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Bankers Sue NCUA Over Field of Membership Rules
Thursday, December 8, 2016 6:55 AM

Contending that the new NCUA Field of Membership rules allow federal credit unions to expand beyond the bounds that Congress prescribed, the American Bankers Association today asked a federal court to nullify the regulations.

In the suit, filed in the U.S. District Court for the District of Columbia, the ABA said that the final rule expands “the universe of members eligible to join a single federally chartered credit union well beyond the limits established by Congress.”

The ABA states that because credit unions are tax exempt, restrictions on their size are essential to prevent them from gaining an unfair competitive advantage over tax-paying financial institutions.

“By exceeding these statutory limitations, the Final Rule upsets the balance Congress struck between granting federal credit unions tax-favored status and limiting their operations to carefully circumscribed groups or localities that share a common bond,” the ABA contends.

Community bankers claim they've lost millions of dollars in commercial loans to credit unions. For instance, the association said, community credit unions will be allowed to operate even though their field of membership is not limited to a single well-defined local community, neighborhood or rural district.

The ABA said that in the past, federal courts have invalidated the NCUA’s attempts to expand credit union fields of membership. The ABA asked the federal court to set aside the rules.