Supreme Court takes a pass on credit union membership rules; agency will start processing new applications ‘immediately’

An appeal of a lower court’s earlier decision upholding rules governing membership at credit unions was rejected by the Supreme Court Monday, essentially ending a challenge by the banking industry to the regulator over the regulations.

The federal credit union regulator said it would immediately begin working on membership expansion applications affected by the court’s action.

In a statement Monday, National Credit Union (NCUA) Board Chairman Rodney Hood said the decision provided some certainty to credit unions and the agency.

“Today’s decision by the Supreme Court ends nearly four years of uncertainty and will help the NCUA in its efforts to foster greater financial inclusion for all Americans,” Hood stated. “The NCUA will begin processing field-of-membership applications affected by this decision immediately.”

The high court declined to consider an appeal by the American Bankers Association (ABA) in its lawsuit against the NCUA over rules first issued by the agency in 2016 (and that went into effect in February 2017) concerning membership in credit unions. The banker group almost immediately challenged the rules, and in late March 2018 a federal district court in Washington, D.C., issued a mixed ruling, striking down one part of the regulations (which determines which, and how, consumers may join a credit union).

Specifically, the court threw out 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.

Both the NCUA and the bankers decided to appeal the district court’s decision. In August 2019, the U.S. Court of Appeals for the D.C. Circuit overturned sections of the lower court’s decision against the agency’s membership rules, finding that the NCUA holds “vast discretion to define terms because Congress expressly has given it such power.”

However, the court also stated that the authority is not boundless. “The agency must craft a reasonable definition consistent with the Act’s text and purposes,” the court stated.

NCUA Chairman Rodney E Hood Statement on Supreme Court’s Decision on Field-of-Membership Lawsuit