Credit union lawyers were hailing a Kentucky Supreme Court ruling upholding state authority on field of membership powers as providing the banking lobby "a resounding defeat" as part of its ongoing quest to curtail CU expansion.
In the key ruling handed down this week, the Kentucky high court overturned a lower appeals court that sided with Ashland-based Home Federal Savings & Loan and the Kentucky Bankers Association that the state commissioner lacked authority in denying FOM expansion to a group of six CUs.
The Supreme Court in citing the Kentucky's legislature proper "intent to broaden allowable categories of membership" based on a 1984 statue, turned the 2006 case back to the lower appellate court directing the Kentucky Department of Financial Institutions to promulgate new FOM rules. "Yes, we beat the bankers' butts," said Wendell Lyons, president/CEO of the Kentucky Credit Union League who credited support of CUs in keeping the case alive through a $100,000 legal defense fund. Echoing Lyons on the American Bankers Association "losing this one" was Michael Edwards, CUNA general counsel for special projects. CUNA had filed an amicus brief in support of the CUs.
A spokesman for the Kentucky Commissioner, Charles A Vice, said the ruling is being reviewed by lawyers as what its next step will be. The six CUs bringing the case, which dealt with common bond language over adding branches in the state's "Area Development Districts," included Members Choice CU, Ashland; C&O United CU, Edgewood; Service One CU, Bowling Green; Beacon Community CU, Louisville; GTKY CU, Lexington; and Kentucky Employees CU, Frankfort.
In making their argument before lower Kentucky courts, bankers' attorneys had cited past NCUA rulings and a parallel FOM case in Pennsylvania on "well defined" language as demonstrating that state law should not permit community-based FOM for state-chartered CUs.