The opinion of the court was delivered by: Chief Judge Kane
On April 24, 2003, the National Credit Union Administration ("NCUA") approved Members First Credit Union's request to amend its credit-union charter to cover six counties in south-central Pennsylvania. In doing so, the NCUA determined that the six-county area, which covers over 3,000 square miles and has a population of more than 1.2 million people, constitutes a "well-defined local community." Plaintiffs, led by the American Bankers Association ("Association"),*fn1 maintain that the area does not constitute a well-defined local community. Accordingly, the Association brought suit against the NCUA to challenge the NCUA's approval pursuant to the Administrative Procedures Act, 5 U.S.C. § 551 et seq. Members First Credit Union and two other affected credit unions intervened as defendants.*fn2
Before the Court are cross-motions for summary judgment. (Doc. Nos. 49, 51, 53.) For the reasons that follow, the Court will grant Plaintiffs' motion for summary judgment.
This case involves the application of two federal statutes, the Administrative Procedures Act ("APA"), 5 U.S.C. § 551 et seq., and the Federal Credit Union Act ("FCUA" or "the Act"), 12 U.S.C. § 1751 et seq. In an earlier order, this Court analyzed the scope and applicable standard of review under the APA. Am. Bankers Ass'n v. NCUA, 513 F. Supp. 2d 190 (M.D. Pa. 2007). Now the Court will determine whether the NCUA's actions, made under the authority of the FCUA, are lawful under those standards. To do so, the Court will begin by discussing the statutory and regulatory framework associated with the FCUA, and then will turn to the application process involved in this case.
A. Statutory and Regulatory Framework
1. The Federal Credit Union Act
The FCUA traces back to the Great Depression, when Congress authorized the chartering of federal credit unions to "serve the productive and provident credit needs of individuals of modest means." 12 U.S.C. § 1751 note (Congressional Findings); Nat'l Credit Union Admin. v. First Nat'l Bank & Trust Co., 522 U.S. 479, 485 (1988). A federal credit union, as defined by the Act, is "a cooperative association organized . . . for the purpose of promoting thrift among its members and creating a source of credit for provident or productive purposes." 12 U.S.C. § 1752(1).
The NCUA, an independent federal agency, is charged with oversight of federal credit unions and is the principal agency responsible for interpreting the FCUA. 12 U.S.C. § 1752a. The NCUA is managed by the National Credit Union Administration Board ("Board"), which is comprised of "three members, who are broadly representative of the public interest, appointed by the President, by and with the advice and consent of the Senate." § 1752a(b)(1).
The Board is also responsible for reviewing applications to obtain a federal credit union charter. In order to become a federal credit union, a prospective credit union must submit an "organization certificate" to the Board for approval. Approval of the organization certificate can be given only after the Board conducts "an appropriate investigation . . . for the purpose of determining (1) whether the organization certificate conforms to the provisions of [the FCUA]; (2) the general character and fitness of the subscribers thereto; and (3) the economic advisability of establishing the proposed Federal credit union." 12 U.S.C. § 1754.
Credit unions share several characteristics under the Act: they are owned and controlled by their members, 12 U.S.C. § 1760; their primary function is to provide loans to members and to other credit unions, 12 U.S.C. § 1757; and they are "exempt from Federal and most State taxes because they are . . . not-for-profit organizations generally managed by volunteer boards of directors and because they have the specified mission of meeting the credit and savings needs of consumers, especially persons of modest means," 12 U.S.C. § 1751 note. Another significant feature of federal credit unions is that, as Congress has noted, "unlike other depository institutions, credit unions are cooperatives whose members must have a 'common bond.'" H.R. Rep. 105-472, at 11-12 (1998).
The existence of a common bond is of paramount importance to credit unions. As Congress found, the presence of "a meaningful affinity and bond among members, manifested by a commonality of routine interaction, shared and related work experiences, interests, or activities, or the maintenance of an otherwise well-understood sense of cohesion or identity is essential to the fulfillment of the public mission of credit unions." 12 U.S.C. § 1751 note.
Under present law, the FCUA recognizes three types of credit unions, distinguished by their "fields of membership": (1) a single common-bond credit union, (2) a multiple common-bond credit union, and (3) a community credit union. 12 U.S.C. § 1759(b). Until 1998, the FCUA limited credit unions' fields of membership to "groups having a common bond of occupation or association, or to groups within a well-defined neighborhood, community, or rural district." 12 U.S.C. § 1759 (1994). After the Supreme Court's decision in National Credit Union Administration v. First National Bank & Trust Co., 522 U.S. 479, 485 (1988), which interpreted the FCUA to require that "the same common bond of occupation . . . unite each member of an occupationally defined federal credit union," id. at 502, Congress enacted the Credit Union Membership Access Act, Pub. L. No. 105-219,112 Stat. 913, to amend the acceptable fields of membership. Of particular significance to this case is the fact that, as part of that act, Congress changed the acceptable field of membership from a "well-defined neighborhood, community, or rural district" to a "well-defined local community, neighborhood, or rural district." § 1759(b)(3) (emphasis added).
