A federal court gave bankers a partial win Thursday in their never-ending fight with credit unions, issuing a ruling that could limit credit union size.
The U.S. District Court for the District of Columbia ruled that two of the criteria established by federal regulators to define eligibility for credit union membership were too expansive.
The American Bankers Association filed the suit against the National Credit Union Administration, or NCUA, which regulates credit unions. The bank industry frequently lobbies to limit the influence of credit unions, which compete with them for some business but do not pay taxes.
One bone of contention is the membership of credit unions, which is supposed to be limited either by association or geographic area. Bankers have complained that some credit unions have grown too large and are advertising themselves to the broader public as if they were banks.
The bankers association challenged a 2016 rule from the NCUA that allowed, among other things, for membership to be based on a geographical area including up to 2.5 million people in some cases or 1 million people in rural areas.
Judge Dabney Friedrich, a Trump appointee, ruled that those two criteria were inappropriately large.
“A definition that calls Doylesburg, Pa., and Partlow, Va., residents part of the same local community is not anywhere near the term’s standard meaning,” she wrote in the opinion.
The American Bankers Association applauded the ruling. “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,” President Rob Nichols said.
Credit union groups took issue with the ruling in a joint statement that included the heads of the National Association of Federally-Insured Credit Unions and Credit Union National Association. “Credit unions must have the ability to grow and serve more Americans,” they argued.
