New FOM Skirmish Emerges In Kentucky

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Another field of membership battle broke out here last week-making four different states where the bankers are taking the credit unions to court.

In the latest legal action brought by the banks to thwart credit unions, Home Federal Savings and Loan Association, of Covington, Ky., in concert with the Kentucky Bankers Association, filed suit against the state's Office of Financial Institutions challenging its community chartering powers for credit unions.

The suit, filed in Franklin Circuit Court, claims the state regulator proposed administrative rules which would expressly allow state-chartered credit unions to adopt community fields of membership-much like every other state allows-in violation of the state statute. Meantime, the OFI has been approving community FOMs for several years and has granted community FOMs for several credit unions, already, according to the suit.

In support of its argument, the local savings bank noted that without an explanation, the OFI withdrew the proposed rules allowing for community chartering after the Kentucky Bankers Association suggested they were not allowed under the state statute.

The suit asks the court to declare any community FOMs granted state-chartered credit unions to be voided, but allow any members who joined under the community grant to continue obtaining service from the credit unions.

Wendell Lyons, president of the Kentucky CU League, said he was aware of several state- chartered credit unions that have been granted community FOMs under the parity provisions of the state statute.

But the bankers claim the parity provisions of the statute do not specifically apply to field of membership, thus any FOM grants, as well as the community chartering rules that were being drafted by the state were invalid.

Lyons said they have been aware for some time that the Kentucky Bankers Association was preparing a legal action and had been shopping for a proper bank or thrift to sign on as a plaintiff to the suit.

Officials with the state refused to discuss the suit, but expressed optimism the court will side in its favor. "I'm not going to comment on the specifics of the suit, itself, just that we've received it and we're confident we will prevail in court," said Mark York, a spokesman for the OFI.

The bankers have filed more than 20 FOM suits against credit unions, with challenges pending in federal courts in Utah and Pennsylvania, and in state courts in Pennsylvania, Missouri, as well as Kentucky.

Lyons vowed to join the suit on behalf of the OFI. "We plan to wage a strong and vigorous defense," he said.

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