We have to hand it to the bank trade groups when itcomes to sheer tenacity in opposing credit union growth. Along thelines of a current commercial, if you are a bank trade group, thatis just what you do.

Undeniably, credit unions rightly question NCUA policies on aregular basis – which makes charges that the NCUA is an “industrycheerleader” laughable.

However, as last year indicated, the NCUA has had some roughtimes with Congress, and the bank groups' continuing tactics todiscredit the agency build on concerns about its ability toimplement the Federal Credit Union Act. Also, the bank groups'efforts can delay final application of important changes such asthe NCUA's pending field of membership proposal, particularly ifthey decide to challenge it in court.

That is why each of the banker misstatements regarding the FCUAmust be carefully corrected, and the focus of deliberations on theFOM proposal must be directed to what the FCUA actually says, noton what the bank groups want it to mean. At the same time, thelegal basis of each element of any new final FOM rule must be fullyarticulated by the NCUA and justified based on reasonable analysesof the FOM provisions in the FCUA, 12 USC 1759.

For example, as they have in the past, the bank groups tried toestablish a statutory connection between credit unions' federal taxexemption and limited fields of membership in a Jan. 20, 2016letter to Congress on the NCUA's FOM proposal. The findingsCongress included with the Credit Union Membership Access Actrefute this. FOM, Congress said, is a “meaningful affinity and bondamong members,” to “promote thrift and credit.”

Moreover, it said, “Credit unions … are exempt from Federal andmost state taxes because they are member-owned, democraticallyoperated, not-for-profit organizations … and because they have thespecified mission of meeting the credit and savings needs ofconsumers, especially persons of modest means.”

The bank groups' letter also told Congress that the NCUA'sproposed approach “totally ignores two key phrases, well-definedand local, out of its statute in order to drastically expand creditunion powers.” As the banker groups claim, the FCUA identifiescommunity credit unions as credit unions that draw their membersfrom well-defined local communities, neighborhoods or ruraldistricts.

Yet the bankers themselves selectively ignore FCUA provisionsthat are equally significant. First, the FCUA directs only the NCUAto define the term, “well-defined local community, neighborhood, orrural district.” Moreover, the FCUA specifically states it is theNCUA's definition that is to be used in the agency's FOM rule andin approving FOM applications.

Congress could have defined WDLC or caused the NCUA to use someother agency's definition, but it did not. These provisions meanthat Congress wanted the NCUA to apply its experience as aregulator and to develop the definition of WDLC that is appropriateunder the law and grounded in the credit union context.

While the FCUA does limit FOM in important ways – and the NCUA'sdiscretion on FOM has significant boundaries – the FCUA's languageand legislative history do not support the severe restrictions thebank groups seek.

Yet, while it is essential to evaluate each of the bank groups'claims in light of the FCUA, so too every change in the agency'sproposal must be supported by the FCUA and that support articulatedby the NCUA so that the final rule can withstand review andscrutiny, which will surely come.

The comment period on the FOM proposal closed Feb. 8, but it isnot too late to talk to your member of Congress and to theNCUA.

The banks' tenacity can lead to success unless their argumentscan be discredited. Bold improvements in FOM are needed, but thekey is underscoring how the NCUA's proposed changes are true to theFCUA.

Mary Mitchell Dunn is partner for CU Counsel. She can bereached at 202-508-3795 or [email protected].