Pennsylvania Bankers Sue to Have Secretary of Banking's Community Charter Ruling Overturned

HARRISBURG, Pa. – In an expected move, the Pennsylvania Bankers Association filed an appeal of the ruling handed down by state Secretary of Banking A. William Schenck that granted a community charter to TruMark Financial CU to serve the five-county Philadelphia area. Mike Wishnow, SVP Communications and Marketing for the Pennsylvania Credit Union Association said the PBA filed its suit “just hours” before the Jan. 21 filing deadline. Ironically, the PBA’s suit in the case of TruMark Financial CU was filed the same day an article ran in Jan. 21st edition of Central Penn Business Journal which spotlighted credit union growth in Pennsylvania and CUs’ move toward community charters “to the chagrin of bankers.” The article by David Dagan focused on the new community charter approved by NCUA for New Cumberland FCU in November to serve Adams, Cumberland, Dauphin, Lebanon, Perry and York counties – the CU’s FOM also includes the Borough of Shippensburg. Last month, New Cumberland FCU began a mass marketing campaign to promote its charter and expanded FOM using billboards, radio and television. Richard Ashby, chairman and CEO of Fulton Bank, was quoted in the article as saying credit unions “are simply competitors with a cost advantage because they don’t pay taxes.” “The bankers’ suit is not a surprise, we expected it to happen,” said Wishnow of the field-of-membership expansion case concerning the $760 million TruMark Financial CU-one of the largest SCCUs in Pennsylvania. “We had the feeling from the very beginning that whichever way Secretary of Banking Schenck’s decision went, there was a better than 50/50 chance the other party would have appealed that decision.” In this case, credit unions were the winners. Just before last Christmas, Schenck issued a final opinion in favor of the credit union’s application to convert to a community charter. The case dates back to November 2003 when TruMark first submitted its community charter proposal to Schenck’s office, as did two other state-chartered CUs – Freedom CU of Philadelphia and Corry Jamestown CU of Corry. The PBA and the Pennsylvania Business Bank subsequently filed a joint petition objecting to the CUs’ charter conversions on the basis that the areas each of the three credit unions applied to expand their FOMs to include did not qualify as a “well-defined, local, community, neighborhood or rural district” as defined by state law. A consolidated hearing for all three CUs was held in July 2004. In announcing his December 2004 decision concerning TruMark, Schenck determined that after listening to testimony and reviewing submitted documents, that the credit union did meet its burden of proof that the proposed five-county Great Philadelphia area consisting of Philadelphia, Bucks, Chester, Delaware and Montgomery counties, does constitute a “well-defined, local community.” Schenck also directed Freedom CU and Corry Jamestown CU to rework their business plans to serve the expanded FOMs they had applied to serve. He further directed Corry Jamestown to provide more well-defined community boundaries. At press time, Schenck’s office had not received documentation from either CU. In its initial decision, the Department of Banking acknowledged credit unions’ historical role of helping people and serving the underserved by stating, “Philanthropists in this country imported the credit union movement to assist the individual working man through `self help’ while at the same time promoting thrift among the workers and later helping farmers with need for borrowing, but few opportunities.In essence, the need for credit unions to perform their original function is ongoing.” At press time, Wishnow said the PCUA counsel was studying the full impact of the ruling “and will stand ready to assist the Department of Banking in defending its decision.” He added that, “Credit unions are in the enviable position of being on the side of the state regulator, and we’ll say and do what we feel is appropriate to support the state regulator.” In contrast, said Wishnow, “the banks are in the position of suing the state banking regulator.” What does the PBA’s suit mean for TruMark Financial CU? CU spokesman Christian Roach said the credit union is operating as a community charter. “We’re focusing on getting new members and getting the word out to the communities we serve.” Department of Banking spokesperson Carol Gifford confirmed that the credit union has a community charter and is able to take in new members. She added that earlier reports published in some media that there was a gag order issued were incorrect. She explained that during the proceedings in December when Schenck announced his decision, a confidentiality order was issued for the parties “to protect privileged information they received from the other parties.” At press time, the PBA’s appeal was in the Commonwealth Court, and Gifford said until the Court issues a schedule of its hearings or briefings, the Department won’t know if it will have a deadline to respond to the PBA’s suit. “We feel confident Secretary of Banking Schenck’s decision was thoughtful, well reasoned, and gave all concerned parties due diligence and will be upheld by the Commonwealth Court,” said Gifford. -