Special Report: HR 1151 Turns Five

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A look at the events that led up to the passage of HR 1151.

1990. Jim Culberson, president of First National Bank & Trust, Asheboro, N.C., convinces four other banks and the American Bankers Association to file a lawsuit against NCUA. The suit argued that AT&T Family FCU of Winston- Salem, N.C., should not have been permitted to take in small employee groups not related to the telephone industry, and challenged NCUA's interpretation of "common bond" as defined by the 1934 FCU Act.

August 1991. U.S. District Court for the District of Columbia dismisses the AT&T case based on "standing." The bankers appeal the decision.

April 1993. The District of Columbia Appeals Court reverses the District of Columbia Court ruling in the AT&T case on "standing." Case sent back to the District Court to determine whether the FCUA permits select employee groups (SEGs) for FCUs.

1993. In early 1993, the Utah Bankers' Association files a suit in the Third Judicial Court of Salt Lake County against 16 named CUs, unnamed CUs that serve more than one county, one CUSO and the Utah Commissioner of Financial Institutions. The suit sought to limit the membership base of community-chartered institutions to one county, claiming shared service service centers violate those limits. Utah District Court dismisses argument against shared service centers, upholds commisioner's decision OK'ing them.

Sept. 16, 1993. Financial Institutions for Tax Equality (FITE), a group of six Montana banks and one thrift, files suit in federal court against NCUA over its past approvals of FOM expansions for Missoula FCU. The complaint seeks to rescind all expansions granted to the now community-chartered credit union since 1974.

Oct. 18, 1993. Nebraska Bankers Association and two western Nebraska banks file suit in state court seeking a reversal of an FOM expansion for Western Heritage Credit Union, which has a community FOM.

1994. A Murfreesboro, Tenn. bank and the Tennessee Bankers Association file suit alleging that NCUA improperly approved a number of FOM expansion requests unrelated to AEDC FCU's original membership base. The judge affirmed the bankers' right to sue, but ruled in favor of NCUA and the credit union group. (The bankers appealed decision to the Sixth Circuit Court of Appeals, which issued a 2-1 decision in favor of the bankers on April 14, 1997, but the matter became moot with the passage of HR 1151.)

July 27, 1994. Texas Bankers Association, the Independent Bankers Association of Texas and six Houston banks file suit in the D.C. federal district court against NCUA over FOM expansions granted Communicators FCU. The complaint also cited an association group of all persons aged 50 years and older living within 25 miles of CFCU as too broad, which won sympathy among some credit unions. The case was assigned to the same judge who decided the FOM case involving AT&T Family FCU, Judge John Pratt.

September 1994. U.S. District Court for the District of Columbia rules in favor of NCUA and credit unions in the AT&T Family case and upholds NCUA's policy allowing SEGs. The bankers appeal.

Sept. 26, 1994. Maine Bankers Association files lawsuit in the Superior Court of Kennebec County appealing an order issued by the Maine Bureau of Banking regarding FOM expansions granted Saco Valley CU.

Nov., 3 1994. The Maine Bankers Association files second lawsuit against the Bureau over its approval of a request by the University of Maine CU to add the 40 employees of a local company. In that case, the same judge ruled that the bankers did not have standing to sue and dismissed the case.

Dec. 5, 1994. Sixth Circuit Court of Appeals issues decision affirming the NCUA's granting of a community field- of-membership expansion for Portland FCU. The bankers choose not to appeal the decision.

May 31, 1995. Judge John Pratt issues a split decision in the Communicators FCU (Texas) case. He once again affirmed the NCUA policy permitting multiple groups within one FOM, but rules NCUA acted improperly in permitting CFCU to add the retiree group.

December, 1995. Five banks, the Independent Bankers of Colorado and the Colorado Bankers Association file suit against the Colorado Financial Services Board and Gates Credit Union over November 1995 decision to approve expansion of Gates CU's FOM.

February 1996. Wisconsin's bankers file suit, claiming that Countryside CU was improperly organized and approved for share insurance because it receives support from the government subsidized Farm Credit Agencies (which it wanted to serve). (On Sept. 30, 1996 President Clinton signs legislation that appears to prohibit Countryside from operating as structured. Countryside withdraws application)

July 1996. The U.S. Court of Appeals holds that FCU Act does not permit a multiple group FOM and that all members must share a single common bond.

July 1996. Banks in Texas file lawsuit involving a new state-chartered credit union, Southside CU, and its charter to serve Southside's low-income community. The suit attracted significant negative media attention for banks.

October 1996. U.S. District Court issues a nationwide injunction prohibiting the addition of SEGs and prohibiting FCUs from offering new memberships to people in existing SEGs. CU trade groups say credit unions turning away more than 4,000 applicants each day.

October 1996. Maine Supreme Court rules in favor of FOM granted Saco Valley CU, saying regulator could conclude that the commonality between two FOMs within a single well-defined community is equal to the commonality within each separate field.

