Mile High Lawsuit Against NCUA

The Fourth Corner Credit Union (TFCCU), a Colorado credit union chartered to serve the cannabis industry, on July 30 sued the National Credit Union Administration (NCUA) in U.S. District Court in Denver for not approving its application for federal deposit (share) insurance. The credit union is also suing the Federal Reserve Bank of Kansas City.

The 78-page complaint alleges that NCUA deprived TFCCU of Due Process of Law in violation of the Fifth Amendment and the NCUA’s own procedures.

The complaint also claims that NCUA acted arbitrarily, capriciously, not in accordance with law and abused its discretion. Among the claims by TFCCU of NCUA's abuse of regulatory discretion are that NCUA:

improperly concluded that the credit union was unable to satisfy DOJ, FinCEN and BSA enhanced monitoring requirements;
concluded that TFCCU’s business model served a single industry that does not have an established track record and remains illegal at the federal level;
determined that TFCCU did not present adequate evidence of compelling interest and commitment among the members to promote thrift through systematic savings;
concluded TFCCU failed to provide information on the general character and fitness of the credit union’s management;
discriminated against TFCCU, a state chartered credit union, and acting in favor of federally chartered and federally insured credit unions in violation of 12 U.S.C. §1790;
violated 12 U.S.C. §1790d by applying net worth requirements to TFCCU, a new credit union;
engaged in improper ex parte communications relative to TFCCU's pending confidential federal share insurance application;
failed to follow the provisions of its August 13, 2014 supervisory letter regarding the ability of credit unions to provide services to marijuana-related businesses (MRBs);
failed to follow the provisions of its July 18, 2014 supervisory letter regarding the ability of credit unions to provide services
to MRBs in acting on TFCC’s federal share deposit insurance application; and
found the provision of services by TFCCU to MRBs involved an undue risk to the federal share insurance fund.

The complaint concludes that "the NCUA does not trust highly qualified state regulators with superior local knowledge, familiarity with a state spawned industry ... to properly charter, regulate, supervise and examine TFCCU...NCUA concocted an over-the-top denial of the federal deposit insurance application by including a series of baseless and gratuitous findings impugning the reputations" of highly qualified professionals and of Colorado regulators. The complaint further claims that NCUA and the Federal Reserve Bank of Kansas City conspired to block TFCCU's access to the Federal Reserve's payment system.