NCUA Publishes Rule Further Loosening Common Bond Requirements
Immediately after the National Credit Union Administration’s publication today in the Federal Register of a controversial final rule further expanding the already loose fields of membership from which federal credit unions can draw their customers, the American Bankers Association filed a lawsuit in federal court seeking to overturn the rule.
“NCUA’s rule ignores statutory requirements at the expense of taxpayers, small banks and the communities those banks serve,” said ABA President and CEO Rob Nichols. “ABA has successfully sued NCUA three times on past occasions in which the agency exceeded its congressional authority, and we look forward to challenging their latest violation of the law in federal court.”
NCUA’s final rule “fails to adhere to the limitations on federal credit unions established by Congress,” ABA said in the lawsuit. “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.”
Under the final rule, scheduled to take effect Feb. 6, FCUs can apply to serve entire geographic regions, so-called “rural districts” up to 1 million people (which include the entirety of Alaska, North Dakota, South Dakota, Vermont or Wyoming), and areas contiguous to their existing service areas. NCUA is also facilitating easier conversions to community charters.
Nichols noted that NCUA’s action affects all taxpayers by “further increasing the industry’s tax exemption, which is already worth more than $27 billion over the next 10 years,” adding that “Congress set appropriate limits on credit union activities in return for a tax-exempt status that no other trillion-dollar industry enjoys.”
The final rule is part of an aggressive series of actions by NCUA to end-run statutory limits on CUs, Nichols explained, including a final rule substantially loosening the cap on business lending by CUs. ABA supports a pending lawsuit filed by the Independent Community Bankers of America over that rule and will file a detailed friend-of-the-court brief in support of ICBA’s litigation. For more information, contact ABA’s Brittany Kleinpaste.