2. Interpretive Rule Policy Statement 99-1
The FCUA does not define what constitutes a well-defined local community, neighborhood, or rural district. Instead, Congress delegated the responsibility to "prescribe, by regulation, a definition for the term" to the NCUA. 12 U.S.C. § 1759(g)(1). The NCUA did so in Interpretative Rule Policy Statement 99-1 ("IRPS 99-1"), 63 Fed. Reg. 71998 (Dec. 30, 1998), as amended by 66 Fed. Reg. 15,619 (Mar. 20, 2001); see also Am. Bankers Ass'n v. NCUA, 93 F. Supp. 2d 35, 47 (D.D.C. 2000) ("Based on its experience of administering community credit unions and its extensive analysis responding to the commentary it received under the notice-and-comment period, the NCUA designed a viable policy for carrying out Congress's mandate."), aff'd, 271 F.3d 262 (D.C. Cir. 2001).
IRPS 99-1 established three requirements for community charters: (1) "[t]he geographic area's boundaries must be clearly defined"; (2) "[t]he charter applicant must establish that the area is a 'well-defined local, community, neighborhood, or rural district'"; and (3) "[t]he residents [in the area] must have common interests or interact." 63 Fed. Reg. 72037.*fn3 Though the NCUA concluded that the "addition of the word 'local' to the previous statutory language was intended as a limiting factor and that additional clarification was required relative to what would qualify as a community charter," 63 Fed. Reg. 72012, the NCUA ultimately interpreted the requirement to be flexible in application. Rather than identify specific limits or criteria, the NCUA identified various factors, including population size and geographic size, that would be considered in deciding whether proposed area qualified as a well-defined local community. In particular, IRPS 99-1 explained that
A large population in a small geographic area or a small population in a large geographic area, may meet NCUA community chartering requirements. For example, an ethnic neighborhood, a rural area, a city, and a county with 300,000 or less residents will generally have sufficient interaction and/or common interests to meet community charter requirements. While this may most often be true, it does not preclude community charters consisting of multiple counties or local areas with populations of any size from meeting community charter requirements.
Conversely, a larger population in a large geographic area may not meet NCUA community chartering requirements. It is more difficult for a major metropolitan city, a densely populated county, or an area covering multiple counties with significant population to have sufficient interaction and/or common interests, and to therefore demonstrate that these areas meet the requirement of being "local." In such cases, documentation supporting the interaction and/or common interests will be greater than the evidence necessary for a smaller and less densely populated area.
More fundamentally, in addition to considerations of geographical area and population, the NCUA concluded that an applicant must demonstrate that residents have common interests or interact. The NCUA stated that whether residents interact or share common interests could be evaluated by reference to a set of nonexclusive factors:
[T]he existence of a single major trade area, shared governmental or civic facilities, or area newspaper is significant evidence of community interaction and/or common interests. Conversely, numerous trade areas, multiple taxing authorities, and multiple political jurisdictions, tend to diminish the characteristics of a local area.
Rather than require every applicant to provide a detailed explanation as to whether the community charter requirements were satisfied, IRPS 99-1 established a "streamlined" approach to facilitate review. Pursuant to the streamlined approach, the NCUA recognized two types of proposed areas that would "presumptively" be considered well-defined local communities: (1) a single political jurisdiction with a population of fewer than 30,000 people and (2) multiple contiguous political jurisdictions with a combined population of fewer than 20,000 people. If the proposed area fell into either of these two categories, the NCUA generally only required "the credit union [to] submit a letter describing how the area meets the standards for community interaction or common interests." 63 Fed. Reg. 72037-38.*fn4
If, however, the proposed area did not fall under either category-as was the case here-the NCUA required a credit union to submit "documentation to support that [the area] is a well-defined local community, neighborhood, or rural district" and provide a "narrative summary" to "demonstrate the relevance of the documentation provided in support of the application [and] explain how the documentation demonstrates interaction or common interests." Id. The rule set forth "examples of acceptable documentation," including:
* The defined political jurisdictions;
* Major trade areas (shopping patterns and traffic flows);
* Shared/common facilities (for example, educational, medical, police and fire protection, school district, water, etc.);
* Organizations and clubs within the community area;
* Newspapers or other periodicals published for and about the area;
* Maps designating the area to be served. One map must be a regional or state map with the proposed community outlined. The other map must outline the proposed community and the identifying geographic characteristics of the surrounding areas; or
* Other documentation that demonstrates that the area is a community where individuals have ...