NCUA directed three Utah credit unions to virtually cease taking new members because of a federal court ruling invalidating their community charters.
The federal regulator also directed Tooele FCU to revert to its previous one-county charter, because the controversial six-county charter it and the three other credit unions were granted was put in limbo by the court ruling.
NCUA General Counsel Robert Fenner said the agency thought an immediate halt to new member recruitment in the contested fields of membership was the most prudent course of action in light of the ruling by the U.S. District Court for the Eastern District of Utah invalidating the controversial FOMs. The agency, he said, is working with the three credit unions-America First FCU, Goldenwest FCU and Utah Community FCU-to create an interim field of membership so they can continue signing new members, but those credit unions were directed by NCUA to immediately halt taking any new customers that aren't family members.
"We are working with them to put an FOM in place," Fenner said, adding that approval of an interim FOM for the three credit unions should be a "matter of days" instead of a "matter of weeks or months."
NCUA granted the three credit unions the controversial community charters in the spring of 2003, just days after approving it for Tooele FCU while the state's legislature was debating taxing large credit unions. This allowed the three credit unions' to escape the tax trap by converting to the tax-exempt shield of the federal charter. While the Tooele FCU application was reviewed in a public meeting by the NCUA Board because of its precedent-setting nature, it allowed NCUA's regional office to then approve the three other applications, part of those credit unions' request to convert to federal charters, behind closed doors because the precedent had already been approved with Tooele FCU.
Fenner said the agency was reviewing its option on the court's ruling, including whether to have the NCUA Board reconsider the six-county FOM after further study by the region to build a greater case that the area qualifies as a single community under the Federal CU Act or whether to appeal the court's ruling.
In its Dec. 9 ruling the court sided with the Utah Bankers Association and the American Bankers Association that a broad six-county community encompassing more than 1.4-million people-or two-thirds of the state's population-awarded Tooele FCU violated provisions of the FCU enacted under HR 1151, the 1998 CU Membership Access Act. Specifically, the court ruled that in granting the broad community-at the time the largest ever awarded a federal credit union-NCUA failed to prove that: the area qualified as a "well-defined local community"; that geographic boundaries were not clearly defined, and that the residents of such communities have common interests or interact.
