Agency urges dismissal of bankers’ action over MBL rule
Nov. 3, 2016 -- Replying to a lawsuit from a banking trade group challenging its new member business lending (MBL) rule, NCUA has urged a federal court to dismiss the action, arguing that the law’s cap on business lending does not extend to purchase of nonmember business loans or participation interests.
The lawsuit was brought in September by the Independent Community Bankers of America (ICBA), a national banking trade association, challenging the new MBL rule’s provision which allows federally insured credit unions to exclude purchased commercial loans or participations in such loans from the aggregate cap on MBLs contained in section 1757(a) of the Federal Credit Union Act, which was enacted by the Credit Union Membership Access Act (CUMAA) of 1998.
“Although ICBA may disagree with the NCUA’s judgments in this area, the agency’s interpretation is consistent with the plain text of Section 1757a(a), and nothing in the statute or CUMAA’s legislative history provides any basis for displacing the agency’s interpretation,” NCUA said in its motion for dismissal, which was filed by the U.S. Justice Department on behalf of the agency.
In its complaint, the bankers’ group asked the court to declare that NCUA acted “arbitrarily and capriciously” and without statutory authority in concluding in the MBL rule (adopted by the agency last spring) that “to purchase a commercial loan or an interest in a commercial loan from another lender is not to ‘make’ a commercial loan within the meaning” of the law.
The bankers’ group (based in Washington, and representing primarily “community” banks), asked the court to invalidate and set aside the rule to the extent that its provisions “purport to treat any acquired commercial loans or interests in such loans as anything other than a ‘member business loan’ for purposes of the lending restriction.”
But the NCUA response makes four key points countering the bankers’ action. Those are: that the bankers’ group lacks standing because it alleges no certainly impending injury in its complaint traceable to the 2016 MBL rule; that the bankers’ claims are not ripe because the new MBL rule is not yet effective and has not been applied to specific transactions (the rule goes into effect in January); that the bankers fail to state a claim upon which relief can be granted, because NCUA has adopted a “permissible construction” of the FCU Act, and; that the action is “in substance” a challenge to the 2003 MBL rule and is thus “time-barred.” “Although the Complaint is styled as a challenge to the 2016 MBL Rule, Plaintiff’s allegations and requested relief all pertain to matters resolved in the 2003 rulemaking,” the NCUA response stated, referring to a rule adopted that year which excluded participation interests from the calculation of the aggregate MBL limit, but distinguished between member and nonmember participation interests.
The NCUA response noted that, under precedent, “any challenge to the 2003 Final Rule was required to be filed no later than October 1, 2009—six years after the NCUA published that Rule. This action, filed nearly thirteen years after the Rule’s publication, is thus time-barred.”