Judge Rules That Postal Community Cannot Become Bank

ARLINGTON, Va. -The Appeals Court of Massachusetts has reversed a previous court ruling and declared that the $128 million Postal Community Credit Union, headquartered in East Boston, Massachusetts, cannot change its charter to that of a mutual bank. The Court found that the Commissioner of Banks’ argument that the Commonwealth’s statutes do not permit such conversions and that federal statute does not preempt the states to be reasonable. “The commissioner argues reasonably that restrictions on cross-industry conversions are of long standing in Massachusetts; are well known to the Legislature; and would not be removed without a legislative mandate of undoubted clarity,” the Court wrote in its decision, adding: “We agree.” The case began in October of 2002 when the credit union first took the Commissioner of Banks to court over the conversion attempt. In papers filed in the Massachusetts Superior Court, the credit union, formerly known as Boston Post Office Employees Credit Union, alleged that frustrations with its limited field of membership and the Commissioner’s inaction on its application to move to a community charter led the credit union board to decide in favor of seeking a federal bank charter. The Commissioner alleged that the credit union’s proposed notices to its membership about the charter change mentioned only a shift in insurance from the NCUSIF to the Federal Deposit Insurance Corporation (FDIC), the federal insurer of bank deposits, and did not mention either a change to a federally chartered mutual savings bank nor to an initial public offering for common stock after the charter changes. The Commissioner also charged that the credit union has not “undertaken a complete analysis of [the] financial, tax and member services implications” prior to the Board voting on the change. The initial court decided in favor of the credit union in March 2003. This decision was the result of the Commissioner’s appeal of that decision. Bill French, CEO of the credit union said the credit union had not yet decided on its course of action. “We are studying the specifics of the Appeals Court’s opinion with our legal advisors and we will make a decision as to our future actions after we have reviewed a number of possible paths,” French said. The Appeals Court decision appeared to leave room for the credit union to convert to a state-chartered thrift, but French declined to comment further until the credit union lawyers had a chance to study the ruling. [email protected]