Even though oral arguments have now been aired, it could take six to nine months before the Kentucky Supreme Court issues a ruling on a long-standing banker-backed court challenge to field of membership rules impacting Kentucky credit unions, attorneys reported this week.

The case, Home Federal Savings & Loan vs. Kentucky Department of Financial Institutions, with six CUs as defendants, is being watched closely by legal teams representing CUNA and the Kentucky Credit Union League for signs how the court might decide the 2006 suit dealing with geographic definitions.

The Kentucky case, involves a lower court ruling supporting banker claims that the DFI lacks authority under Kentucky law to approve geographic FOM bylaws for Kentucky CUs.

"We've long argued that the logic of the lower court is absurd" in misinterpreting a statute approved by the legislature outlining SEG, community and common bond boundaries for the DFI in passing on CU applications," said attorney David Wilson, representing the six CUs and a partner in Skeeters, Bennett, Wilson & Pike.

The Home Federal complaint, with backing of the American Bankers Association, argues the statute does not mention geography and therefore the agency erred in approving FOM expansion.

Though the FOM circumstances differ, the Kentucky case parallels a Pennsylvania case, favoring CUs, in which the Pennsylvania Commonwealth Court supported that state's Department of Banking's approval of community charter conversions by relying on NCUA's "well-defined" community definitions.

Instant Insights /

Kentucky FOM Ruling Likely Still Months Away

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