Credit Union Switch Hits Snag
In an unusual regulatory conflict, the Massachusetts Division of Banks has issued an order aimed at stopping Postal Community Credit Union from pursuing its plans to convert to a federal savings bank.
The order, obtained by The Credit Union Journal, prohibits the $141 million-asset credit union from taking any action to change its corporate structure, communicating to members, or holding any meeting of the board or management without written approval of the state regulator.
The order asserts that the credit union is “acting in an unsafe and unauthorized manner by pursuing such a purported conversion without performing or undertaking a complete analysis of its financial, tax and member services implications.”
Officials in the Massachusetts Division of Banking refused to comment on the matter because the credit union, formerly known as Boston Post Office Employees Credit Union, has filed suit in state court to overturn the regulatory directive.
Credit union officials did not return calls seeking comment.
But documents filed in Suffolk County Superior Court in Boston explain that the credit union is seeking a thrift charter because its management and its board have grown frustrated with the state’s lengthy delays on its application to expand to a community field of membership. That application was filed in the spring of 2001 and the comment period expired a few months later, in August. But state regulators, which have also delayed applications of several field-of-membership expansions, have yet to rule on the bid.
Complicating the latest application for a thrift charter is the fact that Massachusetts law does not authorize the conversion of a state-chartered credit union to a federal savings bank. Though more than 20 credit unions have converted to either state or federal thrift charters since 1996, none have been in the Bay State.
In its suit, the Postal Community Credit Union claims that state law does not prevent a credit union from converting to a federal credit union charter and then to a mutual savings bank. However, the National Credit Union Administration has so far refused to give the credit union a preliminary determination to allow it to proceed with the bid.