HARRISBURG, Penn. – In a scenario reminiscent of recent court challenges, lawyers for banks argued in federal court Friday that NCUA overstepped its legal boundaries when it approved a sprawling, six-county area covering more than 1.1 million people as a “well-defined, local community” for a nearby credit union.
The courtroom showdown focused on the term “local,” which was added in 1999 to NCUA’s rules defining boundaries for community charters.
Washington attorney David Overstreet, representing the American Bankers Association, told the judge in awarding the broad community charter to Members 1st FCU, NCUA illegally combined two separate communities connected by Pennsylvania’s Interstate-83–those surrounding Harrisburg and York–and approved it as a single, well-defined, local community. “NCUA’s acceptance of two areas as one is arbitrary and capricious,” said the bankers’ lawyer, calling the resulting field of membership “a barbell with two independent ends.”
But Eric Womack, a Justice Department attorney representing NCUA, told the judge the credit union regulator conducted a comprehensive review of the proposed community, even requiring the $1.2 billion credit union to reduce its area because the original proposal did not meet the agency’s own standards for a distinct community. “You can see a consistent effort by NCUA to whittle this down, or at least make some effort to make it consistent with agency policy,” said Womack.
The ABA, along with the Pennsylvania Bankers Association and the Pennsylvania Association of Community Bankers, have asked the U.S. District Court for the Middle District of Pennsylvania to set aside the community charter granted by NCUA to Members 1st FCU, as well as the same community charter subsequently granted to New Cumberland FCU and AmeriChoice FCU.
The battle over community chartering boundaries is similar to courtroom challenges fought in recent years between the bankers and credit unions in federal court in Utah, state courts in Missouri and Virginia, and another ongoing case in Pennsylvania.
Robert Marquette, president of Members 1st FCU, who watched last Friday’s argument, said his credit union has not slowed its expansion plans to see how the case turns out. “We’ve kept on going straight ahead. We haven’t paused one bit. We’ve taken the agency’s (NCUA) decision and acted in good faith,” he told The Credit Union Journal after Friday’s court session.
