Courts Make Two Decisions Affecting Credit Unions
The NCUA’s authority to amend the rules surrounding the field of membership is upheld, expanding the communities credit unions will be able to serve. Staying informed about the latest legal decisions is critical to the success of any business. For the highly regulated banking industry, even seemingly innocuous decisions can result in added operational costs or unintended non-compliance. Recently, two court decisions should have credit union leadership sitting up and taking notice.
Field of Membership Rule is Upheld
The first court decision to affect credit unions comes from the U.S. Circuit Court of Appeals for the District of Columbia, which has refused to hear a case brought on by the American Bankers Association (ABA). In this case, the ABA challenged the National Credit Union Administration (NCUA) and its Field of Membership (FOM) rule.
A panel of three judges from the Court of Appeals upheld most of the rule by stating the NCUA was within its legal right to amend the FOM rule. However, the ABA did not agree and asked the full court to review the panel’s decision. The ABA declared a limited win when the full court decided not to hear the case, even though the panel wrote that the NCUA was within the law to redefine the FOM rule.
“We continue to believe the NCUA regulation oversteps the statutory requirements for credit union field of membership,” said Jeff Sigmund, spokesperson for the ABA. Sigmund went on to say the ABA will continue to look at all of the options, including bringing the case to the U.S. Supreme Court.
In the panel’s ruling, it was stated the new provision to increase the population limits in rural districts to 1 million people will be upheld. The panel also said the NCUA was within its rights to define Combined Statistical Areas as local communities. Despite the ABA declaring a limited win, credit union trade associations praised the court’s decision to not hear the case.
“Today’s appeals court decision reaffirms what we already know: The NCUA’s FOM rule is well within the agency’s legal authority,” stated Dan Berger, president, and CEO of the National Association of Federally Insured Credit Unions (NAFCU).
The recognition of the NCUA’s authority to regulate and make changes, such as amending membership populations, has been lauded as a victory for credit unions nationwide. The opportunity for credit unions to serve a larger population is also seen as a win for the communities they serve. However, the lawsuit itself does reinforce the lobbying efforts of the ABA and its continual scrutiny of credit union practices.
Virtual Banking Must Meet ADA Standards
The second decision comes from the U.S. Supreme Court. Although not specifically involving credit unions, the resulting decision has a meaningful impact on the industry. The Supreme Court had decided not to hear an appeal from Domino’s Pizza related to an Americans with Disabilities Act (ADA) suit. At issue was Domino’s Pizza’s argument that ADA rules and provisions only pertain to physical locations and not to websites.
Virtual banking, including websites and mobile apps, must be accessible by the disabled according to the Supreme Court, leaving thousands of credit unions vulnerable to lawsuits, fines, and penalties.
With lobbying power, the country’s most well-known pizza franchise pushed on. The Supreme Court reviewed the case and upheld a lower court’s decision in which it stated businesses are legally compelled to maintain websites that are accessible to those with disabilities. The Court declared that if ADA regulations only pertained to physical locations, millions of disabled people would be left out of a sizable piece of the national economy.
The case began when a blind man by the name Guillermo Robles sued Domino’s Pizza because the company’s mobile app would not work for him, despite his use of specialized software that reads online content. Attorneys for the plaintiff argued in the 9th U.S. Circuit Court of Appeals that the ADA compels companies with both a physical and a virtual presence to develop websites and online apps accessible to the disabled.
The “alleged inaccessibility of Domino’s website and app impedes access to the goods and services of its physical pizza franchises, which are places of public accommodation,” the court stated. After this decision, Domino’s brought the case to the Supreme Court. Their denial to hear the case effectively upheld the ruling that ADA compliance was necessary for online platforms.
Domino’s, backed by several large business groups, argued that the 1990 ADA law did not apply to websites and online apps because they were not envisioned at the time and that there are no existing rules on how to make such platforms accessible. But, attorneys for Robles countered by stating, “The blind and visually impaired must have access to websites and apps to fully and equally participate in modern society, something nobody disputes.”
In the past, other courts have dismissed such lawsuits stating business websites must be accessible, and most credit unions favored these decisions. However, the outcome of the Supreme Court case against Domino’s Pizza will now push credit unions to act or face regulatory fines and penalties.
One likely action that will be taken by credit unions will be to ask Congress and the U.S. Justice Department to change the ADA law, or at the least, to have the existing law clarified. It is also possible that the Supreme Court will revisit the subject later because of the widespread division among lower courts.
Legitimate claims of inaccessibility will continue to be filed and will need to be rightfully addressed. But until more clarity is brought to the current ADA regulations specifically related to websites and apps, the largest threat may come from opportunistic attorneys finding holes in credit union websites and embroiling them in expensive lawsuits.