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What Does the ABA Appeal Mean for FOM?

By Sam Griswold - March 23, 2020

In the latest move in a long-running back and forth, the American Bankers Association has filed an appeal to the U.S. Supreme Court challenging the National Credit Union Association’s new field of membership (FOM) rule.

 

"What the ABA has done is petition the Supreme Court to hear the case. We will know in around six weeks whether the supreme court is going to hear the case. Statistically, they only grant about 1 or 2% of these petitions. If they deny the petition, the bankers challenge on these issues is over.  If they grant the petition, there will be briefs and oral argument and it will likely be several months before there is a supreme court decision." says Bob Fenner former counsel of the NCUA.

 

In December, the U.S. Court of Appeals for the D.C. Circuit denied a rehearing en banc of the case between the ABA and NCUA. That ruling briefly seemed to bring what had been a three-year legal saga over the FOM expansion rule to a close, however, an appeal seemed likely.

 

The argument at the center of the case continues to be the NCUA’s rule’s regarding Well-Defined Local Communities and, in particular, a provision allowing credit unions to serve Combined Statistical Areas of up to 2.5 million people and rural districts with up to one million people. The Appeals Court ruling upheld the NCUA’s right to define the terms of these FOM rules.

 

In its appeal, the ABA reiterated its claim that “the agency’s definitions of ‘local community’ and ‘rural district’ are ‘not anywhere near the standard meaning’ of those terms.”

 

Further, the ABA wrote, “Once an agency is freed from the necessity of adhering to the reasonable range of meaning of the terms actually adopted by Congress and signed into law by the president, it effectively ceases to execute the laws and instead exercises a Humpty-Dumpty-like authority to make law.”

 

The credit union community was united in its response to the appeal. “It’s unfortunate that a banking trade is engaged in a campaign to undercut the NCUA’s efforts to ensure the financial well-being of consumers across the country,” CUNA President/CEO Jim Nussle said.

 

“Banks’ continued opposition to modernizing credit unions’ FOM rules is an indication of their hostility toward credit union growth and competition,” added NAFCU President/CEO Dan Berger.

 

Despite the setback, the move didn’t come as a complete surprise, as echoed by CUNA Mutual Group President/CEO Robert Trunzo, who said, “As a credit union system, we remain undeterred by the bankers’ relentless legal maneuvers.”

 

The fight goes on.

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