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HARRISBURG, Pa. – About one month after the Pennsylvania Bankers Association filed their not-so-surprising suit to have Secretary of Banking William Schenck’s approval of a community charter for TruMark Financial CU overturned, the Pennsylvania Credit Union Association has made its own expected move. PCUA, on Feb. 18, entered field-of-membership litigation with the Commonwealth Court in support of the order issued last year by Schenck approving a five-county community charter for TruMark Financial CU and providing community chartering guidance to Freedom CU and Corry-Jamestown CU. The PCUA’s litigation was filed on Feb. 18, beating the Feb. 22 deadline. PCUA President/CEO Jim McCormack said just as the association was not surprised the bankers filed their suit filed Jan. 21 to have Schenck’s community charter ruling overturned, so too the PCUA has known since then what they would do in response. “There’s too much at stake here, we knew we were going to file litigation,” he said. Since Schenck issued his order Dec. 22, 2004, Freedom CU has been granted their community charter and Corry-Jamestown’s application is pending. In their suit, the Pennsylvania Bankers Association challenged the Department of Banking’s community charter approval process and Trumark’s tax-exempt status by asserting that community chartered CUs should pay the state’s Mutual Thrift Tax, a tax levied on mutual savings banks. While we believe there is little merit to the bankers’ taxation argument, it requires a rigorous defense by our Association on behalf of all Pennsylvania credit unions and their members, said PCUA President/CEO Jim McCormack. PCUA General Counsel Rick Wargo explained that “the banks are trying to argue that a credit union with a community charter is the equivalent of a mutual thrift and so the credit union tax exemption should be deemed unconstitutional. In our additional correspondence that will go to the Court, we intend to demonstrate that the arguments raised by the bankers don’t add up.” Wargo explained that the Commonwealth Court is an appellate court that deals with state agency issues, so the judges are generally unfamiliar with credit union judicial review. “That means we’ll have to start with Credit Union 101,” says PCUA SVP Communications and Marketing Mike Wishnow. “The good news is that at the end of the day if we’re successful, the appellate court in Pennsylvania will have stated for the record that credit unions and mutual savings banks are not the same,” he says, adding that “the bankers’ suit and our subsequent litigation puts credit unions, having already won round one, in the enviable position of being on the side of the state regulator.” McCormack said the PBA’s actions haven’t blocked TruMark Financial or Freedom CU from taking in new members, and neither has it deterred other state-chartered credit unions in the state from seeking expanded charters. “It is clear to us that the Pennsylvania Bankers Association’s actions are a clear part of the overall attack at the state level against state-chartered credit unions. The bankers haven’t been successful in Washington, D.C., so now they’re pursuing the attacks in the states,” says McCormack. The PCUA president/CEO said he’s heard from their congressional delegation about bankers’ efforts in Utah to push legislation through that asks Congress to examine the regulatory and tax-exempt status of federal and state-chartered CUs. The measure – HJR 1 – was passed by the Utah Senate and House. “Our delegates have told me the legislation means nothing in D.C.,” said McCormack Wishnow said the PCUA is very supportive of the Department of Banking’s position, and “we stand ready and willing to provide them with any information we have.” Of the PCUA’s relationship with Schenck, McCormack said “it’s been very strong. We share the value of consumer protection and he appreciates the work done by credit unions to address this.” Wargo said it would probably take several weeks for the Commonwealth Court to sort out the procedural posture of the case, and it could be into mid-March until PCUA receives a briefing schedule. -

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