Court Ruling Jeopardizes Millions of Dollars in CU Investments

Published July 21, 2008, 9:51 p.m. EDT

Updated August 27, 2020, 1:08 a.m. EDT

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HARRISBURG, Penn. – With confidence they would prevail over the bankers in court, three area credit unions granted sprawling community charters by NCUA continued to build branches despite the possibility the federal court would find the new service illegal.

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So after the U.S. District Court struck down NCUA’s community charters yesterday, the question is whether the court will require those three credit unions – Members 1st FCU, AmeriChoice FCU and New Cumberland FCU – to divest those communities and shut down as many as 15 branches opened in those areas since then, at a cost of approximately $1 million per branch.

At a court hearing in January, representatives of the credit unions insisted they were not slowing down their expansion plans while the court challenge was ensuing.

Officials at Members 1st FCU and AmeriChoice FCU could not be reached for comment yesterday.

In delivering her ruling yesterday, U.S. Judge Yvette Kane gave each party 30 days to file their briefs suggesting a remedy in the case, which could include divestiture.

Judge Kane ruled that the six-county charter serving more than 1.2 million people surrounding the state capital of Harrisburg that was granted to Members 1st FCU in 2003, and later to AmeriChoice and New Cumberland, did not fit the definition of a “well-defined” community as required in the Federal CU Act. The suit was brought by the American Bankers Association and three area banks: The Legacy Bank, Adams County National Bank and Mid Penn Bank.

NCUA yesterday issued a statement emphasizing that the court decision only affected the three Pennsylvania credit unions and not its community charter regulations.

This is the fourth time NCUA has been admonished by a federal court for its field of membership approvals. “We hope that the court’s admonishment will compel the NCUA to be less self-serving in its regulatory oversight,” Ed Yingling, president of the American Bankers Association, said yesterday. “The ABA remains vigilant and will challenge the agency when necessary to defend the interests of our members.”