NCUA indicates possible field-of-membership appeal in court filing

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The strongest evidence that the National Credit Union Administration will appeal last month’s split decision on the regulator’s field-of-membership rule in a court filing outlining the agency's plan for implementing the judge's ruling.

Last month a federal judge upheld two provisions of the FOM rule but struck down parts regarding the definition of a combined statistical area and a measure that would increase the population limit of rural districts to 1 million people. While credit union trade groups have vowed to fight to support the rule, NCUA until now has not given any indication whether it would appeal, though board member Rick Metsger lashed out at the ruling in a speech before the Minnesota Credit Union Network earlier this month.

A host of credit union observers have weighed in on how NCUA should proceed in light of the court’s ruling, and whether or not an appeal or a full-scale rewrite of the rule is necessary — or both. And analysts have warned that seeking an appeal could be an even riskier proposition than sticking with the judge's current ruling.

The latest — and most substantial — indication that the agency will appeal came Thursday when NCUA filed its implementation plan with the court for how it will comply with the ruling. According to the filing, the regulator will cease granting community charters on the basis of new definitions for rural districts and combined statistical areas, and “has also instructed affected credit unions not to accept any new members who would only be eligible for membership in the relevant credit union based on the vacated portions of the final rule.”

However, NCUA said it will not require credit unions to “de-list” members who joined prior to the court’s decision. Doing so, court documents said, “would be highly disruptive in the event that the Court of Appeals ultimately reverses this court’s opinion, in whole or in part.”

Court documents said NCUA has conferred with counsel for the American Bankers Association, which filed the suit, and ABA has agreed not to seek an order requiring credit unions to de-list members who joined on or before April 4, 2018.

In an email to Credit Union Journal, an ABA spokesman said only that the group is "awaiting NCUA’s decision on whether it will appeal Judge [Dabney] Friedrich’s decision."

Credit union trade groups reiterated their support for NCUA's move.

“The NCUA is the prudential regulator for the credit union system, and we support their delegated authority to promulgate rules and regulations under which credit unions can serve their member-owners,” Credit Union National Association President and CEO Jim Nussle said in a statement. “CUNA recently completed a very rigorous statistical analysis finding that broader fields of membership unambiguously create substantial benefits to credit unions, their members and the overall safety and soundness of the financial sector.”

CUNA has said it supports NCUA’s ability to utilize all available judicial and administrative measures available to continue to modernize the agency’s Chartering and Field of membership Manual.

The National Association of Federally-Insured Credit Unions offered its backing, as well.

"NAFCU is pleased to see the NCUA is considering an appeal to the court's decision that invalidated portions of its final FOM rule, as we have been staunch advocates of the NCUA's legal authority to modernize credit unions' fields of membership," NAFCU President and CEO Dan Berger said in a statement. "Just as NAFCU filed an amicus brief to support the NCUA in the FOM lawsuit, we will continue to support the agency's efforts to keep credit unions competitive."

This story was updated at 3:32 P.M. on Fri., April 20, 2018.