NCUA appeared to retreat further in its defense of the Utah undeserved case, even as it was asking the court to dismiss the bankers' challenge in the federal suit.
In a new motion to dismiss, the credit union regulator told U.S. Judge Dale Kimball that since the agency has retracted underserved expansions granted America First FCU, the American Bankers Association's court challenge for those expansions is now moot.
In addition, NCUA insisted to the judge-the same judge who ruled a year ago that NCUA violated federal law in a related case-that the agency is certain not to approve any more underserved expansions for community chartered credit unions, because it plans to enact a new rule restricting underserved expansions to multiple group charters.
This has to make credit union observers wonder, if NCUA plans to pass the new restrictions on underserved expansions, why did it bother to send the proposal out for public comment? Was it simply to satisfy administrative procedures requirements or does NCUA want to gauge the sense of the credit union movement before acting on the proposal?
In addition, if NCUA's proposed rule bars community chartered credit unions from adding underserved communities, how does that affect the bankers' suit, which claims the agency's recent practice of granting underserved expansions to community charters violates the law, not just its own rules?
In its suit, the bankers claim NCUA in the America First case violated the Federal CU Act, which expressly restricts underserved expansions to multiple group charters. The bankers cite language included in HR 1151, the CU Membership Access Act, which amended the Federal CU Act, that specifies that multiple group charters are eligible for underserved expansions.
NCUA said it did not read the language as being exclusive and believes the intent of Congress was to allow all credit unions to expand into underserved communities.
The bankers charge NCUA has used its underserved program to allow broad expansions for as many as 200 community chartered credit unions, some of which have encompassed major U.S. cities, like Philadelphia, Baltimore, Houston and Washington, D.C.
Since the filing of the bankers' lawsuit, NCUA has retreated several times, first by withdrawing the approval for American First FCU and imposing a moratorium on any additional underserved expansions allowed for non-multiple group charters. Then NCUA decided to pursue the new rule that would expressly bar underserved expansions for non-multiple group charters, that is, community charters and single common bond credit unions.
The language in NCUA's motion for dismissal suggests that NCUA acknowledges its policy may have violated the law. But the bankers want much more than an acknowledgement in the American First case. They want to brand the credit union regulator as a "rogue federal agency" as one previous federal judge suggested. NCUA knows it is treading in shallow water in dealing with a judge that already ruled against them in a related case.
Observers feel the only way for NCUA to clear up the dispute is to ask Congress for a clarification of the language. They would likely argue that if Congress-as well as the banking opponents of credit unions-want credit unions to fulfill their missions of serving the underserved, as they insist, then they should allow all credit unions to expand into underserved communities.
The Journal's Ed Roberts can be contacted at eroberts
