Mo. Banks Win Bid To Challenge CU's Field of Membership

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The state Supreme Court last week opened the door to bankers' appeals on field of membership by ruling that the bankers have proper legal standing to challenge rules and policies issued by the state's credit union regulator.

Up until now, the state regulator and credit unions have been able to hold the bankers at bay by arguing the bankers do not have legal standing to challenge FOM rulings and the state courts have agreed. The state Credit Union Commission, which renders the final ruling on FOM decisions, has followed suit and denied the bankers standing to bring administrative appeals.

But the Missouri Supreme Court changed all that last week when it ruled that the Missouri Bankers Association and Century Bank of the Ozarks, representing economic competitors of credit unions, have legal standing to challenge an FOM grant for Telcomm CU (formerly Springfield Telephone Employees CU) to serve almost 800,000 residents of the state's 417 telephone area code. The state high court sent the case back to the lower court for a hearing on the merits of the bankers' appeal.

"We now have the standing to appear before the court and argue the case, or cases," said Max Cook, president of the MBA, which has filed more than a dozen appeals to FOM grants in the past three years. "Had we not won this decision we would not have the ability to argue the merits of these cases. So, we're very pleased. So, we'll have our day in court."

"The court will now take a look and decide whether the entire 417 area code qualifies as a 'well-defined' community'," for the sake of the state's FOM rules, said Cook.

The state court ruling mirrors a similar ruling by the federal courts in the landmark AT&T Family FCU (now Truliant FCU) case in which the lower court denied the bankers standing to challenge NCUA's multiple groups FOM policy, but the federal appeals court ruled otherwise and granted the bankers standing to mount a legal challenge. That case resulted in the nullification of NCUA's FOM policy, which necessitated the legislative campaign surrounding HR 1151.

Petition Recommended

Don Ackerman, president of Telcomm Credit Union, said last week he expects to petition the state Supreme Court for a rehearing of the case in hopes of convincing them to reverse their decision.

"That's what our attorney has recommended we do," he said.

The court ruling, noted Ackerman, does not affect the expanded FOM approved for his $60-million credit union yet, but merely sends the case back to the lower court for an argument on the merits of the bankers' challenge. In the meantime, his credit union has been marketing to and accepting new members from the expanded FOM.

John Smith, director of the state's CU Division, said he did not know how the court ruling will affect the deliberations of the CU Commission, which has followed the precedent of the lower courts and refused the bankers standing to bring administrative FOM challenges.

The ruling has broad significance for the ongoing FOM battles in Missouri, which has awarded some of the largest community FOMs in the country, some encompassing as many as half a dozen counties and as many as two million people. The Missouri Bankers Association has been frustrated in every one of the more than a dozen challenges it has filed appealing FOM grants. Last week's court ruling, noted Cook, grants not only individual banks, but the MBA as their representatives, legal standing now to bring those appeals.

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