ICBA sues NCUA over unlawful lending regulation

Challenges rule expanding business-lending loopholes for tax-exempt credit unions

WASHINGTON, DC (September 7, 2016) — The Independent Community Bankers of America® (ICBA) today filed a lawsuit against the National Credit Union Administration (NCUA) challenging the agency’s unlawful commercial lending rule issued earlier this year. If allowed to stand, the NCUA’s final rule would allow tax-exempt credit unions to exceed limitations on commercial lending activity established by Congress while relaxing regulatory oversight—putting consumers and the financial system at risk.

“The NCUA is attempting to unilaterally expand loopholes for tax-exempt credit unions by sidestepping Congress and putting consumers at risk,” ICBA President and CEO Camden R. Fine said today. “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.”

By allowing a credit union to exclude nonmember commercial loans or participations (i.e., loans originated by another credit union to a borrower who is not a member of the credit union purchasing the loan or participation) from its calculation of the member business loan cap, the NCUA has provided the credit union industry with a huge loophole it can easily exploit to increase commercial lending in violation of the law.

The NCUA’s rule is contrary to the plain language of the Federal Credit Union Act, as amended by the Credit Union Membership Access Act. To protect the safety and soundness of credit unions, these laws expressly limit the amount of commercial loans that may be held on credit union balance sheets and clearly define “member business loan” as any commercial loan—necessitating today’s legal action. The NCUA has not offered any rational explanation for its interpretation, which reverses the conclusion it reached more than 15 years ago that such an expansion in lending would lead to “absurd” results and violate the FCU Act. ICBA simply wants the agency to adhere to the law when writing rules.

ICBA’s lawsuit notes that the NCUA rule puts consumers, taxpayers and the financial system at risk by jeopardizing the safety and soundness of federally insured credit unions. It also expands the federally funded competitive advantages these tax-exempt institutions enjoy over community banks. As credit union assets have ballooned, the NCUA’s role has transformed from a federal financial regulator to an industry cheerleader.

ICBA filed its lawsuit as the NCUA considers a separate field-of-membership proposed rule exemplifying its lax and questionable approach to credit union oversight. That rule that would significantly expand the definition of “well-defined local community,” which by law limits the territory a community-based credit union can serve, to include any congressional district. This means the entire territory of each of seven states would qualify as “local.” In the case of Alaska, the NCUA would treat towns located more than 1,000 miles apart as part of the same “local” community.

“Only Congress has the authority to set credit union laws, and the NCUA has ignored the debate on Capitol Hill to satisfy large, growth-oriented credit unions that are subsidized by the American taxpayer,” Fine said. “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.”

The lawsuit, Independent Community Bankers of America v. National Credit Union Administration, was filed in the U.S. District Court of the Eastern District of Virginia. The legal complaint is available here.

A video of ICBA Chairman Rebeca Romero Rainey, chairman and CEO of Centinel Bank of Taos, N.M., explaining the lawsuit is available here.

About ICBA

The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. ICBA is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education, and high-quality products and services. With nearly 50,000 locations nationwide, community banks constitute roughly 99 percent of all banks, employ nearly 700,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding more than $5.8 trillion in assets, over $4.8 trillion in deposits, and more than $3.5 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at


Aleis Stokes
202-821-4457 |

Nicole Swann | 202-821-4458

More News