WASHINGTON — Even though a judge ruled that the NCUA's decision-making process in a key field of membership case was flawed, the three Harrisburg, Pa.-area credit unions could be allowed to keep their new members.
That would be the result if the judge approves a remedy that the NCUA agreed to last week with the American Bankers Association, which sued the agency over the decision.
Members 1st Federal Credit Union, AmeriChoice Federal Credit Union and New Cumberland Federal Credit Union would not be allowed to recruit additional members in their expanded fields of membership while the case is still being decided. But they could enroll spouses and other family members of those made eligible by the NCUA's disputed decision. The agency's decision involved an application by Members 1st for a community charter, and the two other credit unions subsequently were granted the same FOM.
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The NCUA said in its motion filed in federal court that allowing family members to join the credit union restores things to where they were before the decision "while not punishing current members of the credit union."
The remedy was proposed by the ABA in a court filing last month. The association said that "banks have no desire to punish depositors and, consequently, have not asked for injunctive relief that might force depositors to switch financial institutions."
CUNA, NAFCU and the Pennsylvania Credit Union Association expressed support for the remedy in a motion filed last week but said it shouldn't set a precedent that the consent of the bankers or others is required in future cases.
The American Bankers Association and a group of Pennsylvania bankers sued the NCUA after the agency's 2003 decision to granted Members 1st a community charter for a six-county, 3,400-square-mile area.
In July, U.S. District Court Judge Yvette Kane ruled that the NCUA had acted in an "arbitrary and capricious manner" when evaluating evidence and deciding to grant a community charter to Members 1st Federal Credit Union in Mechanicsburg, Pa., a suburb of Harrisburg. She added that the NCUA's "lopsided decision reflects a certain deafness to the unfavorable evidence in the record."
Members 1st argued that the six-county area constituted a community for purposes of gaining a charter because all six of the area's major shopping malls are on the I-83 corridor and all nine of the area's main roads filter toward that corridor. In her decision, Kane criticized the NCUA for ignoring evidence demonstrating that two dozen shopping centers exist within the area but not along I-83.
Kane's ruling was the second major loss for the NCUA in a community charter case.
In 2004, U.S. District Judge Dale Kimball ruled, in a lawsuit also filed by the ABA, that the NCUA did not follow certain MSA standards in granting the six-county approvals to Tooele FCU, America First FCU, Goldenwest FCU and University of Utah FCU.
Tooele Federal Credit Union in Utah was forced to scale back its field of membership to one county after a lawsuit by the ABA challenged the NCUA's decision to expand Tooele's field of membership to six counties. The NCUA board granted Tooele's community charter at the same meeting that it granted the expanded FOM for Members 1st.
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