Federal Judge Invalidates Portion of NCUA's FOM Rule

A U.S. District Court judge today invalidated a portion of the National Credit Union Administration’s field of membership (FOM) rule.

Judge Dabney Friedrich declared invalid and vacated two aspects of the rule challenged by the American Bankers Association in a lawsuit against NCUA: (1) the inclusion of Combined Statistical Areas with fewer than 2.5 million people, and (2) the dramatic expansion of a “rural area” to include areas with up to 1 million people -- which in some cases could encompass entire states. She noted that NCUA’s actions in these areas “are manifestly contrary to the [Federal Credit Union] Act."

However, the judge upheld the parts of the rule that allow federal credit unions to serve Core-Based Statistical Areas without serving the urban core that defines the area, and the ability to add “adjacent areas” to existing well-defined local communities on a case-by-case basis. Judge Friedrich upheld both of those provisions, concluding that “neither [are] in excess of the agency’s statutory authority nor arbitrary and capricious.” She added, however, that “the approach to Core-Based Statistical Areas pushes against the outer limits of reasonableness.”

Read the opinion.