The National Credit Union Administration is pushing back against a lawsuit filed by the American Bankers Association last year seeking to overturn a rule approved by the NCUA granting credit unions more flexibility to expand their membership.
The NCUA late last year approved the rule streamlining the process and making it easier for credit unions to grow.
The rule revised definitions of well-defined local community to include combined statistical areas and portions of a core-based statistical area, and expanded the options for multiple common bond credit unions and single common bond credit unions to add potential members.
The new rule also raised the population cap for well-defined communities to 10 million, and permitted a credit union to designate a portion of a core-based statistical area as its community without regard to metropolitan division boundaries, among other provisions.
“Congress delegated broad interpretive authority to NCUA,” the NCUA wrote in a court filing earlier this week responding to the ABA’s lawsuit.
The ABA has claimed the rule disregards Congress’ explicit instruction that community credit unions serve only a single, well-defined local community.
The ABA also claims the rule declares that large regions including millions of residents and cutting across multiple states are single local communities, and that it allows credit unions to selectively serve only parts of the local community.
“NCUA’s rule ignores statutory requirements at the expense of taxpayers, small banks and the communities those banks serve,” Rob Nichols, ABA president and CEO, said in a statement last December. “The final rule risks further increasing the industry’s tax exemption, which is already worth more than $27 billion over the next 10 years. Congress set appropriate limits on credit union activities in return for a tax-exempt status that no other trillion-dollar industry enjoys.”
In response, the NCUA said in a court filing that congress did not believe the terms “well-defined local community” or “rural district” have one single meaning.
“If Congress had intended to limit community credit unions to geographic areas of a particular size or with particular population restrictions, it could have said so,” the NCUA said in its court filing. “Yet Congress did not include any such limitation.”