WASHINGTON -- The Pennsylvania Supreme Court ordered a lower court to re-hear a challenge to community charter approvals for three state-chartered credit unions.
In a 4-1 decision issued on Sept. 24, the justices said the Pennsylvania Department of Banking failed to adequately consider input from bankers when reviewing challenges to the community charters it granted to Corey Jamestown Credit Union, Freedom Credit Union and TruMark Financial Credit Union for the right to serve five counties in the Philadelphia area.
The exclusion of the Pennsylvania Bankers Association and Pennsylvania Business Bank as interveners "offended the most basic tenets of due process," the justices stated in their majority opinion.
"The banks' petitions to intervene alleged that they would be competitively harmed by the credit unions' conversions to geography-based membership. The banks asserted that this harm provided them with standing and entitled them to intervene in accordance with the direct interest prong. Rather than addressing the issue, the department ignored it," they wrote.
The case will be reheard by the Commonwealth Court, though no date has been scheduled.
"Our credit unions are OK with it because they maintain their community charters and can execute their business plans," said Mike Wishnow, the senior vice president for communications and marketing of the Pennsylvania Credit Union Association.
He said the lawsuits are part of an overall "contain and convert" strategy by the bankers.
Jill Helsel, assistant vice president and communications director of the Pennsylvania Bankers Association said they are reviewing decision and declined additional comment.
The bankers had also filed a suit challenging credit unions' tax-exempt status in the state and alleged that the different treatment being accorded credit unions violates the state constitution. The courts have set aside that suit until the community charter challenge has been finalized.
The Pennsylvania Department of Banking defended the tax status of credit unions, saying it is constitutional to have different tax treatments, with different exemptions, to further public policy objectives.
The Pennsylvania Supreme Court decision was the second recent court decision that did not go credit unions' way.
In July, U.S. District Court Judge Kane ruled that the NCUA had acted in an "arbitrary and capricious manner" and ignored contrary evidence when deciding to grant Members 1st Federal Credit Union a community charter. The agency, granted the other two credit unions, AmeriChoice Federal Credit Union and New Cumberland Federal Credit Union, community charters after its Members 1st decision.
The American Bankers Association and the NCUA reached an agreement whereby the community charter was vacated, but the credit unions would be allowed to keep the new members they acquired under the community charter.