State-chartered Credit Unions Deal with Bank FOM Expansion Applications

WEST PALM BEACH, Fla. – Federal credit unions aren’t the only ones keeping their eye on the ramifications of a U.S. District Court’s decision to remand a Utah field-of-membership expansion case back to the NCUA for further review. State-chartered credit unions, aware that the outcome of the federal case could possibly spill over to state FOM expansion cases, are also keeping a watchful eye on developments. Earlier this year, Virginia credit unions were faced with a challenge from the Virginia Bankers Association of a FOM expansion case which like the Utah case, concerned the definition of the term “local.” In February, the Virginia Supreme Court handed credit unions an historic victory when it affirmed a community charter expansion granted DuPont Community CU in May 2002 by the state Bureau of Financial Institutions allowing the credit union to serve a five-county, five-city FOM in the Shenandoah Valley. In its challenge of BFI’s decision, the Virginia Bankers Association argued the FOM expansion didn’t meet the required definition of a “well-defined local community.” The VBA sought to have the BFI’s decision overturned. Pennsylvania and Missouri also both have FOM expansion cases pending, but the Pennsylvania Credit Union Association and Missouri Credit Union Association say the facts surrounding those cases are different from Virginia. PCUA is still waiting for word from state Secretary of Banking William Schenck on his decision on challenges filed with his office by the Pennsylvania Bankers Association and local banks concerning applications filed by three credit unions – Freedom CU, Philadelphia; TruMark Financial CU, Trevose; and Corry Jamestown CU, Corry – to convert to community charters. The plaintiffs have argued that the areas the CUs want to expand their FOMs into do not qualify as a “well-defined, local, community, neighborhood, or rural district” as defined by state law. Schenck heard oral arguments from the banker and credit union sides in July, and the last set of briefs were filed in October. At press time, a spokesperson for the Department of Banking said Schenck expected to release his ruling before Christmas. Missouri credit unions are still waiting for word from the Circuit Court in Cole County on a challenge to a FOM expansion dating back four years concerning TelComm CU (formerly Springfield Telephone Employees CU). In February, the state Supreme Court denied a petition to rehear the case that gave bankers standing to challenge the FOM expansions approved by the Missouri Division of Credit Unions. The Supreme Court sent the case back to the Circuit Court in Cole County where it remains now. The Circuit Court previously found the bankers lacked standing to seek a judicial remedy for the FOM expansion decision. -