Credit Unions Confident of Victory in ABA Twin Lawsuits

WASHINGTON-The credit unions cited in two recent American Bankers Association court challenges are confident NCUA will be victorious in the matters. The ABA filed a lawsuit earlier this month against NCUA for the two-year-old approval of a community charter for Members First Federal Credit Union to serve a six-county area in South Central Pennsylvania. Additionally, ABA announced the same day that it was also suing the agency in Utah for its granting of underserved areas for America First Federal Credit Union. America’s First has used the addition of underserved areas to re-enter areas it lost in December’s court decision to remand its community charter approval back to the agency, which the agency subsequently denied. Member’s First Federal Credit Union CEO Bob Marquette was highly animated in his reaction to the suit. “I think it’s frivolous. I think it’s another one of the concerted attacks on a number of fronts,” he said. Pennsylvania credit unions are also currently battling three field of membership cases at the state level, Pennsylvania Credit Union Association Senior Vice President of Communications and Marketing Michael Wishnow explained. Marquette continued, “We’ve got to continue to fight these attacks. The banks are trying to define who we are and if we let them do that, they’ve won.” In the Pennsylvania case, the ABA is challenging NCUA’s concept of a `local’ community, as it did in last year’s suit in Utah. “Local means many things to many people,” Marquette said. Member’s First’s community charter application was two-and-a-half years in the making. The credit union is “very, very, very comfortable” with it, he said. The field of membership encompasses six counties with 1.1 million potential members. When asked whether he felt the earlier decision in Utah would hurt his credit union’s case, Marquette said, “The facts there are a little bit different.” He added, the agency will have learned from that case. Wishnow said the league is talking with interested parties to determine legal strategy, including who is going to be involved and how. He said they had 60 days from the filing to decide. “I suspect, at the end of the day we will have a role,” Wishnow predicted. America First Federal Credit Union Executive Vice President John Lund also vigorously defended his credit union’s field of membership. “America First has followed to the letter all the rules and regulations of the NCUA,” he stated. He said the credit union is currently evaluating its role in the suit with counsel and senior staff and is in contact with NCUA and the trade associations. In this lawsuit, the ABA is questioning whether community chartered credit unions are authorized to adopt underserved areas. The implications of a loss here are widespread. “There are literally hundreds of community credit unions that the agency has approved [to adopt underserved areas],” Lund pointed out. He also noted that the underserved areas credit unions can adopt are the very same one the banks use for CRA credits. Representatives from the Utah Credit Union League did not return calls for comment as of press time. Former NCUA Chairman Dennis Dollar, a principal in the Dollar Associates consulting firm, took the ABA’s newest lawsuit against NCUA involving America First Federal Credit Union as a personal affront. “As the author of Access Across America, I take an assault on Access Across America very seriously,” Dollar said of the program targeting service to underserved areas. He highlighted the legislative history. In written remarks submitted for the record, Credit Union Membership Access Act author Congressman Paul Kanjorski (D-Pa.) wrote, “By including explicit language authorizing multiple group credit unions to include underserved areas in their field of membership, we are not in any way restricting the ability of the National Credit Union Administration to allow community and single group credit unions to include underserved areas in their fields of membership. “Precluding community credit unions from serving underserved areas would be contrary to their reason for existence.” NCUA Chairman JoAnn Johnson also highlighted Kanjorski’s remarks. “The agency will vigorously defend its position in this case. The rights of consumers, especially those who have not realized the American dream of financial self-sufficiency, are at stake in this case.America’s consumers deserve to have access to mainstream financial services and the choice of credit union service within the bounds of federal law.” The agency does have 60 days to respond, NAFCU Director of Regulatory Affairs Carrie Hunt explained. “We are coordinating with the agency and CUNA as well,” she said. Member’s First and America First are both NAFCU members. CUNA attorneys were in Florida for a conference and unavailable for comment. The credit unions cited were incredulous about the challenges. Marquette asserted that the big banks must be focusing smaller banks on credit unions so they can gobble up the small banks’ market share. Lund indicated banks’ record profits. “Obviously, they’re not being harmed,” he said. If forced back to a SEG-based charter, Member’s First is exploring its options. Marquette estimated that the credit union could actually reach further than its current geographic boundaries if it continued adding SEGs. “We are determined to bring credit union service to as many Americans in south central Pennsylvania as we can,” he stated. Over the two years since the application was approved, Member’s First has deployed a lot of resources to the new areas, including marketing, branches, ATMs, and expanded phone and computer systems. The institution is opening its 27th branch next week. Lund said America First did not have any back up plans in place but does have ideas floating that he was “not at liberty to disclose” at this point. PCUA’s Wishnow said he has spoken with a number of long-time credit union operatives who have never seen the level of intensity in the bankers’ opposition as they do right now. [email protected]