The banking industry went to court Monday to try to block new membership rules adopted by the National Credit Union Administration.
The rules, approved by the agency Thursday, violate an October federal court ruling blocking occupation-based credit unions from adding members who do not work for the business they were chartered to serve, according to banking industry lawyers.
"The rules are obviously an attempt to evade the court's order," said Michael F. Crotty, deputy general counsel for litigation at the American Bankers Association. "The court has declared that NCUA was allowing credit unions to add members in an illegal fashion; the agency has chosen to get around this in a different illegal fashion."
The banking industry asked Judge Thomas P. Jackson of U.S. District Court for the District of Columbia to schedule a hearing Wednesday for arguments on its motion to void the rules. Previously, Judge Jackson had scheduled a Dec. 4 hearing to discuss the status of each party's actions.
The new NCUA rules would allow an occupation-based credit union to serve an entire profession, rather than employees of a single company. In addition, credit unions would be able to retain members at several local companies by converting to community-based institutions.
The rules are a response to a July 30 federal appeals court ruling mandating that all members of a federal credit union share a common bond. The lawsuit, which began in 1990, pitted four North Carolina banks against the NCUA and AT&T Family Federal Credit Union in Winston-Salem, N.C.
Judge Jackson enforced the appeals court decision last month by barring 3,586 occupation-based credit unions from adding customers who don't share a common bond with core members.
"NCUA's adoption of the interim rules violates the letter and the spirit of the court's order," said Leonard J. Rubin, a partner at Bracewell & Patterson representing the Independent Bankers Association of America in the case.
In a statement issued Monday, NCUA Chairman Norman E. D'Amours maintained that the new rules are "well within the parameters of the appeals court's July 30 decision.
"The motive behind the bankers' consistent court challenges is to simply take the higher income earners and leave the less affluent with no other financial alternative."
In the motion filed Monday, the banking industry also alleged that the NCUA had illegally approved the rules because Thursday's board meeting was announced less than seven days in advance. Federal agencies may hold public meetings with less than a week's notice only in case of an emergency.
Judge Jackson "rejected the allegation that the (court's) ruling would cause irreparable injury, so NCUA can't rely on their notion that this is an emergency," Mr. Crotty said. In addition, banking lawyers complained that, while the rules had not been published for public comment, the agency had discussed them with credit union trade groups before the board meeting. The NCUA is accepting comment on the new rules through Feb. 1.
NCUA spokeswoman Lesia Bullock said the agency "believed there were special circumstances to warrant an emergency meeting."