November 1996. AT&T Family case appealed to U.S. Supreme Court. CUNA and NAFCU joine forces to form Credit Union Campaign for Consumer Choice.

Dec. 24, 1996. Court of Appeals issues a partial stay on the nationwide injunction, allowing CUs to admit new members from all existing SEGs; prohibition remains against adding new SEGs.

November 1996. Bankers file motion for enforcement of Judge Jackson's Oct. 25 order, claiming that an interim regulation issued by the NCUA violates the judge's order because there was no proper notice and comment.

Dec. 4, 1996. Judge Jackson denies credit unions' motion for a stay of his October order pending appeal, and grants bankers' motion for enforcement of that order, finding that IRPS 96-2 violated the law and his order. NCUA, CUNA and NAFCU file a motion for stay in the D.C. Circuit Court and appeal the Oct. 25 order as well.

Dec. 24, 1996. D.C. appellate court grants the credit unions' motion for a stay in part, permitting FCUs to add members of previously approved groups.

Jan. 31, 1997. Court dismisses the Colorado case against Gates CU. Bankers appeal, file a second case involving Longs Peak Credit Union.

January 1997. State regulators in Virginia and Oregon apply the federal injunction against state-chartered CUs.

Jan. 16, 1997. Texas bank and several bank trade associations file suit against the NCUA in federal district court in D.C., over FOM granted Red River Employees FCU.

Feb. 24, 1997. U.S. Supreme Court agrees to hear NCUA's and the CUs' appeal of the lower court's ruling.

March 20, 1997. Credit Union Membership Access Act, H.R. 1151, introduced by U.S. Reps. Steven LaTourette (R- OH) and Paul Kanjorski (D-PA). The original bill is one sentence long.

May 12, 1997. Consumer Federation of America and U.S. Public Interest Research Group and others file amicus briefs with the Supreme Court on behalf of CUs.

July 1997. HR 1151 adds its 100th co-sponsor.

July 7, 1997. Two credit union "members" file a lawsuit against the Missouri regulator and Mid-Missouri CU claiming MMCU's FOM violates Missouri CU laws in ways that harm them as members and taxpayers.

Oct. 6, 1997. AT&T Family case argued in the U.S. Supreme Court. Separately, ABA and the California Bankers Association file suit in D.C. against NCUA regarding Point Mugu FCU's conversion from a multiple group to a community charter. Banks further claim NCUA's description of Ventura County as predominantly white and middle class means NCUA and the credit union are "red- lining" and violating the Equal Credit Opportunity Act. Also challenge "once a member, always a member" policy.

Feb., 24, 1998. Speaker of the House Newt Gingrich announces before a roaring crowd at CUNA's GAC that he will sign on to H.R. 1151 as a cosponsor. Later that day, the Campaign delivers petitions with 2.4 million signatures in support of HR 1151.

Feb., 25, 1998. U.S. Supreme Court rules against CUs.

March 11, 1998. House Banking Committee holds hearings on the credit union membership issue.

March 26, 1998. Thirty-four pages of amendments added to HR 1151 by House Banking Committee. Amendment to stop member business loans is defeated 27-25, before bill passes committee unanimously. Senate Banking Committee holds hearings on FOM issue.

April 1, 1998. House voted overwhelmingly, 411-8, in favor of HR 1151.

April 30, 1998. The Senate Banking Committee reported out H.R. 1151, just 29 days after the House passed the bill and only after Chairman Sen. Alfonse D'Amato breaks 9-9 tie vote on amendment to require CUs to comply with CRA. D'Amato votes against amendment. An additional 59 pages of language are added to the legislation.

July 14, 1998. More than 6,500 credit union supporters show up on short notice for a rally in favor of Senate passage of HR 1151.

July 28, 1998. The Senate votes by a margin of 92-6 in favor of HR 1151.

Aug. 7, 1998. President Clinton signs HR 1151 into law.

August 1998. NCUA calls special meeting to issue for public comment amendments to its FOM and Chartering Manual based on the new provisions in HR 1151.

September 1998: CUNA forced to suspend its new "Deduct-A-Buck" program until it gets a legal opinion from FEC officials on its permissibility.

September 1998: NCUA approves a new member business lending rule that enables federal credit unions exceeding the new MBL limits in HR 1151 to apply for waivers.

October 1998. California league erects billboards thanking three members of Congress for supporting HR 1151.

November 1998. Credit unions begin to emerge as stronger force during political campaigns. New Jersey passes parity bill for state charters to have same FOM powers as federal charters.

November 1998. Three staunch CU supporters in Congress lose races: Alfonse D'Amato (R-NY), Lauch Faircloth (R-NC) and Carol Moseley-Braun (D-IL).

November 1998. A court rules against Utah's credit unions in a lawsuit filed by banks over FOM. An injunction goes against nine credit unions, which are to be limited to one county.

