JEFFERSON CITY, Mo. – With court actions that could possibly tie up Missouri's state community-chartered credit unions' ability to take in new members and expand for several months, some of the state's largest are exploring their options and not ruling out any possibility including, if necessary, converting to federal charters. On April 17, in its first meeting following the decision handed down by the Cole County Circuit Court to strike down the state's credit union field of membership expansion regulation, the state Credit Union Commission directed the state director of the Division of Credit Unions to draft a new regulation that, according to the Missouri Credit Union Association, "is substantially similar to NCUA's federal credit union expansion regulation." According to the state regulator, there are five credit union FOM expansions directly affected by the court's decision, another five expansions that were stayed, pending an outcome at the court, and another five expansions that have been submitted to the Division director's office, but haven't yet come before the commission. Judge Richard Callahan issued his decision on March 24 and he has until April 24 to change his decision. The deadline for filing appeals is May 4. MCUA President/CEO Rosie Holub said, "Our goal remains providing state-chartered credit unions with a viable avenue for expansion. We are evaluating all legal and legislative options to accomplish that end." Hubert Hoosman, president/CEO of Vantage CU – one of five CUs included in the original lawsuit – bluntly described his reaction to Cole County Circuit Court Judge Richard Callahan's March 24 decision. "His decision was very one-sided, he obviously didn't understand the big picture," said Hoosman. "The state legislature passed the membership access act in 1998, and the judge's decision wiped out any definition of field-of-membership except common bond. Basically he's telling the state legislature `you're all wet.' It doesn't make sense. The judge basically ruled out every option for a citizen of Missouri to be able to join a credit union. The state legislature has to be upset about that," said Hoosman. "We've had county-based credit unions in Missouri for years, I don't understand the basis for his decision," Hoosman continued, adding he's confident "we stand a great opportunity in the appeals process." Vantage CU's community charter was approved in the spring of 2002. Prior to its expansion, its FOM included all the educational systems in St. Louis county and 17 surrounding counties. In addition, said Hoosman, it was approved to serve "key areas as requested by the credit union." He explained that whenever Vantage would deploy a branch office, it would apply to serve the community within an approximate five-mile radius of that facility. Lastly, through a merger with Government Records Employees CU, Vantage's FOM also includes Warren County. Since the state Division of Credit Unions approved Vantage's community charter four years ago, Hoosman said the CU hasn't "aggressively pursued" new members, but rather it's depended on word-of-mouth marketing. Faced with the court's action, Hoosman said Vantage is faced with two options. It could continue with business as usual – "the ruling will not hurt us, it will just limit citizens' ability to join us" – or pursue converting to a federal charter. Of the two, he admitted "business as usual" is not really an option, meaning Vantage would probably move to convert to a federal charter. "Converting to a federal charter doesn't cause me heartburn," said the president of the $470 million, 87,000-member Vantage. Hoosman weighed the advantages and disadvantages of being a federal charter – on the plus side, the federal charter would protect the CU from bankers' assaults and the CU would pay less taxes. "I think because of the structure of the federal charter, we'd less likely be challenged based on what we're experiencing now," he said. The downside of converting to a federal charter, said Hoosman, is "we'd lose the flexibility of the state charter that allows the regulators to develop rules and regulations that are unique to Missouri." But after tallying up the pros and cons, Hoosman said, "There are more pluses than minuses to converting to a federal charter. It wouldn't be the end of the world." Anheuser Busch Employees CU – the state's third largest state-chartered CU at $840 million and 92,000 members – wasn't involved in the bankers' lawsuit, but the consequences of Judge Callahan's decision obviously affects the credit union. President/CEO David Osborn said a switch to a federal charter is something the CU has considered for "some time," but "if barred from taking on new members" then ABECU might take that step. The credit union would probably wait until all the appeals and legal remedies are exhausted before making a move to convert to a federal charter, but it's keeping the door open. "A lot of things could happen, but if we are forced not to take in new members," then that would be an alternative, he said. While Missouri's credit unions are in a wait-and-see mode and keep a watchful eye on developments in the case, some are beginning to speculate that it's already starting to take on characteristics of the situation that brewed in Utah a couple of years ago that resulted from bankers' challenges to state-chartered CUs' conversions to community charters. In Utah, bankers' aggressiveness to thwart state-chartered credit unions conversions to community charters ended with some of the state's largest such as Mountain America, America First and Deseret First converting to federal charters. The Utah League of Credit Unions estimated the state lost about $3 million in sales tax and regulatory revenue as a consequence of the CUs' conversions. Hoosman is optimistic it won't come down to that. The bottom line, he said, is if credit unions and the Division of Credit Unions go through the appeals process "they'll find a way to resolve this." -

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