ABA Charges NCUA Is Allowing Credit Unions to Engage in Redlining
The ABA charges the rules allowed credit unions to expand their services in ways that violated federal law.
The NCUA is allowing credit unions to engage in redlining when they define their fields of membership, the American Bankers Association charges in documents filed Friday in a Washington, D.C. federal court.
“It is shocking that NCUA would authorize credit unions to engage in a practice that is illegal for other financial institutions, even those without a special mission of lending to persons of modest means,” the ABA said in its brief filed in the legal battle over the NCUA’s most recent amendments to the field-of-membership rule.
The ABA charged that the NCUA essentially is allowing credit unions to pick and choose which suburbs to serve.
That, the bankers said, is redlining.
The ABA filed suit after the NCUA amended the rule, charging that the rules allowed credit unions to expand its services in ways that violated federal law.
Judge Dabney Friedrich of the U.S. District Court for the District of Columbia ruled that certain sections of the rules violated the law, while also upholding other sections.
The ABA is appealing a portion of the rule dealing with allowing credit unions to add members in an adjacent area under certain circumstances.
That section of the rule allows a credit union serving a Single Political Jurisdiction, Core-Based Statistical Area, or Combined Statistical Area to add an adjacent area as long as the credit union can demonstrate if the credit union can demonstrate that a “sufficient level of interaction” exists between the adjacent area and the already-served area.
Friedrich also said that in the past, the NCUA defined a portion of a Core-Based Statistical Area as part of a local community if it included the core of the area. The new rule deletes that requirement.
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.
The NCUA is appealing those sections of the ruling.
In its brief, the ABA contends that the NCUA has repeatedly expanded “its definition of ‘local community, neighborhood, or rural district.’”
The bankers charged that the NCUA defined a rural district in ways that could include a state or several states.