The Kentucky Court of Appeals has ruled that six state-chartered credit unions with community charters will not be permitted to expand their fields of membership.
In a ruling last week, the court said that state law forbids state-chartered credit unions to have community charters and that such charters already granted by the Office of Financial Institutions to at least six credit unions are void. The credit unions will be allowed to retain members already accepted under their community charters but may not accept new ones.
The case was initially filed by Home Federal Savings and Loan, which had protested a rival credit union's expansion. The ruling is the third in the past four months favoring bankers and adds to the list of credit union defeats on field of membership.
In June, a federal court in Pennsylvania struck down three broad community charters granted by the National Credit Union Administration, then two months later a state court ruled against community charters granted by Pennsylvania regulators. In recent years courts in Utah and Missouri have also struck down credit union charter grants.
The credit unions and the state regulator are exploring their options, which include appealing to the state Supreme Court, seeking legislation to authorize community charters, or having the handful of affected credit unions convert to federal charters to let them serve geographic areas. Twenty-six of the 95 credit unions in Kentucky have state charters.
Wendell Lyons, president of the Kentucky Credit Union League, said it will be talking with the credit unions and the state regulator to coordinate a strategy. "I can't believe there is not a solution in sight legislatively," he said. "I think ultimately that's where this thing is headed."
