Wednesday, December 14, 2016

NCUA Thumbs Its Nose at Federal Courts

The National Credit Union Administration (NCUA) in its final field of membership (FOM) rule has thumbed its nose at the federal courts.

On two separate occasions, federal courts have invalidated NCUA’s attempts to expand the FOM for community credit unions.

Paragraphs 31 and 32 of the American Bankers Association's complaint show that federal courts found that NCUA failed to comply with the Federal Credit Union Act (FCUA) by ensuring that community credit union must serve a single, well-defined local community.

A federal court in Utah in 2004 invalidated a community charter that included six counties with 1.4 million residents — almost two-thirds of Utah's population — and encompassed an area extending from the Nevada border to the Wyoming border of Utah.

Also, a federal court in Pennsylvania struck down NCUA's decision that a six-county area in south-central Pennsylvania constituted a single “well-defined local community.” The judge wrote in 2008 “[t]o a casual observer familiar with central Pennsylvania, it would likely be a remarkable finding that . . . a geographical area of more than 3,000 square miles with a population of over 1.1 million people and encompassing Harrisburg, Hershey, Carlisle, York, Lebanon, Gettysburg, and Shippensburg — constituted a ‘well-defined local community.’”

Nothing has changed in statute; but now, NCUA's final FOM rule will allow a Combined Statistical Area (CSA) with up to 2.5 million population to be treated as a presumptive well-defined local community. (See my earlier post)

For example, this final rule would allow Utah’s Salt Lake City-Ogden-Clearfield CSA to be classified as a presumptive “well-defined local community,” even though six of the eight counties in the CSA were part of previous litigation that found that those six counties do not constitute a single, well-defined local community.

So, how can these eight counties now be a presumptive well-defined local community?

NCUA is thumbing its nose at the federal courts and is unreasonably interpreting the FCUA.

1 comment:

  1. Your headline is missing a key word.
    " NCUA thumbs its nose....AGAIN"
    As they've thumbed their nose at congress on LICU, RBC, charter change rules, and the White House on contingency lawsuits.
    Hensarling, where art thou?



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