JEFFERSON CITY, Mo. – A hearing has been set for October 3 in a state appellate court here to hear arguments in the running feud between bankers and credit unions in Missouri. But regardless of that decision, the dispute is likely to drag on for months or even years. The battles so far are over the legal technicality of who has standing to appeal field of membership expansion decisions to the state's Credit Union Commission. Once this issue is resolved, the bankers say, they hope the commission will take up the substantive issue of what they say are overly broad FOM expansions. That, they concede, may lead to more court battling. The case at hand involves the request by Springfield Telephone Employees Credit Union (which has since changed its name to Telcomm Credit Union) to include everyone who lives in the 417 area code and part of another area code in its field of membership. The Missouri Bankers Association and the Century Bank of the Ozarks believe the expansion violates the intentions of a 1998 law that set a 3,000-person limit on employee groups that could be included in a credit union's field of membership. The case is the furthest along of 14 challenges the bankers association and selected banks have made to field of membership expansions in Missouri in the last two years. If legal action fails, the bankers may take their case to the legislature. Max Cook, president of the MBA told Credit Union Times that before seeking new legislation, his group would play out its hand in court. In 1998, the Missouri legislature passed a law, patterned after H.R. 1151, which set a 3,000-person limit on employee groups that could be included in a credit union's field of membership, though it allowed for larger fields of membership for community-based credit unions. The Missouri legislation, which compromised competing bills backed by credit unions and banks, also created a credit union commission to oversee the state's credit union division and to rule on exceptions to the 3,000-person limit. In 2000, after the commission was created and members appointed, the new commissioners ruled that the new law, as written, also applied a 3,000-person limit to community-based credit unions that sought to expand their fields of membership. Shortly thereafter, Springfield Telephone applied to expand its field of membership to include everyone who lived in the 417 area code and part of another area code. The commission approved that exception to the 3,000 limit, though John Smith, director of the credit union division, later trimmed that back to the single, full area code, saying he didn't believe the credit union had demonstrated that it had the ability to serve the wider territory. The approved territory added more than 600,000 residents to the credit union's FOM. In November 2000, the bankers association and Century Bank filed an appeal of that exemption to the commission. In May 2001, the commission upheld the decision of the director. But in September of that year, the bankers filed a petition in state court for administrative review of that decision. In January 2002, the circuit court judge hearing the petition dismissed the case, saying bankers did not have standing to appeal the decision. That decision was appealed and both sides are awaiting the Oct. 3 hearing before a three-judge appeals panel. In the meantime, the commission continued to grant exemptions to the 3,000-member limit for community-based credit unions. In April, the commission granted its largest request, allowing Educational Employees CU in a St. Louis suburb, to add 1.6 million residents in a five-county area around St. Louis to its field of membership. The bankers challenged that expansion and 12 others since the Springfield Telephone case. Once the court ruled in the Springfield case that the bankers lacked standing to appeal, however, the commission also began to rule that the bankers lacked standing before the commission. The bankers went to court over that as well, asking the court to tell the commission it had to hear its appeals. The criteria for deciding to grant an exemption are sketchy, beyond the expectation that it is likely that the applicant can operate a credit union in a safe and sound manner. It is also unclear, even to members of the commission, who has standing to appeal a FOM expansion. Commissioner Pat Jacobs-McDonald, a community development activist, said she believes the commission would consider an appeal from another credit union that served the same FOM or a group within the FOM that wanted to form a credit union. "You don't want two credit unions operating and not be successful," she said. McDonald also agreed with fellow Commissioner Bill Humpfer, president and CEO of St. Louis Community Credit Union, who said it was not the commission's role to regulate competition between financial institutions. However, when asked what the commission's job was, Humpfer said "I can't answer that off the top of my head. It think it's a regulatory body to approve what the director does and to oversee what the director does." Bank association General Counsel Wade Nash argues that what was put into law in 1998 is considerably more limiting on field of membership expansion than what the commission and the director are doing. At the time, credit unions defeated provisions of the legislation that would have created a financial institutions commission controlled, they believed, by bankers. Instead, the legislation created a seven-person credit union commission that included four members with experience as an officer or director of a credit union. Nash also complained that the legislature has looked favorably on credit unions unfairly, at the expense of the state's smaller community banks. "They (the credit unions) use the same narrow segment of the public's unhappiness with the very largest banks to beat up on the entire banking industry." The banks' have not appealed every FOM request to add more than 3,000 potential members. For example, it did not contest the FOM request of CommunityAmerica CU to add 660,000 residents of Jackson County, a significant portion of the Kansas City metropolitan area. "They've never challenged a single county request," observed CommunityAmerica president Dennis Pierce. An election in November and likely high turnover among legislators, makes it unlikely that either side will push new legislation early in the session that begins next January. "Nothing is on the burner right now for any kind of legislative action and at this time we're going to pursue this matter through the courts," Cook said. "Once we get a ruling out of the courts, then we'll look at our options and do what we might think is necessary." That doesn't mean bank lobbyists aren't talking to legislators. So are credit union lobbyists. "Our thought is our best defense is good education," said Amy McLard, vice president of legislative and public affairs for the Missouri Credit Union System. "We're having a strong education push, and I'll be up there (at the capitol) for large portions of the session meeting with legislators." -

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