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ALEXANDRIA, Va.- Just a few days after the U.S. General Accounting Office released a study recommending NCUA better demonstrate how credit unions are serving the underserved, the U.S. District Court for the District of Columbia handed dismissed the lawsuit brought by the National Community Reinvestment Coalition against NCUA regarding its interim final rule repealing the Community Action Plan. In the lawsuit, filed Jan. 22, 2002, NCRC alleged that NCUA violated the Administrative Procedures Act by not publishing in the Federal Register a notice of the proposed repeal of CAP and by not allowing for public comment prior to the repeal’s effective date. On Dec. 20, 2001, the NCUA Board approved an interim final rule-following a marathon-length meeting-with a final vote of 2-1 in favor of its repeal, with then-Board Member Yolanda Wheat voting to keep the CAP and NCUA Chairman Dennis Dollar and then-Board Member Geoff Bacino voting in favor of its repeal. At the same time a 60-day public comment period was approved. The CAP would have required credit unions applying for a community charter and existing community credit unions to explain in its business and marketing plans how it would serve the entire service area. That December NCUA Board meeting was the last for both Wheat and Bacino as board members. The interim final rule was made final at the April 24, 2002 board meeting with an effective date of May 24 after Vice Chair JoAnn Johnson and Board Member Deborah Matz were installed. The vote was 2-0-1, with Matz abstaining from the vote. “The Court’s decision clearly affirms that the agency exercised its authority in a reasonable manner and followed proper administrative procedures in issuing the interim final rule to repeal CAP,” Dollar said. “This decision not only affirms that the agency followed proper procedures in repealing CAP, but in my view, reaffirms the agency’s authority to address and change a policy that I have long felt was ill-suited and ill-advised for credit unions.” Bacino said he always felt the NCUA Board’s actions were in the right. “The District Court saw fit to uphold the way we repealed it. I felt at the time and continue to feel it was not the right avenue for credit unions,” he said. Bacino added that he does not expect any further challenges. NCRC, in consultation with its attorneys, has determined that it is not going to appeal the case, according to NCRC Senior Vice President of Policy and Director of Civil Rights David Berenbaum. “Of course, relative to what were seeking to do-to ensure that the regulator, in this case NCUA, lived up to its charge to [support] consumers’ interests rather than the lenders’ interest-we’re disappointed,” he said. However, NCRC does plan to pursue the reporting requirement legislatively with key players, including Senate Banking Committee Ranking Member Paul Sarbanes, who requested the study. The credit union trades also feel NCUA’s decision has been vindicated. “We felt strongly from the beginning that the NCRC’s case lacked merit,” CUNA General Counsel Eric Richard stated. “The court reaffirmed our views in dismissing this case decisively.We have always held that NCUA’s decision in repealing the CAP rule was proper and in the best interests of all concerned. Had NCRC succeeded in convincing the court it had standing to bring the suit, they still would have lost on the mootness issue.” “NAFCU has consistently supported the action taken by NCUA and we believe that the court’s ruling certainly was the correct ruling in this case,” NAFCU Senior Vice President and General Counsel Bill Donovan said. In August of 2003, the court had denied a motion from CUNA and NAFCU to file an amicus curiae brief in the case. NCUA filed a motion to dismiss the lawsuit on the grounds that NCRC lacked standing and that the comment period following the interim final rule rendered their claims moot. Additionally, NCUA argued that it had “good cause,” one of the exemptions to the APA requirements, to dismiss the requirements. District Court Judge Henry H. Kennedy wrote in his decision that the case could only be dismissed if “it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.” To determine standing the plaintiffs only need to show “a realistic danger of sustaining a direct injury.” The three-pronged test for standing, he said, includes 1) demonstration of “injury in fact”, not hypothetical; 2) demonstration of causal relationship between injury and complaint; and 3) it must be “likely” the injury can be “redressed by a favorable decision.” NCRC claimed that it was injured by not being able to receive the data that would have been in the CAP plans for use in dispensing accurate advice to its members about credit unions’ services. The group also said that the CAP repeal injured the “financial health and security” of credit unions. NCUA countered that much of the information in the CAP would have been held confidential-such as trade secrets and commercial or financial information-and not distributed to the public. What would be available from the CAPs was available from other sources. The court sided with NCUA on this point because the agency often withholds data in Freedom of Information Act requests that include business and marketing plans under exemption 4 (disclosure of information that is “(a) commercial or financial, (b) obtained from a person, and (c) privileged or confidential) and exemption 8 (information from and examination or other report prepared by or on behalf of an agency supervising financial institutions). “NCRC’s position cannot be sustained. NCRC correctly argues that publicly available CAP information would not be confidential,” Judge Kennedy wrote. “This argument, however, undermines NCRC’s position because the public availability of such information also means that NCRC did not suffer injury from the repeal of the CAP requirements. NCRC’s assertion that no substantial competitive harm would occur if all CAP information were disclosed does not follow from the fact that some of the CAP information is publicly disclosed through other means (judge’s emphasis). The portions of the CAP information that are not already publicly disclosed are likely those portions that would cause competitive harm.” NCRC had also argued that some of the CAP information could be segregated and disclosed, but the judge found that the information not already disclosed would likely be exempt from public disclosure. As for the safety and soundness of credit unions being harmed by the CAP repeal, Kennedy said that was merely speculative and that the CAP would not protect against potential litigation. “Moreover,” the judge wrote in his decision, “The CAP requirement was not instituted because NCUA believed that community credit unions were not planning on serving their entire community.” In fact, he pointed out that NCUA’s own rule stated as much. On the point of mootness, the judge also found in NCUA’s favor. The comment period and final rule, which followed the interim final rule, demonstrated that the agency kept an open mind before promulgating the final rule. The timing of the dismissal and the U.S. General Accounting Office recommending NCUA better demonstrate how credit unions are serving the underserved is ironic. According to Bacino the lawsuit and the GAO report are not an apples to apples comparison since the lawsuit only involved community charters and their service to their entire field of membership while the GAO report suggested data collection on service to the underserved. Chairman Dollar recently announced he had formed a working group to review and evaluate GAO’s findings. [email protected]

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