CBAI Supports Law Suit Against the NCUA

The Community Bankers Association of Illinois (CBAI), joined with a coalition of state affiliates and the Independent Community Bankers of America to file a friend-of-the-court brief strongly supporting a lawsuit against the National Credit Union Administration (NCUA) which challenges its field of membership rule. Read Amicus Brief.

The NCUA’s October of 2016 final rule greatly expanded the service areas within which credit unions can operate. The rule renders meaningless the existing statutory standard that limits these institutions to serving a well-defined local community, neighborhood or rural district. The brief says the agency’s deliberate violation of statutory restraints to enlarge credit unions’ geographic reach is part of its ongoing campaign to promote the credit union industry. It urges the court to grant the motion for summary judgment [against the NCUA].

In a February 5, 2016 comment letter, CBAI responded forcefully to the NCUA’s proposed expansion of its field of membership rule and urged its immediate withdrawal. The proposed rule was then being framed by the NCUA as “regulatory relief” - versus the wholesale charter enhancement that it really was. The sweeping changes in this proposal would dramatically extend the credit union tax-advantaged status over taxpaying community banks. Read CBAI Comment Letter.

At that time, the NCUA stated their proposed rule was the most sweeping change in membership in the NCUA’s 45 years history. The reason for the proposal was clearly identified by the NCUA’s Vice Chairman by the comment, “Congress is deadlocked” on these issues. Apparently this was the reason why quasi-legislative actions could be justified by unelected NCUA bureaucrats. The proposed rule was a clear and intentional end-around Congress and disregarded congressionally imposed and established rules to assure that credit unions adhere to their original mission.

If credit unions want to weaken (so as to virtually eliminate) the common bond requirement and operate like banks, they should be taxed like banks and should be required to meet all of the same regulatory requirements as banks. They can't have it both ways.

Credit unions were never meant to be tax-exempt community banks!

June 8, 2017