ICBA, Banking Associations Support ABA in Arguing That FOM Rules Are Illegal

The NCUA far exceeded its authority when it issued new Field of Membership rules, the Independent Community Bankers of America and state banking associations said this week, in support of a request for the U.S. Supreme Court to review the rules.

“Congress did not give NCUA carte blanche to extend the fields of membership,” the groups said, in support of a petition by the American Bankers Association for the court to consider an appellate court ruling upholding several sections of the rule.

The NCUA’s response to the petition had been due last week, but federal government attorneys requested an extension to May 11.

In March 2018, Judge Dabney Friedrich of the U.S. District Court for the District of Columbia struck down parts of a rule the NCUA issued in 2016. Those sections automatically qualified a Combined Statistical Area or a contiguous portion of it with fewer than 2.5 million people to be a local community and increased the population limit to one million people for rural districts.

However, a three-judge panel from the U.S. Court of Appeals for the District of Columbia overturned large parts of that decision, ruling that major sections of the FOM rule complied with federal law.

The ABA has asked the high court to review that decision, contending that the rules give credit unions an unfair advantage.

The ICBA and state banking associations agreed.

“(The) NCUA’s unabashed promotion of the credit union industry contravenes congressional intent and permits the dramatic expansion of credit unions at the expense of banks, especially small, local banks,” the groups said.

They contended that the definition of “rural district” could “span hundreds of thousands of square miles, encompass major metropolitan areas, and exclude low-to-moderate income areas, in contravention of congressional intent.”