Credit Union Membership Rules Left Intact

A federal judge on Wednesday left intact new rules designed to let federal credit unions accept members from outside their core groups, rejecting arguments from a bank trade group seeking to thwart expansion by the largest of those tax-exempt financial institutions.

U.S. District Judge Colleen Kollar-Kotelly refused to issue a preliminary injunction blocking the rules, issued last year by the National Credit Union Administration. The American Bankers Assn. argued that the NCUA gave large credit unions more leeway on membership than Congress authorized, at the expense of smaller credit unions.

The decision is a setback for banks in their bid to reduce competition from large credit unions, which banks say have unfair tax and regulatory advantages. Credit unions say they need the ability to take on new members in order to stay financially healthy.

The rules are designed to implement a 1998 law, which came in response to a Supreme Court decision barring credit unions from accepting members from outside a single group or company. Among other things, the law lets credit unions accept members from outside their core group as long as those people come from companies or groups with fewer than 3,000 people. Credit unions can also apply for exemptions to accept even larger groups.

When the NCUA wrote rules to implement that law, the ABA said they would allow virtually unlimited growth by large credit unions while discouraging small groups from forming new ones.

However, the judge disagreed. The ABA can still press its case for a permanent injunction reversing the rules.