Supreme Court won't hear bankers' appeal in credit union membership suit

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The U.S. Supreme Court on Monday denied the American Bankers Association’s request for an appeal in its lawsuit against the National Credit Union Administration, effectively ending the bankers’ challenge to the regulator’s field-of-membership rule.

The NCUA board updated that rule in the fall of 2016, including provisions that would allow credit unions to broadly expand their membership across wide geographic areas. Banks suedthe agency in December, claiming four provisions of that rule violated the Federal Credit Union Act. In March 2018, a judge struck down two parts of the rule, but the NCUA and the ABA both appealed, with a court ultimately upholding most of NCUA’s original rule.

That decision compelled the NCUA to revise part of the rule as it combated charges of allowing credit unions to engage in redlining, but bankers still moved ahead with an appeal, first to the full appeals court and ultimately to the Supreme Court.

If the court had elected to hear the case, it would have been the credit union industry’s first Supreme Court case since the late 1990s, when the court ruled in favor of banks challenging a credit union expansion effort. That defeat led to the passage of HR 1151, the Credit Union Membership Access Act of 1998, which laid the groundwork for multiple common-bond membership and kick-started much of the growth the industry has seen over the last two decades.

“Today’s decision by the Supreme Court ends nearly four years of uncertainty and will help the NCUA in its efforts to foster greater financial inclusion for all Americans," NCUA Chairman Rodney Hood said in a statement. "The NCUA will begin processing field-of-membership applications affected by this decision immediately.”

The court’s decision Monday not to consider the field-of-membership case is likely to be the end of the lawsuit. Not surprisingly, credit union groups were ecstatic about the court’s decision.

“Today is a great day for anyone hoping to access the financial well-being afforded by credit unions,” Jim Nussle, president and CEO of the Credit Union National Association, said in a press release. “In denying the bankers’ lawsuit, the court has established credit unions’ mission and structure as part the fabric of America. In recognizing the NCUA’s right to oversee our system, the court has also established a much-needed firewall from spurious attacks by the bankers.”

Dan Berger, president and CEO of the National Association of Federally-Insured Credit Unions, said in a press release that the court's refusal to hear the lawsuit indicated "that the case is and has always been a baseless one."

"For years, bank lobbyists have been unrelenting in their hollow efforts to maximize their own profits by working to undermine credit union growth and the financial well-being of America’s communities and small businesses. … It is well within the agency’s legal authority and works in favor of consumers, especially those that are underserved," Berger added.

In a statement, the ABA expressed disappointment with the ruling and suggested the credit union industry continues to grow beyond the limits of the Federal Credit Union Act.

“The NCUA continues to steadily erode those limits," it said, "and now we believe it's time for Congress to reassert itself and either restore real credit union eligibility rules, or ask this growing industry to start paying taxes and meet the same regulatory requirements as the tax-paying banks they compete with every day. The free ride should end."

This story was updated on June 29, 2020 at 2:55 P.M.

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