CEO Jim Nussle and CUNA Mutual Group President and CEO Robert Trunzo said in a joint statement. “The field-of-membership rule is not only entirely consistent with the Federal Credit Union Act, but also credit unions must have the ability to grow and serve more Americans. As the parties consider their options going forward, we will continue to support the agency on this critical issue.”
Friedrich upheld two provisions in the rule that gave credit unions the ability to serve core-based statistical areas without serving the urban core that defines the area, and the ability to add “adjacent areas” to existing well-defined local communities on a case-by-case basis.
