WASHINGTON — The U.S. Court of Appeal for the D.C. Circuit’s has ruled in favor of almost all of NCUA’s 2016 field of membership (FOM) rule in a lawsuit filed by the American Bankers Association, yet both sides are seeing a victory in the decision. The ABA said it is now considering its next steps.
The court, where three federal judges heard oral arguments in April of this year, ruled in a case in which NCUA had appealed a March 2018 district court ruling that had struck down portions of the expanded FOM rule approved by the NCUA board.
The court remanded the portion of the rule—without vacating it entirely—that addressed core-based statistical areas “for further consideration of the discriminatory impact it might have on poor and minority urban residents.” The provision permits credit unions to serve core-based statistical areas without serving the urban core that defines the area, an issuein the case that was the subject of questioning by the judges when the case was heard.
NCUA prevailed in its appeal of a district judge’s decision that had vacated portions of the the agency’s new FOM rule related to combined statistical areas and rural districts as “local communities.” In upholding these portions, the court cited the doctrine of Chevron deference, which gives wide latitude to administrative agencies to interpret their authorizing statutes.
The ruling was hailed by the credit union trade groups.
CUNA, NAFCU and CUNA Mutual Group issued a joint statement that said, “Today’s decision by the D.C. Court of Appeals upholding almost all portions of the NCUA’s rule is a big win for credit unions. This will have a positive impact for the industry’s 117 million members and American consumers who now have better access to member-owned not-for-profit credit unions. For the one aspect of the rule that the court asked for more explanation, we are confident the agency will provide additional support.
“CUNA, NAFCU and CUNA Mutual Group stand united in our position that credit unions provide the best in financial services to American consumers,” the statement continued. “Against meritless banker attacks, we will continue our efforts to ensure field of membership regulations are updated to reflect the modern financial services system so that credit unions can serve their members, including the underserved.”
The broadened FOM rule NCUA had approved included allowing credit unions to consider as part of their FOM rural districts of up to one-million people and portions of combined statistical areas of up to 2.5 million people as a well-defined community.
“The NCUA is pleased with today’s Court of Appeals decision," said Board Chairman Rodney Hood. "The agency is still reviewing that decision. In the near future, we will provide guidance for affected credit unions.”
Author of FOM Expansion Rule Responds
Former NCUA Board Member Rick Metsger—who was the chief author of the FOM expansion rules during his term on the board—told CUToday.info he is pleased, but not surprised, by the ruling.
“As I noted at the time, I felt strongly the regulation we put together was clearly within the authority granted by Congress to ensure all Americans have access to not-for-profit credit unions as their financial partner,” Metsger said. “This represents an important win for the American consumer. I also commend the NCUA General Counsel’s office and the Department of Justice for clearly and thoroughly articulating the merits of our work to meet the NCUA’s federal mandate.”
The American Bankers Association called the ruling a “limited win” for its arguments in the case and noted the court’s opinion left open the possibility that certain future approvals of fields of membership based on expansive interpretations might warrant legal challenge.
In a statement, ABA President and CEO Rob Nichols said he was “pleased that the D.C. Circuit recognized the potential redlining risks that are created when credit unions try to exclude the urban core from their communities.
Nichols said the ABA is “disappointed the court ruled that rural districts may be large and cross state lines [and]that a local community may be larger than a county.”
The ABA said its staff will review the ruling in detail as the association determines its next steps.
“NASCUS congratulates NCUA on the field of membership ruling and commends the agency’s efforts to maintain an effective federal charter," said NASCUS CEO Lucy Ito. "We have long held that a competitive federal charter is vital to preserving a robust dual charter system and today’s ruling certainly advances that goal.”