Appeals Court upholds huge portion of expanded field of membership rule

US Court of Appeals in Washington DC

The U.S. Court of Appeal for the D.C. Circuit’s has ruled in favor of almost all of NCUA’s 2016 field of membership rule in a lawsuit filed by the American Bankers Association.

In the ruling, the court also considered ABA’s cross-appeal on those portions of District Judge Dabney Friedrich’s opinion upholding the provision of the rule permitting credit unions to serve core-based statistical areas without serving the urban core that defines the area.

“But we ultimately disagree with many of them,” said Judge Robert Wilkins, in writing for the appeals court. “In this facial challenge, we review the rule not as armchair bankers or geographers, but rather as lay judges cognizant that Congress expressly delegated certain policy choices to the NCUA. After considering the Act’s text, purpose, and legislative history, we hold the agency’s policy choices “entirely appropriate” for the most part. Chevron, 467 U.S. at 865. We therefore sustain the bulk of the rule. Still, we do not rubber-stamp this regulation. We remand, without vacating, one portion for further consideration of the discriminatory impact it might have on poor and minority urban residents.”

As previously reported, the agency approved the FOM rule at their June board meeting which included allowing credit unions to consider as part of their FOM rural districts of up to one million people and portions of combined statistical areas of up to 2.5 million people as a well-defined community.

NCUA had appealed a March 2018 district court ruling that struck down two provisions of the agency’s FOM rule while upholding two others that were challenged in a lawsuit filed by the ABA.  Judge Dabney Friedrich of the U.S. District Court for the District of Columbia found that NCUA exceeded its statutory authority when it promulgated regulations that automatically qualify a combined statistical area with fewer than 2.5 million people to be a local community, and increased to 1 million people the population limit for rural districts.

NCUA Chairman Rodney Hood said the agency is still reviewing the ruling and will provide guidance to credit unions in the near future.

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