HARRISBURG, Pa. – Add Pennsylvania to the list of states where banks have challenged credit unions over community field-of-membership charter expansions. Notices of Protest were filed with state Secretary of Banking William Schenck concerning notices to convert to community charters filed by three credit unions: * Freedom Credit Union, Philadelphia seeks a community charter that includes the more than five million population area of Bucks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as three counties in New Jersey – Burlington, Camden, and Gloucester – that are considered part of the Greater Philadelphia area. The $251 million CU, formerly known as Educational CU, currently counts 200 select employee groups in its FOM and serves more than 45,000 members; * TruMark Financial CU, Trevose seeks the Pennsylvania counties of Bucks, Chester, Delaware Montgomery, and Philadelphia with a population of 2.5 million. The $750 million credit union, formerly known as Philadelphia Telco CU, has more than 77,000 members; * Corry Jamestown CU, Corry seeks to serve the portion of Erie County in Pennsylvania between the cities of Corry and Erie. This primarily rural area includes about 300,000 people who the credit union says are underserved. Corry Jamestown has 3,500 members and counts about 32 SEGs in its current FOM. The protesting parties include the Pennsylvania Bankers Association, Pennsylvania Business Bank, Univest, The First National Bank and Trust Company of Newtown, the New Jersey Bankers Association, NOVA Savings Bank, Leesport Bank, The Bank, The Lafayette Ambassador Bank, First National Bank of Chester County, Fulton Bank, and Northwest Savings Bank. In language reminiscent of bankers' FOM challenges in other states, the contesting banks in the Pennsylvania CU cases argue that areas the credit unions want to expand their FOMs into do not qualify as a "well-defined, local, community, neighborhood, or rural district" as defined by state law. The Pennsylvania State Credit Union Parity Act, passed in 2002 and enacted in 2003, gave state-chartered credit unions parity with federal credit unions on the definition of community charter, and the three credit unions in question are seeking to convert to community charters under authority granted them under the Act. It is the Act's parity provision that gave the credit unions' the confidence to assume their notices to expand their FOMs would be approved by the banking department without protest from the bankers, said Pennsylvania Credit Union Association SVP Communications & Marketing Mike Wishnow. "We presumed because of the parity provision that we would be treated the same as federal credit unions applying for community charters," said Sue Kimmy, manager of Corry Jamestown CU which filed its notice with the Department of Banking the end of October 2003. "The bankers' protest came out of left field." But Lee MacMinn, president/CEO, Freedom CU said he wasn't too surprised with the bankers' actions, given other state banking associations' track record with challenging credit unions community charter FOM requests. Freedom CU filed its Notice to Comment on the CU's FOM expansion plans, as required by law, on Nov. 3 and it was supposed to run for just 10 days. But the Banking Department notified the credit union it was extending the deadline, for another 30 days "because of the nature of the application," said Press Secretary Kim Bathgate. She did not elaborate. Wishnow said PCUA was surprised the bankers challenged Corry Jamestown's application. "They're a small credit union seeking a small community charter in a very limited area. The challenge is coming from financial institutions literally hundreds of times the size of the credit union," he said. Wishnow added that, "The Pennsylvania Credit Union Association hopes the integrity of the process remains intact and that the banking department considers the credit unions' applications on their merits without the political interference of the banking lobby. "There's a lot of questions whether the bankers have the right to challenge this at all. Our understanding is that as long as credit unions meet the definition of a well-defined community and have a bona-fied, viable business plan to serve the needs of the community, then from our perspective, the law allows it and the regulator will allow it." The bankers' challenge has left the credit unions in a wait-and-see mode. MacMinn said the Department of Banking "hadn't told us anything." The credit union's lawyers are preparing briefs to file with the DofB. "We're at the Department's mercy," he said. Kimmy said the Department of Banking didn't give her any more information either. "You feel like you're spinning your wheels, but you keep on truckin," she said. Wishnow said Schenck is faced with making a determination whether to hold a hearing or to go-ahead with the FOM approvals. If it opts for the former, it will have to decide on the structure of the hearing and who has standing to testify. "Ultimately Schenck will have to make an administrative decision and that could be challenged, depending on how it falls," said Wishnow. At press time, Bathgate said the department's chief counsel was looking at the administrative process and the direction that process will go through. By next month, she said, "things should be underway." The credit unions, meanwhile, said they have every intention of persevering. "The bankers' protest might make credit unions apprehensive about applying for community charters because of the roadblocks, but it's something we believe in and will keep going forward with," said Kimmy. MacMinn agreed. "This is not just an issue about community charters, but whether banks have the right to interfere with credit union business." -

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