Bankers Blast New Field of Membership Rules
“This captive regulator is once again pushing the envelope and cheerleading the industry it is supposed to regulate.”
The Field of Membership rule adopted by the NCUA board Thursday obliterates the statutory limits that Congress imposed on credit unions, banking trade groups said Thursday.
“The fact that the NCUA today chose to allow tax-exempt credit unions to make up what constitutes a ‘well defined local community’ is disappointing, but given previous decisions, not terribly surprising,” said American Bankers Association President/CEO Rob Nichols. “The reality is the rule approved today effectively allows large credit unions to operate with no membership limitations at all, well beyond Congress’ original intent.”
Nichols’s comments stand in stark contrast to those made by credit union trade groups, who praised the NCUA board’s decision.
The Field of Membership Rule approved Thursday will allow applicants for community chartering approval, expansion or conversion the option of presenting a narrative in order to provide it will serve a well-defined local community.
However, citing a federal lawsuit filed by banking groups and now being appealed, the board decided not to increase to 10 million the population limit on a community consisting of all or part of a statistical area.
The ABA and other bankers’ groups filed suit challenging the last round of Field of Membership rules adopted by the NCUA board.
On March 29, U.S. District Judge Dabney Friedrich ruled in favor of the bankers on two sections of that rule and in favor of the NCUA on two other sections.
The ABA will appeal a portion of the rule dealing with allowing credit unions to add members in an adjacent area under certain circumstances.
While the ABA said it intends to appeal the ruling affecting those sections of the rule, the NCUA has said it will appeal Friedrich’s ruling that two sections of the rule violated federal law.
Friedrich threw out a provision of the field of membership rule that increases to one million people the population limit for rural districts. She also threw out a provision of 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.
Nichols cited that court ruling in blasting the NCUA board and said the rule also validates criticism by lawmakers—most notably Senate Finance Chairman Orrin Hatch (R-Utah)—who say the credit union tax exemption may be outdated.
“NCUA’s action only adds to legitimate questions the courts and lawmakers have raised about this regulator and the unbridled growth of large, tax-exempt credit unions,” Nichols said.
Rebeca Romero Rainey, president/CEO of the Independent Community Bankers of America also cited the court ruling in criticizing the new rule.
“Unwilling to wait for its latest unlawful power grab to be settled in the courts, the NCUA continues working to extend the industry’s taxpayer-subsidized competitive advantage over taxpaying community banks,” she said. “This captive regulator is once again pushing the envelope and cheerleading the industry it is supposed to regulate.”