The new rules allow credit unions to exceed limitations placed on it by Congress and gives the institutions a huge advantage over community banks, since credit unions are tax exempt, the ICBA said.

In adopting the new rules, the NCUA said it was moving away from prescriptive limits on credit unions such as collateral and security requirements, equity requirements and loan limits and to a principles-based regulation.

The bankers see other motives.

“The NCUA is attempting to unilaterally expand loopholes for tax-exempt credit unions by sidestepping Congress and putting consumers at risk,” ICBA President/CEO Camden R. Fine said Wednesday. “This unlawful rule from the NCUA is the latest example of the agency stretching the law beyond its breaking point to serve as the tax-exempt credit union industry's regulatory rubber stamp.”

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

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

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

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

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

NCUA Public Affairs Specialist John Fairbanks said the agency is reviewing the complaint and will respond to it in federal court.

Instant Insights /

Community Bankers Sue NCUA Over MBL Rules

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