Despite spending many hours responding to all kinds of legal papers, credit unions don't always understand which ones they are required to answer. Legal notices come from lawyers, judgment creditors, taxing authorities and child support agencies and credit unions are named as trustees of member accounts in civil lawsuits. Must you respond to every notice? If the notice is from a court or agency in your state, the answer is probably yes. If the notice is from out of state (and is not for child support arrearages or from a federal agency), the answer could well be no.
State courts and agencies cannot simply compel an out-of-state credit union to comply with a notice; they must have jurisdiction over the credit union. That commonly means the credit union conducts some business in the state. For example, a Los Angeles court cannot force a credit union in New York to obey a subpoena or judgment (same rules apply for federal and state chartered credit unions). The party seeking compliance must go to New York and ask the courts there to enforce the California notice or, if possible, have a California court find a way to get jurisdiction over the New York credit union. A collector with a $2,000 judgment is not going to spend money to get out-of-state jurisdiction.
If you are a credit union with activities in one state and with no substantial business in other states, it will be difficult to require you to obey an out-of-state action. Credit unions must develop procedures with its legal counsel on responding to out-of-state lawsuits against members. Why spend hours answering out-of-state subpoenas when you're attorney can tell you in minutes if you have to? Why send your member's savings to a distant state with no jurisdiction when he or she is barely meeting loan payments with you?
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But there is a new twist to the jurisdiction problem. With more credit unions involved in shared branching, network membership might subject a member credit union to jurisdiction in any other state where its member happens to now live. Credit unions considering shared branching need to weigh the effects of being subjected to multistate jurisdictions. Shared branch networks need to consider a limited local network option for credit unions that do not want to be subjected to multistate jurisdictions.
Out-of-state child support garnishments are covered by a uniform system of law and must be obeyed. On the other hand, there is no automatic multistate enforcement mechanism for out-of-state tax liens. While states have an interest ensuring that out-of-state parents pay child support, they don't want other states seizing potential tax revenues. Comply with your home state and federal tax liens and ask your legal counsel about any out-of-state tax liens and orders that are issued outside of your state. As discussed, shared branching may require you to comply. Lastly, you should discuss compliance with out-of-state criminal subpoenas with your legal counsel. There are good public policy reasons to comply with these orders. In all cases, your legal counsel, and not the credit union, should sign any letters responding to a notice or order.
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