ALEXANDRIA, Va.–NCUA has won a court decision in a lawsuit filed by the Independent Bankers Association of America over the agency’s recently approved and expanded Member Business Lending (MBL) rules.
While the U.S. District Court of the Eastern District of Virginia dismissed the suit on procedural grounds, it indicated the suit would have been dismissed on the merits, as well.
The credit union trade groups issued a joint statement praising the court ruling, which was written by Judge James Cacheris, as did both members of the NCUA board.
In its ruling, the court wrote, “The Court begins its analysis with Plaintiff’s Complaint. Curiously, the Complaint makes little mention of the regulatory changes wrought by the 2016 Rule. Indeed, Plaintiff dedicates only seven of the Complaint’s 90 paragraphs to the Rule Plaintiff ostensibly challenges. Instead, Plaintiff’s Complaint is almost entirely addressed to Defendant’s 2003 Rule. The relief Plaintiff requests is directed solely at overturning changes in Defendant’s regulations traceable to the 2003 Rule, to wit, the agency’s determination that ‘purchases of nonmember loans and participation interests . . . do not involve the provision of member loan services, and the acquired loan assets are not [member business loans]…’ This is significant because a six-year statute of limitations applies to lawsuits brought under the APA.”
Cacheris noted the bankers sought to challenge the 2003 rule under the “reopening doctrine,” but said it could find no “Supreme Court or Fourth Circuit precedent recognizing the reopening doctrine.”
The court also said it found the bankers argument that NCUA had reopened the issue based on its call for comment to be a “thin reed.”
Beyond the ruling on procedural grounds, the court further said “It is not clear at this point that Defendant’s 2016 regulation will result in increased competition against Plaintiff’s member banks. Credit unions were able to compete with banks in the commercial loan arena before the 2016 Rule. Indeed, Plaintiff represents that they have done so vigorously…The 2016 Rule on its face does not permit additional competition. All it does is dispense with the requirement that, after taking on a certain amount of member business loans, a credit union obtain permission to purchase an additional interest in a nonmember business loan.”
The court stated that it sees little merit in the ICBA’s argument that the expanded MBL powers will result in increased competition for banks, and cited the $1.4-trillion in assets held by ICBA-member banks.
A complete copy of the court’s ruling can be found in CUToday.info’s The Gov here.
Response To Ruling
“I’m pleased with the court’s decision, and I congratulate NCUA’s legal staff and the Justice Department for their work,” said NCUA Chairman Rick Metsger. “While the court dismissed the suit on procedural grounds, as NCUA argued persuasively in our original response, the decision notes that NCUA would have prevailed on the merits of the ICBA’s challenge under the Administrative Procedure Act. The decision affirms that the NCUA board acted within its authority when it issued the final member business loan regulation.”
Added board member J. Mark McWatters in a statement, “The decision of the court in favor of the actions taken by NCUA relating to credit unions and member business lending is a victory for small businesses throughout the country. I supported NCUA's member business lending rule because it is legally permissible pursuant to the Federal Credit Union Act and the rendered decision today affirms that.”
In a joint statement by CUNA CEO Jim Nussle and NAFCU CEO Dan Berger, the two said, “The court made the right decision in granting NCUA’s motion to dismiss ICBA’s groundless lawsuit. We had maintained all along that this was nothing more than a frivolous and ill-conceived effort by the bankers. Today’s decision is a clear message that NCUA acted well within its statutory authority when it issued its member business lending rule. The CUNA/League system and NAFCU applaud today’s ruling because it is a huge win for Main Street businesses which look to credit unions to secure much-needed access to capital. Perhaps the bankers should put more effort into serving their own customers instead of filing meritless lawsuits that only result in wasted time and money.”