American Bankers Association v. National Credit Union Administration

By Perry Glantz

“Credit unions originated in mid-19th-century Europe as cooperative associations that were intended to provide credit to persons of small means; they were usually organized around some common theme, either geographic or associational.”1 The Federal Credit Union Act (“FCUA”)2 was enacted in 1934 to establish a system of credit unions to facilitate the stabilization of the nation’s credit structure and to achieve an increased availability of loans.

One prerequisite for a federal credit union is that its membership complies with one of the categories set forth in the FCUA. The three types of membership fields set forth in the FCUA are: (i) single common-bond credit unions—one group that has a common bond of occupation or association; (ii) multiple common-bond credit unions—more than one group, each of which has a common bond or association and is limited to no more than 3,000 members; and (iii) community credit unions—persons or organizations within a well-defined local community, neighborhood or rural district.3 It is the definition of community credit unions that has led to the current conflagration of the turf war between banks and federal credit unions.

The American Bankers Association (“ABA”) has filed a lawsuit in the United States District Court for the District of Columbia against the National Credit Union Association (“NCUA”) challenging the Final Rule issued by the NCUA regarding the community credit union field of membership.4 According to the ABA, the “Final Rule allows community credit unions to operate even though their field of membership is not limited to a single well-defined local community, neighborhood, or rural district, as Congress directed.”5 Specifically, the ABA challenges the inclusion of “combined statistical areas,”6 “core based statistical areas,”7 “areas adjacent to well-defined communities,” and the definition of “rural district” in the Final Rule. The ABA argues that these definitions of community credit unions would allow federal credit unions to serve millions of potential customers in areas that are sometimes larger than many entire states. The ABA contends that its member banks will be harmed by the Final Rule allowing federal credit unions to expand their tax-exempt operations at the expense of other financial institutions.

The NCUA has not responded to the Complaint as of the time of this writing. However, this litigation bears monitoring as a potential source of clarification of the “turf” to be divided between banks and credit unions.

  1. National Credit Union Administration v. First National Bank & Trust Company, 522 U.S. 479, 493 n. 6 (1998).
  2. 12 U.S.C.A. §§ 1751 to 1795k.
  3. 12 U.S.C.A. § 1759.
  4. See Chartering and Field of Membership Manual, 81 Fed. Reg. 88,412 (Dec. 7, 2016).
  5. American Bankers Association v. National Credit Union Administration, Case No. 16-2394, United States District Court for the District of Columbia, Complaint, December 7, 2016.
  6. Combined statistical area” consist of two or more adjacent metropolitan and micropolitan statistical areas that have substantial employment interchange.
  7. Core based statistical areas” consist of the county or counties or equivalent entities associated with at least one core (urbanized area or urban cluster) of at least 10,000 population, plus adjacent counties having a high degree of social and economic integration with the core as measured through commuting ties with the counties associated with the core.

Perry Glantz is a member of the firm's Business Litigation division. He is located in the Denver office. For more information, please contact Perry or your usual Stinson Leonard Street contact.

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