HARRISBURG, Pa. — The Pennsylvania Supreme Court has agreed to hear bankers' appeal of a lower court decision permitting two state credit union community charter approvals.
Just over a year ago, the Pennsylvania Commonwealth Court unanimously ruled in favor of the Department of Banking decision to permit community charters for credit unions and dismissed the bankers' challenges to that and the credit union tax-exemption; the Pennsylvania Bankers Association and others have argued the tax-exemption as unconstitutional in the state.
No date has been set for the case involving the community charters approved for $846 million TruMark Financial and $329 million Freedom Credit Union. The state regulators approved the credit unions to serve five counties in the Philadelphia area. May 14 is the date set to hear oral arguments on the tax status issue.
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Subsequently, the bankers have challenged a community charter for Belco Community Credit Union in the Harrisburg-area, Pennsylvania Credit Union Association Senior Vice President of Communications and Marketing Mike Wishnow explained. He described the effort as "part of [the banks'] contain and convert strategy." Pennsylvania Department of Banking Director of Communications Heather Tyler further explained that the litigation began after Correy Jamestown, TruMark and Freedom credit unions applied to convert to community charters late in 2003. "The department, after receiving letters and notices of protest by various entities, decided that it would be in the public interest to hold a hearing since the matter was one presenting issues of first impression for the department," she said. After that July 2004 hearing, the department approved TruMark's request and remanded the other two for restrictions, limitations and conditions. The TruMark and Freedom decisions were appealed to Commonwealth Court and the PBA and several banks simultaneously filed challenges to the tax status.
On the issue of the tax-exemption, Tyler said, "The agency's position on the tax-exemption is that it is constitutional to establish a separate tax scheme, with many tax-exemptions, such as the credit unions have, to further the public policy, subject to the uniformity clause of the constitution. The Department is charged with executing the statute as it is written as is the Department of Revenue, and not our place to make or change tax policy."
Then Belco's community charter approval was appealed in 2005; K of C Credit Union's community charter was challenged by PBA April 4, 2006 and appealed to Commonwealth Court September 14, 2006; Boeing Helicopters Credit Union was challenged by PBA and Phoenixville Bank on December 26, 2006, which is still pending before the department. Tyler also noted, "Various small credit unions throughout the state have amended their field of membership without challenge."
However, Wishnow added, "The good news in this story is so far it has gone the way of the banking department."
Regarding the future outcome of the Supreme Court decision, Tyler stated, "One can never predict how any Court will decide a question, however, we are confident that the Supreme Court will give careful consideration to the questions presented and that the merits of the department's arguments will be convincing." –[email protected]
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