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Federal judge partially rejects NCUA's membership rule

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Federal judge partially rejects NCUA's membership rule

Two provisions of the National Credit Union Administration's recent field of membership rule updates were rejected by a federal judge March 29, and other aspects were upheld.

U.S. District Judge Dabney Friedrich struck down measures that expand the NCUA's definition of a rural district to areas with a population of up to 1 million, an increase from 250,000, as well as a portion of the regulator's definition of a "local community" that included any combined statistical area with fewer than 2.5 million people. The action is the result of a lawsuit filed by the American Bankers Association.

The NCUA approved the updated rule, which gives credit unions the potential to broaden their membership bases and thus accept more customers, in late 2016.

Friedrich said the definition of a rural community could include areas that were not "in the ballpark" of the general understanding of a rural community and the NCUA did not leave itself an "escape hatch" to reject these kinds of applications.

The combined statistical area definition of local community was spiked by Friedrich because its automatic acceptance of any such community was against federal statutes that require such a community to be well defined, the opinion noted.