Ruling Could Help Banks Fight Credit Unions

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The Missouri Supreme Court's ruling last week that gave banks proper legal standing to challenge the policies of the state's credit union regulator could open the door for more appeals of decisions that have allowed credit unions to expand fields of membership.

Until now the Missouri Division of Credit Unions and the credit unions themselves have held bankers at bay by arguing that they do not have the standing to challenge field-of-membership rules, and state courts have agreed. The Credit Union Commission, a 5-year-old body that renders the final ruling on field-of-membership decisions, has followed suit and denied bankers the standing to bring administrative appeals.

But the state Supreme Court changed all that when it ruled that the Missouri Bankers Association and Century Bank of the Ozarks in Gainesville, representing the economic competitors of credit unions, can challenge a field-of-membership grant for Telcomm Credit Union in Springfield to serve almost 800,000 residents of the 417 area code. The case has been sent back to the Circuit Court of Cole County for a hearing on the merits of the bankers' appeal.

The ruling has broad significance for the ongoing battles in Missouri, which has awarded some of the country's largest community fields of membership, encompassing as many as six counties and as many as two million people.

"We now have the standing to appear before the court," said Max Cook, the president of the Missouri bankers group, which has filed more than a dozen appeals to field-of-membership 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. We'll have our day in court."

The courts will now decide whether the 417 area code qualifies as a "well-defined" community for the sake of the state's field-of-membership rules, Mr. Cook said.

The ruling mirrors a federal one in the landmark AT&T Family Federal Credit Union case. In that case, the district court denied the American Bankers Association's standing to challenge the National Credit Union Administration's multiple groups field-of-membership policy, but the U.S. Court of Appeals for the District of Columbia Circuit granted the bankers standing to mount a legal challenge. That case resulted in the nullification of the NCUA policy.

Don Ackerman, the president of Telcomm Credit Union, said last week that he expected to petition the state Supreme Court for a rehearing in the hopes of getting the decision reversed.

He noted, though, that the ruling does not affect the expanded field of membership approved for his $60 million-asset credit union but merely sends the case back to the lower court for an argument on the merits of bankers' challenge. In the meantime, Telcomm has been marketing to and accepting new members.

John Smith, the director of the Missouri Division of Credit Unions, said he did not know how the ruling would affect the deliberations of the Credit Union Commission, which has followed the precedent of the lower courts and refused the bankers' standing to bring administrative challenges.

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