The Independent Community Bankers of America filed suit infederal court on Wednesday, challenging the NCUA's new MBL rules,contending that the regulations allow credit unions to exceedlimitations on business loans that were established byCongress.

In the suit, the ICBA argues that at the same time, the agency is looseningregulatory oversight, creating risks for consumers and thefinancial system.

In the suit, filed in U.S. District Court for the EasternDistrict of Virginia, the ICBA asks that the rules be voided.

The new rules allow credit unions to exceed limitations placedon it by Congress and gives the institutions a huge advantage overcommunity banks, since credit unions are tax exempt, the ICBAsaid.

In adopting the new rules, the NCUA said it was moving away from prescriptive limits on creditunions such as collateral and security requirements, equityrequirements and loan limits and to a principles-basedregulation.

The bankers see other motives.

“The NCUA is attempting to unilaterally expand loopholes fortax-exempt credit unions by sidestepping Congress and puttingconsumers at risk,” ICBA President/CEO Camden R. Fine saidWednesday. “This unlawful rule from the NCUA is the latest exampleof the agency stretching the law beyond its breaking point to serveas the tax-exempt credit union industry's regulatory rubberstamp.”

The ICBA contends in the suit that NCUA is purposely trying togive credit unions that advantage.

“It is part of a concerted pattern of questionable regulatoryactions by NCUA that appear designed to empower credit unions anddiscourage them from converting into banks and moving out fromunder the jurisdiction of NCUA,” the suit states. “In this case,NCUA has clearly crossed the line and exceeded its authority underthe Act.”

In addition to violating federal law, the suit charges that theNCUA” also acted arbitrarily and capriciously and without reasoneddecision making.”

“ICBA and the nation's roughly 6,000 community banks believethat the credit union industry should not be allowed to continueexpanding its lending authority as long as it remains exempt fromtaxation and the federal financial regulations that taxpayingcommunity banks are obligated to meet,” Fine said.

The ICBA made it clear it is gearing up for another fight whenthe NCUA finalizes its field of membership rules.

NCUA Public Affairs Specialist John Fairbanks said the agency isreviewing the complaint and will respond to it in federalcourt.