JEFFERSON CITY, Mo. – The field of membership cases in Pennsylvania and Missouri seemed very similar from the outset but have ended on starkly different notes. Cole County Circuit Court Judge Richard Callahan's decision issued March 24 that the credit union field of membership expansion regulation determined by the state Credit Union Commission is invalid, was not the decision credit unions in the state had hoped for. While the defendants in the case including the director of the Division of Credit Unions, the Credit Union Commission, the Missouri Credit Union Association and 10 credit unions have 30 days from the date of the decision to decide to appeal the case, state-chartered credit unions in Missouri that were approved for large FOM expansions have to wait and see what the implications of the judge's decision will have on them. Meanwhile, in Pennsylvania, the court's decision in support of credit unions' field of membership expansions is in stark contrast. Why the different outcomes for two cases that both revolve around the definition of well-defined, local community? Judge Callahan's decision differs markedly from the one issued last month in Pennsylvania Commonwealth Court, which dismissed bankers' challenges to credit unions' community charters and upheld Secretary of Banking William Schenk's approval of field of membership expansions for TruMark Financial CU and Freedom CU by Secretary of Banking William Schenck. Pennsylvania Credit Union Association Senior Vice President Communications and Marketing Mike Wishnow said while there has been "some discussion" of the Missouri case by the association, they don't expect it to have any implications on the Pennsylvania case. In fact, Wishnow said the association's attorneys have said there would be "minimal impact" of Judge Callahan's decision on Pennsylvania FOM cases. "The issues aren't very similar," said Wishnow. "The only similarity between the two cases is the banks are attacking credit unions." He explained that the major difference between the two cases – and the feature that would make it difficult for the Missouri court decision to set a precedent for Pennsylvania cases – is Pennsylvania credit union field of membership law looks to NCUA guidelines for definitions. "So each state takes a very dissimilar approach to defining field of membership," said Wishnow. As a result of the 1998 passage of the Credit Union Membership Access Act in Missouri, the seven-person commission was created and charged with defining terms in the act including "family" and the phrase "local neighborhood, community, or rural district" as it described a geographic area including zip code, telephone area code, county, township, city, other geographic area with clearly defined boundaries, and an area which includes persons with common interests. Members of the commission are appointed by the governor, and five of them are required to be credit union representatives. They serve varying terms. In issuing his judgment, Judge Callahan wrote, "As noted, the legislature authorized the Commission to define the terms `neighborhood,' `community' or `rural district.' 370.080.2(2). However, by that section the legislature required that the Commission's definitions be confined to persons who reside or work in `well-defined local' neighborhoods, communities, or rural districts. Thus, the authorization by the legislature to the Commission to define such terms as `neighborhood,' `community,' or `rural district' was not unlimited. Those definitions had to be of a well-defined local nature. The local nature of credit unions was a paramount feature in their creation and is a guiding principle in their present incarnation." Therefore, said the Missouri Credit Union Association, "the court overruled the Missouri Credit Union Commission's statutory authority." and ruled that the FOM expansion regulation determined by the Credit Union Commission "is invalid." Callahan wrote that, "When the Commission defined a local neighborhood, community, or rural district to include such areas as those within a telephone area code or a zip code, it changed fundamentally the mission of a credit union as envisioned by both Congress and the legislature. That mission was to meet the credit needs of people with modest means who were associated with one another. Because of the Commission's definition it changed the nature of a credit union; instead of members with a common interest and bond in association with one another, the Commission authorized the formation of a new entity – one where a myriad of people from all walks of life, with no particular association with one another, and in large and demographically diverse geographical zones deposit their money, borrow money, and have their other banking needs fulfilled." According to Callahan, "The clear intention of the legislature, as found in 370.080.2(2), was to limit Missouri credit unions to meaningful local geographic areas, in furtherance of the long-standing credit union objectives of serving members who know each other and who share common values and concerns." The judge further stressed that "the definitional rule issued by the Commission must not conflict with its governing statute, otherwise it is invalid." Finally, Callahan wrote in his judgment that, "Credit unions and banks are distinct entities. They have different governing rules and different tax rates. The Commission, by allowing credit unions to form in a way which makes them direct competitors of banks, is in violation of the structural framework declared by Congress and our state legislature." In a prepared statement issued by the Missouri Credit Union Association, President/CEO Rosie Holub expressed the association's disappointment in the court's decision and said "we will continue our efforts at the local, state, and federal levels to advocate a fair and level playing field for credit unions in Missouri." The 10 credit unions involved in the Missouri lawsuit include five that are part of the original lawsuit – Central Communications CU, City Utilities Community CU, South Community CU, TelComm CU, and Vantage CU – plus five others that have agreed to be bound by the decision – Aerospace Community CU, Alliance CU, First Community CU, Neighbors CU and United Community CU. -

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