The issue of community obligation refuses to go away for credit unions, with the nation's leading advocacy group for community reinvestment filing suit last week against NCUA over last month's repeal of the Community Action Plan, better known as CAP.
In its suit, filed in federal court here, the National Community Reinvestment Coalition (NCRC) claims the NCUA Board violated the provisions of the U.S. Administrative Procedures Act (APA) when it voted Dec. 13 to repeal the Community Reinvestment Act-like rule through a so-called interim final rule. This maneuver allowed NCUA to immediately scrap the controversial rule just days before its Jan. 1, 2002 enactment, while ostensibly collecting comments on the much-reviled requirement.
The repeal was undertaken so hastily that it was proposed by then-board member Geoff Bacino on Dec. 3, just 10 days before the monthly board meeting, and roughly two weeks before Bacino's term on the NCUA board was due to expire.
The NCRC, which says represents hundreds of community groups around the country, claims the maneuver runs afoul of the APA, which requires that major rules be subject to advanced notice and a public comment period.
"We were so surprised that this vote was going down as fast as it did that nobody had a chance to comment in advance," said David Berenbaum, director of civil rights for the NCRC.
'Two Simple Issues'
But the procedural issues are just a pretext for the legal challenge, according to Berenbaum, whose association was one of the few that lobbied for passage of the rule, even as all of the credit union groups opposed it. "There are two simple issues," said Berenbaum. "The notice and comment requirement under the Administrative Procedures Act; and more broadly, NCUA has a responsibility to foster economic growth in core communities."
In fact, Berenbaum said his group is lobbying Congress, specifically Senate Banking Committee Chairman Paul Sarbanes (D-MD), a leading advocate of the CRA, to hold oversight hearings on the NCUA action. Sarbanes' offices did not return calls requesting comment.
The rule, originally designed by former NCUA Chairman Norman D'Amours, is similar to the CRA applied to banks and s&ls and would have required all federally chartered community credit unions to develop and adhere to a plan to market to all segments of their fields of membership (FOM). NCUA examiners would monitor to determine whether the credit union is complying with its own plan. If not, the agency could take some kind of remedial action, such as an administrative citation.
NCUA General Counsel Robert Fenner said last week he was convinced the emergency repeal of the CAP was proper and in compliance with provisions of the APA. "Obviously, I felt from the start that the NCUA board was within its authority to take this action as an interim final rule, and I look forward to defending this action," he said.
Fenner said defense of the suit will fall on several issues, besides the provisions of the APA, such as whether this outside group has proper standing to challenge NCUA's rulemaking for credit unions and whether there was any harm caused it by the NCUA board's repeal action.
The provisions of the APA was the main focus of the more-than two-hour debate preceding the board's Dec 13 repeal. Board member Yolanda Wheat, like Bacino also in her final board meeting, argued strenuously that the interim final rule did not comply with the APA.
"I believe this lacks both substance and legality," she said. "If the board proceeds today with this Interim Final Rule, I believe it does so at its own peril."
Dollar: 'Public Had Input'
Wheat argued that the immediate repeal was in violation of the APA because there was no advanced notice published in the Federal Register, where all major rule proposals are made available to the public.
"The Administrative Procedures Act requires advanced notice. Not after the fact," she insisted.
But NCUA Chairman Dennis Dollar, who has been angling to repeal the controversial measure since voting against its passage two years ago, claimed that the public has had ample opportunity to vote on the issue during several public comment periods, when more than 99% of almost 1,000 comment letters opposed adoption of CAP.
"For us to sit here and say the affected parties and stakeholders have not had an opportunity to be heard is an insult," he stated.
Dollar and Bacino voted to repeal the CAP over Wheat's objections.