Amended Field of Membership Rule Still Illegal: ABA

The NCUA’s proposed Field of Membership rule is “unreasonable and unlawful,” the American Bankers Association said, in a letter to the agency.

“Congress granted tax-exempt status to credit unions in view of their special mission to serve those of modest means,” Justin Underwood, senior director of banking with the ABA wrote, in commenting on an updated proposal. “It is the responsibility of the Board to ensure that credit unions deliver on this mission, including to those that might call a low-income neighborhood home.”

The rule does not fulfill that mission, he said.

The comments represent the latest in the ongoing battle between bankers on credit unions over how much power Congress intended to give the NCUA is defining fields of membership.

The NCUA board earlier this year approved a proposed rule that board members said would help credit unions that want to serve core-based statistical areas without serving the urban core demonstrate that they are not discriminating against low- and moderate-income people.

Those changes were made at the behest of panel of appellate court judges, which said the agency had not adequately explained the justification for the rule.

In that same appeals court ruling, the three-judge panel from the federal Appeals Court for the District of Columbia said, in dismissing the rest of an ABA challenge to rule, that the NCUA has wide discretion in defining fields of membership.

The ABA has asked the full appeals court to re-hear the case.

In his comment letter, Underwood said that the changes depart from the idea that credit unions must have a common bond.

Underwood also said it would be inappropriate for the board to issue amended rule while the appeals court case is pending.