High Court To Rule On Credit Union Membership

The Supreme Court agreed Monday to decide whether credit unions may serve employees at more than one company.

The justices' decision to hear the AT&T Family Federal Credit Union case could cool congressional interest in the common bond controversy.

"This could cause a Congress reluctant to take up this issue to move a bit slower," Rep. Jim Leach, chairman of the House Banking Committee, told reporters after at speech at a Credit Union National Association conference.

Oral arguments are expected in late October and a ruling could come in January. The case affects 3,586 occupation-based credit unions, which serve nearly 33 million consumers.

Credit unions had urged the justices to accept the case, hoping to overturn a federal appeals court decision requiring all members of a credit union to share a single, common bond.

"We are obviously very pleased," AT&T Family president Marcus B. Schaefer said. "We expect the justices to find that the Federal Credit Union Act is intended to grow and help credit unions. We need a competitive financial marketplace that includes all types of providers, including credit unions."

"This is indeed a happy moment," said Norman E. D'Amours, chairman of the National Credit Union Administration. "Frankly we are gratified, but I don't think our lawyers are terribly surprised."

Five North Carolina banks and the American Bankers Association sued the NCUA in December 1990 for allowing AT&T Family to serve employees at more than 150 companies. The federal appeals court in Washington sided with the bankers in July 1996.

Banking industry officials said they were disappointed by the court's decision to hear the case, but they predicted an eventual victory.

"We are right," said Michael F. Crotty, deputy general counsel for litigation at the American Bankers Association. "The law says what it says."

James M. Culberson, president of First National Bank and Trust Co. in Asheboro, N.C., one of the original plaintiffs in the case, said he was disappointed because the decision gives credit unions another year to compete head on with his institution.

Brenda S. Furlow, CUNA's acting general counsel, said her group will ask the federal appeals court here to let credit unions temporarily add new companies to their fields of membership.

U.S. District Judge Thomas P. Jackson ruled in October that credit unions could not expand their fields of membership and the appeals court agreed with him in December. But the appeals court said it would reconsider if the Supreme Court agreed to hear the case.

Credit unions will continue to be allowed to add members from all companies within their current fields of membership until the case is decided.

Banking and credit union officials on Monday pledged to push for legislation, even though they conceded it was an up-hill struggle. "The fact that the Supreme Court has agreed to hear the case makes congressional action this year less likely," said Edward L. Yingling, the ABA's chief lobbyist. "Members of Congress are reluctant to take on this issue because of its controversy."

"There is less of a crisis attitude and members of Congress don't like to choose among their constituencies," Mr. Schaefer of AT&T Family said.

Still, CUNA president Daniel A. Mica vowed to continue the fight. "We absolutely will move forward on the Hill," he said. "We will try to do it with even greater urgency than before."

The lobbying will serve as an insurance policy in case credit unions lose the appeal, he said. "Our goal should be if they rule against us, the next day we have a bill with 218 co-sponsors ready," he said.

Mr. Mica refused to identify any lawmaker who has agreed to back CUNA's legislative initiative. "There's no sense making our friends into targets for our opponents," he said.

Credit union groups ran an ad in the Capitol Hill newspaper Roll Call on Monday citing research showing that 85% of consumers support legislation allowing anyone to join the nonprofit financial institutions.

Mr. Yingling, although he doesn't expect legislation to pass this year, said the banking industry will press lawmakers on the common bond issue. "Our No. 1 goal this year is to have Congress take a good look at what is going on in the credit union industry and for the first time Congress is doing that," Mr. Yingling said. "The more discussion about the issue, the better it is for us."

A coalition of banking trade groups ran a full-page ad Monday in Roll Call questioning the tax exemption for credit unions, which it says costs the Treasury Department $1 billion a year. The coalition also sent a letter Monday to members of Congress urging them to oppose the Credit Union Membership Access Act. Finally, it wrote 6,000 credit unions on Friday to explain that bankers are only battling large institutions that serve employees at multiple companies.

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