By Frank J. Diekmann
Get ready, because while you’re looking at that shiny object over there…
The court decision handed down late last week that invalidated two provisions in NCUA’s expanded field of membership rules has the bankers cheering, but the champagne corks aren’t just popping due to legal interpretations around combined statistical areas.
As CUToday.info is reporting, the American Bankers Association had plenty of praise for U.S. District Court Judge Dabney Friedrich’s decision in a case brought by the bankers that declared NCUA had exceeded its statutory authority in saying it’s OK to automatically qualify a combined statistical area (CSA) with fewer than 2.5 million people as a local community, and to raise to one million people the population limit for rural districts.
The bankers said those rules, approved by the NCUA board in 2016, “are manifestly contrary to the [Federal Credit Union] Act.”
“It never made sense that an entire region could be declared a ‘local community’ or that an entire state could be declared a ‘rural district,’ and today’s ruling recognizes that fact,” said ABA President and CEO Rob Nichols in a statement. “Today’s decision also affirms what we have known for years — NCUA won’t hesitate to push the boundaries of reason for the credit union industry even at the expense of taxpayers, small banks and the communities those banks serve.”
The ABA downplayed the judge’s rulings that upheld the ability of credit unions to serve Core-Based Statistical Areas without serving the urban core that defines the area, and the ability to add “adjacent areas” to existing well-defined local communities on a case-by-case basis.
Of those decisions, Nichols expressed disappointment in provisions he said “allow credit unions to cherry pick communities and ignore serving people of modest means, which is fundamental to the original purpose of the credit union tax exemption.”
But that’s not the only cherry picking or boundary pushing to watch for, and this time it won’t be credit unions driving the cherry picker.
'Don't Take Our Word For It'
You can bet the American Bankers Association, the Independent Community Bankers Association of America and some state bankers’ associations (can anyone say Iowa?) will be twisting the judge’s ruling as support for their arguments against the credit union tax exemption.
“Don’t take our word for it,” the bankers will say earnestly as they have one hand over their hearts and the other handing over a political contribution to legislators and members of Congress–“Here’s what an impartial federal judge said.”
So, start getting ready now, because a new stanza is about to be added to the bankers’ song sheets. All the well-known refrains about “forgetting their original purpose” and “violating the intent of the Federal Credit Union Act” that every banker has memorized are about to be joined by the Dark Suit Chorus singing about “pushing boundaries at the expense of taxpayers and communities” and the abandonment of urban cores and rural areas.
Forget all about the contradictions in those claims or the fact no bank is rushing to open branches in low-income urban areas or sparsely populated rural areas. Instead, remember how this ruling is now going to be used.
But don’t take my word for it–take the judge’s.
Frank J. Diekmann is Cooperator in Chief at CUToday.info and can be reached at Frank@CUToday.ino or@FrankCUToday.