Credit union agency mulls appeal of adverse court ruling in banker suit

The federal regulator of credit unions is considering whether to appeal a March 29 federal district court ruling that found two chartering and field-of-membership (FOM) rule provisions in effect since February 2017 to be invalid.

The National Credit Union Administration (NCUA), in a notice filed with the court Thursday, said that while the court’s order is in effect, the agency will not grant any new community charters under the vacated rule provisions. It has also instructed affected credit unions during this time not to accept any new members who would only be eligible for membership under those provisions. It will not, however, require credit unions to de-list members who became members on or before April 4, 2018.

The NCUA notice says, among other things, that requiring de-listing “would serve only to punish individuals and entities who did nothing wrong and who were not parties in this litigation” and would be “highly disruptive” if the Court of Appeals overturned the district court’s finding.

The plaintiff in the suit, the American Bankers Association (ABA), “at this time” has no plans to ask that such members be de-listed, the NCUA notice states. Not surprisingly, the two parties disagree over Congress’ intent regarding continuing membership status in such situations.

The ABA is challenging NCUA over chartering and FOM rule changes adopted by the NCUA Board in October 2016 and published Dec. 7, 2016, in the Federal Register. The portions vacated in the March 29 order include a provision that qualifies a “combined statistical area” with fewer than 2.5 million people as a “local community” that can be served by a credit union; and one raising to 1 million people the population limit for rural districts that may be served.

The court found these two provisions to be outside NCUA’s authority; other provisions challenged in the case were upheld.

NCUA notice filed April 19, 2018, in FOM lawsuit