The Independent Community Bankers of America (ICBA) expressed strong opposition to the National Credit Union Administration final rule significantly increasing the powers of tax-exempt credit unions beyond their statutory limits amid a court challenge. The NCUA issued the field-of-membership rule just weeks after parts of the rule were vacated by a federal judge and continue to be litigated in court.
“Today’s National Credit Union Administration final rule further expanding the rights of tax-exempt credit unions beyond their statutory limits comes on the heels of a March court ruling that vacated two of its provisions,” ICBA President and CEO Rebeca Romero Rainey said. “Unwilling to wait for its latest unlawful power grab to be settled in the courts, the NCUA continues working to extend the industry’s taxpayer-subsidized competitive advantage over taxpaying community banks. This captive regulator is once again pushing the envelope and cheerleading the industry it is supposed to regulate.”
The NCUA rule issued today would further expand the service areas in which community credit unions can do business, rendering meaningless the statutory standard that limits a community credit union to serving a well-defined local community. It follows a March ruling by D.C. District Court judge Dabney Friedrich that vacated provisions automatically qualifying combined statistical areas with fewer than 2.5 million people as local communities and increasing the population limit for rural districts to 1 million people. Today’s rule allows credit unions to use a “narrative statement” to apply for membership fields with no population limits whatsoever, undermining the credit union industry’s mission to serve people of small means with a common bond and forfeiting its claim to a tax exemption valued at $2.9 billion this year alone.
The rule comes after NCUA Chairman Mark McWatters admitted in a recent letter to Senate Finance Chairman Orrin Hatch (R-Utah) that the tax-exempt industry’s fund insuring credit union deposits would be at risk without taxpayer subsidies. Responding to Hatch’s call for large credit unions to report financial information required of other tax-exempt institutions, McWatters’ admission that the credit union industry’s insurance fund is underwritten by American taxpayers underscores the need to review and ultimately abolish this taxpayer handout.
ICBA and the nation’s community banks will continue working to raise awareness of the credit union industry’s federal tax subsidy and the NCUA’s attempts to drastically increase the powers of these tax-exempt financial firms beyond their statutory limits.