Contending that the new NCUA Field of Membership rules allow federal credit unions to expand beyond the bounds that Congress prescribed, the American Bankers Association on Wednesday asked a federal court to nullify the regulations.
In the suit, filed in the U.S. District Court for the District of Columbia, the ABA said that the final rule expands “the universe of members eligible to join a single federally-chartered credit union well beyond the limits established by Congress.”
The ABA states that because credit unions are tax exempt, restrictions on their size are essential to prevent them from gaining an unfair competitive advantage over tax-paying financial institutions
“By exceeding these statutory limitations, the Final Rule upsets the balance Congress struck between granting federal credit unions tax-favored status and limiting their operations to carefully circumscribed groups or localities that share a common bond,” the ABA contends
For instance, the association said, community credit unions will be allowed to operate even though their field of membership is not limited to a single well-defined local community, neighborhood or rural district.
The ABA said that in the past, federal courts have invalidated the NCUA's attempts to expand credit union fields of membership.
Many of the provisions of the final rule, as adopted by the NCUA in October, were part of the proposed rule issued last year. However, the NCUA did not include a proposal defining a congressional district as a well-defined local community in the final rule. The NCUA received 11,380 comments on the proposed rules, with commenters generally supporting them by a ratio of about three to one.
The goal, according to NCUA Board Chairman Rick Metsger, is to make it easier for people to gain access to affordable financial services.
The NCUA also has issued proposed rules to make additional changes to field of membership regulations. The comment period for those rules closes Friday.
The ABA asked the federal court to set aside the rules.
The NCUA also is fighting a suit filed by the Independent Community Bankers of America challenging the recently revised Member Business Lending rules.
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