Trades Decide to Intervene in ABA vs. NCUA Pa. Lawsuit; CU Parties Confident

WASHINGTON-CUNA, NAFCU, and the Pennsylvania Credit Union Association have announced that they intend to apply to intervene on behalf of NCUA in the American Bankers Association's lawsuit challenging three Pennsylvania community charters. After backing down on a simultaneously filed lawsuit in Utah over the ability of non-multiple group credit unions to adopt underserved areas, NCUA and the trades appear determined to fight the ABA's challenge of the agency's approval of a six-county area plus one town involving three metropolitan statistical areas and over one million residents for $1 billion Members 1st FCU and subsequent approvals of the same area for $100 million AmeriChoice FCU and $78 million New Cumberland FCU. NCUA changed its Field of Membership and Chartering Manual a couple years ago to allow credit unions to rely on previous determinations of well-defined communities rather than requiring subsequent applications to provide duplicate proof of the same community. Members 1st CEO Bob Marquette also recently said his credit union will be intervening as well. AmeriChoice Federal Credit Union CEO Kipp Stecher said his credit union has not hired outside counsel to intervene but is working with the PCUA. “We met in Harrisburg with all the attorneys involved.and they laid it all out that this is quite different from the [Tooele] case,” he commented, adding, “I think it's more of a harassment thing than anything else.” Bingham McCutchen LLP Partner Paul Lambert-who is no stranger to credit union litigation-said he expected to file the documents to intervene some time last week. “We've never been precluded from intervening in one of these cases,” he stated. The credit union trades are eligible to intervene because they have a stake in the case and have different interests in its outcome. NCUA, the trades, and credit unions cannot supplement the information because the facts of the case must stick with the credit unions' original package used to determine the existence of a community, Lambert explained. What they can do is “argue the significance of the information,” he said. If the judge at this point in the case does not invalidate the case, the intervenors have another defense strategy. “On top of that issue is the laches defense where you assert that the other side waited too long to bring action,” Lambert said, pointing out that it had been more than two years since Members 1st was approved for the community charter and it relied on the validity of the agency's decision. The filing deadline in the case is Feb. 6 and a hearing date has not been set, according to the attorney. Lambert said there will be a conference in mid-February between the court and the parties to determine how the case will proceed. Marquette has said his credit union's application was two-and-a-half years in the making and he is “very, very, very confident” about it. According to CUNA General Counsel and Executive Vice President Eric Richard, CUNA and the PCUA decided to intervene so credit unions can continue to rely on the decisions of the agency. “NCUA has the right to act on its own discretion and independently in determining what works best for the credit unions that it regulates, and must continue to have that right into the future,” Richard said. “The criteria for defining a local community have been upheld by the courts, and the agency must have the right to apply these criteria in reasonable ways.” “What's at stake is the authority of NCUA to make decisions that it believes are appropriate for credit unions and the ability of credit unions to rely on those decisions when they move forward with expansions into approved areas,” NAFCU Director of Regulatory Affairs Carrie Hunt said. “These three credit unions have acted in good faith, expending significant resources in new infrastructure to serve their members. Their rights should be protected.” PCUA Senior Vice President of Communications Mike Wishnow agreed, “The reason we chose to intervene was to support NCUA's decision in this case. We feel it's imperative that NCUA-and the state regulators for that matter-be able to use its discretion.” He added that NCUA has a strong case and “gave due and appropriate” attention to the community charter applications. In the last couple of years, Members 1st has made significant investments in the approved areas, including marketing, branches, ATMs, and expanded phone and computer systems, according to Marquette. AmeriChoice's Stecher commented, “We got the community charter this past September. We haven't acted upon it yet.” The credit union had originally planned to begin expansion after the first of the year but that was halted when the lawsuit was filed. AmeriChoice sought the community charter in order to grow and expand its service. Calls to New Cumberland FCU CEO Donald Varner seeking comment were not returned. As intervenors, the trades and credit union take on the same benefits and risks as the defendants. According to CUNA's Richard, the trades weighed the positives and negatives of intervening and the key downside is the expense and commitment of resources. On Nov. 1, 2005, the week of the House Ways and Means Committee hearing on the credit union tax-exemption, the ABA, the Credit Union Strategies Task Force of Pennsylvania (a group of 275 Pennsylvania banks), and Legacy Bank filed suit against NCUA. -

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