NCUA plans 'phased approach' on FOM implementation

The National Credit Union Administration is treading lightly with the implementation of its controversial field of membership rule, announcing today it plans to take a "phased approach" to executing the rule.

The announcement comes just two weeks after the agency claimed victory in a long-running court battle against the American Bankers Associating, which sought to see the rule struck down. Three provisions of the rule were upheld while a third – which the ABA claims amounts to permitting credit unions to engage in redlining – was remanded back to a lower court.

The decision left credit unions in the position of having to decide whether to move ahead with potential FOM expansions or wait to see how any potential ABA appeals come out – including the possibility that the bankers could take the matter as high as the Supreme Court.

Wednesday’s announcement was intended to provide some clarity for those CUs that intend to move forward.

“Such a phased approach is necessary because the D.C. Circuit’s ruling remains subject to requests for further review,” NCUA Chairman Rodney Hood said in a press release.

For federal credit unions serving rural districts, the NCUA board will allow those institutions to submit applications to expand geographic regions with populations of up to one million people, while adhering to other FOM rules. But while the agency will accept those applications, Hood deferred on when it would move forward on them, saying only that it would act at an “appropriate time.”

This guidance will curb the holding pattern imposed onto the industry from the ABA lawsuit. But the ABA still has 45 days to file a motion for an en banc hearing following the August court decision, in which the full slate of judges on the bench would reconsider the matter.

The American Bankers Association did not immediately respond to Credit Union Journal’s request for comment.

Further guidance is required, however. The NCUA Board is gearing up to consider a limited proposal that will address what defines a local community, one that includes portions of core-based statistical areas, but lack an urban core – the provision of the rule that bankers said was tantamount to redlining. Credit unions can expect a notice of proposed rulemaking in the near-term that will invite public comment.

“We will announce further guidance on this issue shortly,” Hood said in the release.