On Deadline

Register now

Court Rules Against Missouri CUs On FOM

JEFFERSON CITY, Mo.-In a ruling that could cause havoc among the state's biggest CUs and affect field of membership challenges across the country, a state court here ruled for the bankers and struck down the Missouri CU Commission's FOM rules that have allowed some of the most expansive community charters in the nation.

In its ruling, the Cole County Circuit Court overruled the CU Commission, made up by a majority of CU executives, to define what would be considered a valid geographic area for an FOM and asserted counties, townships, zip codes, area codes and even cities do not qualify under the state's statute-which is based on NCUA's-to delineate community FOMs.

In fact, the court found the CU Commission's working definition of the statute, which requires that community FOMs be delineated from "well-defined local neighborhood, community or rural district," do not meet the "plain and ordinary meanings of these words to be derived from the dictionary."

The Missouri Bankers Association and local banks had challenged the Commission's rulings in granting several of the biggest FOM grants ever in Missouri, several of which encompassed numerous counties and more than 1.5 million people.

Among the FOMs being challenged are those awarded to some of Missouri's biggest state-chartered credit unions, including First Community CU, Vantage CU, St, Louis Postal CU, St. Louis Telephone Employees CU, Alliance CU and Electro Savings CU.

Officials of the CU Division of the Missouri Department of Economic Development, which originally approved the disputed FOMs, did not return calls seeking comment.

Officials of the Missouri CU Association, also would not comment. But Roshara Holub, league president, issued a prepared statement indicating she expects the ruling to be appealed. "We are confident that the appellate court will overturn the circuit court decision and give due deference to the rulings of a regulatory commission authorized by state statute," said the statement.

In his decision, Judge Richard Callahan wrote the broad community grants awarded the state-chartered CUs did not fit the definitions of "well-defined," "local neighborhood" or "rural district," on which both the federal law and the state's, adopted in 1998 just before the passage of HR 1151, the CU Membership Access Act, rely to approve community FOMs.

In fact, in one disputed FOM awarded Springfield Telephone Workers CU (now called Telecom CU) that encompasses almost one million people in the telephone area code of 417, contains numerous municipalities that are distant and disparate, with constantly changing boundaries that lack "common interest," the judge wrote.

Another criteria used by the CU Commission to delineate community grants, a postal zip code, "is not a geographic area at all," said the judge.

Furthermore, Missouri's counties, said Callahan, "also have internal characteristics that show they do not all necessarily fit into the required statutory slots of neighborhood, community or rural district," because they have multiple municipalities, school districts, fire districts, legislative districts and media outlets. A city, the judge ruled, also cannot be considered a "rural district" or local neighborhood" because neighborhoods are primarily sub-areas of cities or towns.

"Because this court has found (the Commission's rules) to be invalid, the entire regulatory definition is declared null and void as illegal," wrote Judge Callahan.

-Ed Roberts

CUs Seek Carve-Out In Bill

WASHINGTON-The CU lobby was working last week to carve out an exemption for credit unions and banks from a host of new requirements that would be part of a new security bill.

NAFCU helped convince Rep. Vito Focella (R-NY) to propose the credit union carve out, then agree to withdraw the proposal after the House Commerce Committee to consider the carve out before passing it on to full House for a vote. The Commerce panel passed a bill quite different from a data security measure approved by the Financial Services Committee earlier.

The Commerce bill would create a number of new security requirements over users and brokers of personal information.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER