ABA Sues NCUA Over Field of Membership Restrictions

On October 2, 2017, the American Bankers Association (ABA) filed a new brief with a notice of supplemental authority in an ongoing lawsuit against the National Credit Union Administration (NCUA). The ABA now contends that the NCUA has become a cheerleader for the very industry that they are charged with regulating and insuring. As a result, the ABA says the NCUA is already approving Fields of Membership (FOMs) that are not in accordance with the Federal Credit Union Act requiring that they be limited to a “well-defined community, neighborhood, or rural district”. The ABA further states that the NCUA is also circumventing the Act’s rules requiring that they create a 1 million person limit per rural district.

A year ago, the NCUA board approved rules designed to make it easier for people to gain access to affordable financial services. One of these rules entailed giving member credit unions more flexibility in determining how they would restrict their field of membership. Since last October, Chairman Rick Metsger and successive NCUA officials have supported the argument that the Federal Credit Union Act does not impair their ability to relax their own rules. In prior Court papers, the NCUA has stated:

"Congress did not define ‘local community’ or ‘rural district,’ and the statute imposes no size or population limit on those terms. Rather, Congress directed NCUA to prescribe, by regulation, a definition for the term well-defined local community, neighborhood, or rural district."

The ABA’s latest brief cites only one real example of a case where it feels any reasonable definition of a “well-defined local community” has been violated. The ABA claims that NCUA’s expanded FOM granted to Utah Community Credit Union now enables it to serve anyone in Salt Lake City, Provo and Orem, an area that encompasses over 2.4 million people.

The ABA, however, cites multiple examples now where it says that the NCUA’s 1 million person limit for a rural district is challenged. Potlatch No. 1 Federal Credit Union now covers an area that includes parts of Oregon, Idaho and Montana, and Pioneer West Virginia Federal Credit Union covers an “oddly-shaped area with a donut hole” in West Virginia, Kentucky and Ohio. However, in both of these cases, the areas covered include, in fact, just under 1 million people.

The ABA brief also says that Visions Federal Credit Union covers the so-called “urban areas” of Binghamton, Ithaca and Elmira, New York, and North County Federal Credit Union covers eight of Vermont’s nine cities, when both are only supposed to have FOMs covering rural districts. (As a New York City resident, I will be glad to testify that all of these areas are, in fact, rural by any reasonable definition!).

The NCUA has not responded publicly to the ABA’s latest brief, but has already moved for summary judgment dismissing the entire suit before Judge Ketanji Brown Jackson of the U.S. District Court for the District of Columbia.

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