November 22, 2019

NCUA responds to FOM case petition

gavelThe NCUA Thursday filed its response to the American Bankers Association's (ABA) petition for an en banc rehearing of its lawsuit challenging the NCUA's 2016 field of membership (FOM) rule. The appeals court three-judge panel decision in August was largely in favor of the NCUA on key issues in the lawsuit.

In the response, the NCUA argues that the ABA does not present an adequate basis for rehearing and points to the Chevron doctrine. The agency also notes that the Supreme Court has previously enabled agencies to use "effective and efficient administrative proxies" to administer general rules when implementing a statute. In the previous decision, the appeals court asked for additional explanation of the NCUA's decision to eliminate the urban-core requirement for local communities based on core based statistical areas (CBSAs). 

Last month, the agency proposed a rule to address key concerns by:

  • re-adopting a provision to allow an applicant to designate a combined statistical area (CSA), or an individual, contiguous portion CSA, as a well-defined local community, provided that the chosen area has a population of 2.5 million or less;
  • providing further explanation and support for eliminating the urban-core requirement for local communities based on CBSAs, as provided for in the 2016 FOM rule; and
  • providing express authority for the NCUA to reject a credit union application for CSAs and CBSAs if the agency determines that the FOM selection reflects discrimination (the ABA had argued that the 2016 rule would allow credit unions to engage in redlining; this addresses that concern).

NAFCU plans to submit comment to the NCUA on the proposed rule, and has stood by the agency throughout the lawsuit, filing an amicus brief in support. The association has previously urged the NCUA to continue efforts to modernize FOM rules.