Regulator opens door for more credit union memberships after Supreme Court denies bankers’ appeal

By Theo Wayt · June 29, 2020

The National Credit Union Administration said on Monday that it would immediately begin processing a wider group of credit union membership applications after the Supreme Court declined to hear a key challenge from the American Bankers Association

The Supreme Court’s decision ends a nearly four-year-long legal battle in which the NCUA defended a 2016 rule change intended to expand Americans’ access to credit unions. The bankers’ group claimed that the new rule gave credit unions an unfair competitive advantage.

The agency will now be able to widen its field-of-membership guidelines to legally classify some metropolitan areas and sections of metropolitan areas with fewer than 2.5 million residents as “local communities” and will raise the number of people in an area designated a rural district to one million people. That means more Americans will qualify for credit union membership. 

Credit unions operate as nonprofits and tend to be much smaller than banks. 123 million Americans currently belong to credit unions, according to the Credit Union National Association, an industry group.

The NCUA originally proposed the field-of-membership expansion in 2016, which was then challenged by the bankers association. In 2018, the U.S. District Court for the District of Columbia overturned key aspects of the NCUA rule, but nearly all portions of the provision were then upheld in 2019 by the D.C. Circuit Court of Appeals. The Supreme Court’s decision not to hear the case marks the end of the road for the ABA’s appeal. 

“Today’s decision by the Supreme Court ends nearly four years of uncertainty and will help the NCUA in its efforts to foster greater financial inclusion for all Americans,” said National Credit Union Administration Chairman Rodney E. Hood. “The NCUA will begin processing field-of-membership applications affected by this decision immediately.”

An ABA spokesperson called the Supreme Court’s decision “disappointing.” He added, “The NCUA continues to steadily erode those limits, and now we believe it's time for Congress to reassert itself and either restore real credit union eligibility rules, or ask this growing industry to start paying taxes and meet the same regulatory requirements as the tax-paying banks they compete with every day. The free ride should end.”

CUNA President and Chief Operating Officer Jim Nussle called Monday “a great day for anyone hoping to access the financial well-being afforded by credit unions.”

He continued, “In recognizing the NCUA’s right to oversee our system, the Court has also established a much-needed firewall from spurious attacks by the bankers. CUNA looks forward to working with the NCUA and credit unions to find new opportunities to expand people-over-profit financial services to communities across the country, and thanks the court for today’s decision.”

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