Credit Union Agency Will Continue to Allow 'Multiple Group' Expansion

The National Credit Union Administration will continue to allow occupation-based credit unions to expand by accepting members from unrelated companies, despite a recent court decision rejecting this practice.

"We believe that the multiple group policy remains legally sound and operationally critical," NCUA Chairman Norman D'Amours wrote in an Aug. 6 letter to credit unions.

On July 30, the U.S. Court of Appeals for the District of Columbia said the agency overstepped its authority when it allowed AT&T Family Federal Credit Union to accept as members people who work for other, unrelated companies. AT&T Family, based in Winston-Salem, N.C., has roughly 300 so- called "select employee groups" in 50 states. Only eight of those groups represent employees of AT&T or its subsidiaries. If the credit union is forced to divest unrelated employee groups, it would lose 108,000 of its 150,000 members.

Mr. D'Amours said his agency, which is expected to appeal the decision, will maintain business as usual for at least the next month. In mid- September, the trial court is expected to announce which employee groups AT&T Family must divest. Experts have estimated last week's appeals court decision could result in the dismantling of 2,000 occupation-based credit unions with unrelated employee groups.

The case was filed in 1990 by five North Carolina banks and the American Bankers Association. Bankers this responded with disbelief to the NCUA's business-as-usual approach.

"I'm incredulous that they would do this in the face of a unanimous decision of a three-judge panel," said James M. Culberson Jr., ABA president and chairman of First National Bank and Trust Co., Asheboro, N.C. "It's like the speed limit's been set at 65, but NCUA doesn't care if it goes 85."

Credit union industry executives, on the other hand, hailed the regulator's stance.

"It avoids disruption to credit unions and their members while the issue is still being contested," said Kathleen Thompson, senior vice president of the Credit Union National Association. "It keeps a process going that we firmly believe is legally valid."

Mr. Culberson said that the ABA is contemplating asking the courts to block the approval of credit union applications seeking expansion under the "multiple group" policy. Last week's court ruling provides bankers with powerful legal ammunition in any attempt to stop such approvals, said Michael F. Crotty, the ABA's deputy counsel for litigation.

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