Appellate Court Issues Mixed Decision in CU Field of Membership Appeal

A three-judge panel of the D.C. Circuit Court of Appeals today upheld much of the National Credit Union Administration’s 2016 field of membership rule, which further expanded the already loose fields from which federal credit unions can draw their customers.

In a limited win for the American Bankers Association, which sued to block the rule, the court remanded the portion of the rule—without vacating it entirely—addressing core-based statistical areas “for further consideration of the discriminatory impact it might have on poor and minority urban residents.” This provision, upheld by the district judge, permits credit unions to serve core-based statistical areas without serving the urban core that defines the area. The appellate court saw merit in ABA’s argument that this would encourage redlining by allowing credit unions to construct fields of membership consisting of wealthier suburbs without lower-income core neighborhoods.

However, NCUA prevailed in its appeal of the district judge’s decision vacating portions of the NCUA rule related to combined statistical areas and rural districts as “local communities.” In upholding these portions, the court cited the doctrine of Chevron deference, which gives wide latitude to administrative agencies to interpret their authorizing statutes. The court’s opinion left open the possibility that certain future approvals of fields of membership based on expansive interpretations might warrant legal challenge.

ABA President and CEO Rob Nichols said he was “pleased that the D.C. Circuit recognized the potential redlining risks that are created when credit unions try to exclude the urban core from their communities” and added that ABA is “disappointed the court ruled that rural districts may be large and cross state lines [and]that a local community may be larger than a county.” ABA staff will review the ruling in detail as the association determines its next steps. For more information, contact ABA’s Thomas Pinder.