A “phase in” of a court’s ruling allowing expanded credit union membership eligibility got underway Thursday when the federal credit union regulator proposed new rules, despite the banking industry’s vow to continue to try and overturn the regulations.
The National Credit Union Administration (NCUA) Board unanimously proposed amendments to its rules on credit union membership at federal credit unions that would allow an applicant credit union to designate a combined statistical area (CSA), or an individual, contiguous portion of that area, as a well-defined local community (WDLC) provided that the chosen area has a population of 2.5 million or less.
The agency said, in accordance with an August D.C. Circuit Court of Appeals ruling with respect to communities based on a Core-Based Statistical Area (CBSA), that it is providing “further explanation and support for its elimination of the requirement to serve the CBSA’s core area” as provided for in the original rule adopted in 2016 by the board. The agency also said it is proposing to clarify existing requirements and “add an explicit provision to its rules to address concerns about potential discrimination in the FOM selection for CSAs and CBSAs.”
In August, a federal appeals court overturned a district court ruling from the previous year that vacated two provisions of the agency’s chartering and field-of-membership (FOM) rule that had been in effect since February 2017 (as adopted in 2016). Those provisions qualified a CSA with fewer than 2.5 million people as a “local community” that can be served by a credit union; the other raised to 1 million people the population limit for rural districts that may be served.
In its August decision, the U.S. Circuit Court of Appeals for the D.C. Circuit ruled that NCUA holds “vast discretion to define terms because Congress expressly has given it such power.” However, the court also stated that the authority is not boundless. “The agency must craft a reasonable definition consistent with the Act’s text and purposes,” the court stated.
Following that ruling, NCUA Board Chairman Rodney Hood indicated last month that the agency would take a “phased approach” in moving forward on its regulation, given that the court’s ruling remained subject to requests for further review. Hood also said “in the near future” the agency would consider a limited proposal to address the definition of local community. The federal court, in its decision, focused on the definition of “Core-Based Statistical Areas” that do not include the urban core.
Thursday, Hood said re-adopting the CSA provision and other provisions in the proposal were “an important stage” in modernizing the agency’s credit union membership rules, and in phasing in the August decision by the appeals court. However, a banking trade group (which originally asked the court to intervene and block the rules, but was blocked by the appeals court) has stated it will seek an “en banc” review of the appeals court decision.
NCUA staff, in response to a question by Hood, said the banking group’s pending litigation will change nothing that NCUA is proposing, and that all other options are left in place.