That's the key result of a recent Pennsylvania Supreme Court decision in a case that has been closely watched by credit unions and banks.
The court overruled a 2006 lower court decision that the Pennsylvania Department of Banking erred when it granted the Harrisburg-based credit union a community charter.
The justices rejected claims by bankers that the department made procedural mistakes during the decision-making process.
At issue were decisions made by the state following a law passed by the Pennsylvania legislature in 2002 authorizing credit unions to amend their field of
membership either by common bond or by well-defined communities or districts. That measure brought the Pennsylvania law in line with the Federal Credit Union Act.
When Belco sought to change its charter from occupation-based to geography-based, state and local bankers' groups expressed objections, saying that credit union would have an unfair competitive advantage. The banks' suit did not focus on the merits of the credit union's case but on the procedures used to determine the FOM.
The Pennsylvania high court ruled that the procedures followed by state officials were appropriate and that the bankers had ample opportunity to make their case. As a result of the decision, Belco will be able to recruit members from Adams, Cumberland, Dauphin, Lancaster, Lebanon, Perry and York counties. Belco currently has 45,200 members and $268.6 million in assets.
Rick Wargo, the executive vice president and general counsel of the Pennsylvania Credit Union Association, praised the decision.
"We had claimed all along that the department gave everyone adequate opportunity to make their case and the justices agreed with our decision," Wargo said.
Raymond Pepe, a lawyer representing the Pennsylvania Bankers Association, said they may ask for a rehearing because the court incorrectly described some of the association's actions during the hearing process.
The state high court sent the question of how much access bankers have to information contained in Belco's application back to the lower court; the Pennsylvania Department of Banking and Belco claimed some of that was confidential. No date has been set for the rehearing on that aspect of the case.
Four justices on the Pennsylvania Supreme Court signed the majority opinion while two justices signed an opinion that agreed with parts of the majority opinion and disagreed with others.
Pennsylvania has been the site of three highly publicized court cases involving community charters.
In September, the Pennsylvania Supreme Court ordered a lower court to rehear a challenge to the granting of community charters to three credit unions.
In a 4-1 decision, 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.
That case has not been reheard and no date for the hearing has been set.
In July, U.S. District Court Judge Yvette Kane ruled that the NCUA had acted in an "arbitrary and capricious manner" and ignored contrary evidence presented by bankers when deciding to grant Members 1st Federal Credit Union a community charter. The subsequently granted the same community to AmeriChoice Federal Credit Union and New Cumberland Federal Credit Union.
Kane approved a remedy, which had been agreed to by the NCUA and the American Bankers Association, allowing the three Harrisburg, Pa.-area credit unions to keep their new members but not recruit additional ones in the expanded fields of membership.