Credit Union Showdown


ICBA continues its court battle against NCUA’s out-of-bounds rulemaking

By Karen Thomas

ICBA’s fight to rein in the tax-exempt credit union industry’s captive regulator has taken several turns in recent weeks and is headed for a showdown in the courts. The National Credit Union Administration moved to dismiss ICBA’s lawsuit against the agency’s expansion of industry commercial lending authority, while at the same time expanding its rule relaxing field-of-membership guidelines.

Although ICBA submitted its official response to the NCUA’s motion after this issue went to press, the association continues to vigorously challenge both issues against the credit union industry’s most ardent cheerleader.

Commercial lending contest
In its motion to dismiss ICBA’s challenge to the commercial lending rule, the NCUA claims ICBA lacks legal standing. In other words, the NCUA says ICBA cannot show that community banks have been injured by the agency’s rule change. However, ICBA has made it quite clear that the NCUA’s rule allowing credit unions to exceed statutory limits on commercial lending activity harms community banks, consumers and the financial system at large. ICBA’s legal team is confident the association is in the best position to bring the lawsuit against the agency’s unlawful rule.

ICBA’s case notes that the NCUA rule allows tax-exempt credit unions to exceed limits on commercial lending activity established by Congress, sidestepping the legislative branch and putting consumers at risk. The NCUA final rule allows credit unions to exclude nonmember commercial loans or participations from their calculation of the member business loan cap, contrary to the plain language of federal law.

The NCUA’s push to unilaterally expand credit union loopholes shows it is captive to the taxpayer-subsidized industry it is charged with regulating. While ICBA is responding forcefully to the NCUA’s motion, community bankers who would like to help ICBA’s legal challenge can contribute to the ICBA Credit Union Litigation Fund ( The fund allows community bankers to provide voluntary contributions to ICBA’s lawsuit to help level the playing field with tax-exempt credit unions through the courts.

Membership multiplier
While the NCUA plays defense on its commercial lending rule, the agency continues its push to dramatically inflate the powers of credit unions to access new customers. In fact, the regulator intensified its planned expansion of its field-of-membership rules to allow credit unions to serve larger populations and territories.

In an updated final rule, the NCUA significantly eased membership requirements for all charter types, particularly multi-common-bond and community credit unions. The agency’s rule:

  • applies the 2.5 million population limit to any portion of a core-based statistical area;
  • allows credit unions to serve a combined statistical area, subject to the 2.5 million population cap;
  • permits credit unions to serve an area adjacent to a core-based statistical area if it shows common interests or interaction between the areas; and
  • quadruples the population threshold of rural districts from 250,000 to 1 million.

The NCUA did defer action on two of the most expansive items in its original proposal, after vigorous opposition from ICBA. One would have recognized an individual congressional district as a well-defined local community, allowing community credit unions in seven states to serve the entire state and making a mockery of the term “local.” Another would have allowed multiple-common-bond credit unions to expand “virtually” through a transactional website, ignoring the requirement that groups be within a reasonable proximity to their credit union as long as members have access to
the Internet.

In holding back on these proposals, perhaps the NCUA recognized that it should be somewhat circumspect as its rules face court challenges from community banks.

Or perhaps not. The agency also proposed additional field-of-membership expansions, including one that would quadruple the population limit for a well-defined local area from 2.5 million to 10 million. Together, these reforms render field-of-membership restrictions essentially meaningless—representing yet another example of the captive regulator illegally extending the credit union industry’s taxpayer-subsidized competitive advantage.

Learn More, Take Action

Want to learn more about ICBA’s NCUA lawsuit and how to contribute to the Credit Union Litigation Fund? Visit

In a comment letter filed earlier this year, ICBA wrote that the NCUA’s expansion of field-of-membership rules violates the Federal Credit Union Act and further erodes meaningful distinctions between tax-exempt credit unions and taxpaying community banks. And ICBA has long warned that these changes will result in much larger credit unions serving larger and more geographically diverse areas. ICBA will continue to fight this egregious power grab.

Although there is much left up in the air regarding these NCUA initiatives and ICBA’s ongoing legal challenge, community bankers can rest assured we are vigorously opposing these misguided policies. ICBA has filed suit because it is the right thing to do for community banks, consumers and the nation’s financial system. We thank all the community bankers who have joined the fight against the NCUA’s unlawful regulations and encourage continued involvement as the battle continues.

Karen Thomas ( is ICBA’s senior executive vice president for government relations and public policy.