Bankers who had hoped a lawsuit challenging revised field-of-membership rules would force a pause in credit union expansion may be disappointed.
The American Bankers Association filed a lawsuit in December in U.S. District Court for the District of Columbia in hopes of blocking policies it believes remove most restrictions on credit union membership.
For now, the litigation seems to have had little, if any, impact on credit union applications to expand fields of membership, industry experts said. While reasonably confident that there has been no decline in applications, some consultants said they have received more calls from credit unions keen on expanding before the litigation is resolved.
"I wouldn't say it's had a chilling effect because credit unions have become used to [banker] litigation," said John McKechnie, a senior partner at Total Spectrum, a Washington credit union consulting firm. "There's been so much lately, it's become part of the background noise. … They seem to have decided, at least anecdotally, to push forward."
A National Credit Union Administration spokesman noted that the new field-of-membership rule has been in effect for barely two months, so the agency has yet to draw any conclusions about the number applications it has received.
The ABA filed its lawsuit two months after the Independent Community Bankers of America sued the NCUA over changes it made to member business lending regulations. That lawsuit fizzled after a federal judge affirmed the revised regulation and the ICBA opted against filing an appeal.
An ABA spokesman said the field-of-membership lawsuit is likely months away from a decision. Lawyers representing the NCUA filed a response last month, and now the sides have several months to submit competing motions for summary judgment. A hearing to consider those has been tentatively scheduled for Sept. 8.
Despite a steep decline in the number of credit unions, the industry's overall membership has been on an upswing, increasing by 16% since 2010, to nearly 107 million members at Dec. 31.
The new field-of-membership rule should make it easier to add members. It expands the definition of a well-defined local community for community-chartered credit unions, while also making it easier for multiple-common-bond credit unions to add new groups.
Bankers have complained for years that the NCUA is diluting the common bond that is supposed to tie credit union members to each other, claiming that recent rule changes only serve to accelerate that drift. Bankers are also irate about another pending proposal that would quadruple the population cap that limits membership fields defined by statistical areas to 10 million from 2.5 million.
"The reimagined definitions eviscerate the major limitations placed on credit union field-of-membership expansion and would allow nearly any federal community credit union to serve almost any geographic area or population center it desires," Brittany Kleinpaste, the ABA's director of economic and policy research, wrote in a comment letter to the NCUA.
It is premature to conclude that loosened field-of-membership regulations would result in a spike in new applications, said Lance Noggle, senior director of advocacy and counsel at the Credit Union National Association. Credit unions looking to serve expanded memberships will have to demonstrate they have the infrastructure in place to do so.
"It's not like a credit union can simply assume it has the capacity," Noggle said, adding that the growth necessary to support expanded memberships would occur incrementally, not all at once.