A federal court has dismissed a lawsuit against NCUA’s new member business loan (MBL) rule on procedural rules, but only after also pointing out that the suit would have been dismissed on its merits as well.
The lawsuit was brought against NCUA late last summer by the Independent Community Bankers of America (ICBA, a bankers’ trade group) to invalidate and set aside a provision in the MBL rule (adopted by the agency last spring) that allows federally insured credit unions to exclude purchased commercial loans or participations in such loans from the aggregate cap on MBLs.
The bankers’ group asked the court to declare that NCUA acted “arbitrarily and capriciously” and without statutory authority in concluding in the MBL rule that “to purchase a commercial loan or an interest in a commercial loan from another lender is not to ‘make’ a commercial loan within the meaning” of the law.
But U.S. District Court Judge James C. Cacheris, of the Eastern District of Virginia, did not see it that way. “The challenged regulations reflect a reasonable interpretation of the Federal Credit Union Act,” he wrote, referring to the plaintiff’s argument that the rule violated the Administrative Procedures Act (APA). But the judge went further: “Even if the Court was to reach the merits of Plaintiff’s APA claims, the Court would still dismiss this case.”