Dec. 18, 1998. NCUA board gives federal credit unions the go-ahead to once again add new SEGs to their FOM and approves final amendments to its FOM and Chartering manual effective Jan. 1, 1999. CUNA reports credit unions added 4.1 million members during 1998.

December 1998. Utah's CUs race to get 35,000 names on a petition to force the legislature to consider a bill reversing a ruling limiting community CUs to one county. A group calling itself Utahns for Fair Taxation launches newspaper attacks on CUs. D. Michael Riley, former director of E&I at NCUA, says, "I think a lot of things coming out of HR 1151 are really very bad for credit unions." ABA files suit challenging NCUA's new FOM rule.

January 1999. Independent Bankers Association of America joins ABA and America's Community Bankers in suing NCUA, claiming its new FOM rules are too broad. NCUA asks court to dismiss suit. ABA announces it is considering a separate lawsuit in connection with a CUNA request to allow CUs to serve people outside their FOM for the purpose of offering Treasury's Electronic Transfer Account to the underserved.

February 1999. NCUA Chairman Norman D'Amours and fellow board members Yolanda Wheat and Dennis Dollar are called before the House Banking Financial Institutions Subcommittee to testify on NCUA implementation of new FOM rules. D'Amours had voted against the proposal. NCUA OK's biggest ever FOM grant for First Service FCU, Grove Port, Ohio, to serve more than one-million people in Franklin County, Ohio.

February 1999. ABA President R. Scott Jones tells The Journal, "I think if credit unions above a certain size were to agree to be taxes, most of this argument would go away."

March 10, 1999. Court denies ABA request for injunction that would block enactment of NCUA's new FOM rules. In Washington, Rep. John LaFalce (D-NY), a critic of NCUA, says he'll introduced a bill aimed at helping small CUs, since NCUA's "new FOM rules foster a climate favoraing expansiveness and large credit unions."

March 1999. Utah legislature unanimously passes bill that reduces the blow from court ruling banning multiple- county FOMs. Network FCU, Las Vegas, approved for community charter to serve 1.2 million people.

April 1999. Through the first 12 weeks of 1999, NCUA says it OK'd 4,125 SEG additions representing 316,352 potential members.

May 1999. CUNA calls on Congress to roll back the MBL cap in the CU Membership Access Act. NCUA rejects a request from Bellco CU to expand to serve 2.2-million residents of greater Denver. Connecticut passes FOM parity legislation for state charters. PCA system proposed rule issued. Final MBL rule issued.

July 1999. In a sign of things to come, at least six state-chartered CUs are approved to serve the 1.2-million residents of Sacramento County, Calif. But NCUA rejects requests from three CUs seeking a four county area in central New York.

August 1999. The Credit Union Journal reports increasing number of CUs requesting NCUA delete FOM exclusionary clauses from their charters.

September 1999. Proliferation of community chartered CUs leads America's Community Bankers to call on the Treasury to reconsider credit union tax exemption. CUNA reports that 571 credit unions changed names in 1998. In California, Gov. Gray Davis signs bill permitting state charters to serve member groups outise the U.S.

September 1999. Despite HR 1151, The Credit Union Journal reports that dozens of federal credit unions have opted to switch to a state charter.

November 1999. An investigation by The Credit Union Journal discovers NCUA has failed to publicly disclose dozens of conversions by FCUs to community charters.

Jan. 1, 2000. Y2K arrives. World doesn't end.

January 2000. NCUA approves largest SEG addition ever, 10,000 employees of Worldwide Flight Services, for OmniAmerican FCU, Ft. Worth, Texas.

February 2000. For the 1998-99 election cycle, the Credit Union Legislative Action Committee reports it made a record $1.2-million in donations to candidates. Separately, the Utah League of CUs estimates 300 people per month are being turned away from Utah state charters. PCA final rule issued.

March 2000. In California, Telesis CU applies for a community FOM encompassing more than 20-million people. Bill in Calif. General Assembly proposes applying CRA to credit unions.

April 2000. Federal appeals court dismisses bankers' challenge to NCUA FOM rules; ABA vows it will appeal.

May 2000. A Dallas roundtable of managers of small credit unions pledges to fight expansion plans by larger CUs. Meanwhile, CUNA announces creation of Renaissance Commission, whose agenda will include issues related to spiraling growth. In Washington state, two CUs announce plans to conver to mutual savings banks.

May 2000. ABA appeals dismissal of case.

June 2000. NCUA announces an expedited process for adding SEGs. NAFCU, CUNA support legislation adjusting the MBL cap in HR 1151.

June 2000. Legislative advisory committee to Texas CU Commission recommends prohibition on combining associational or occupational charters with community charters.

July 2000. Independent Community Bankers of America drops out of appeal of dismissal of case against NCUA. Missouri CU Commission approves three community charters of more than one- million people. NCUA announces it will process all SEG apps of 500 people or fewer in five days or less.

August 2000. PCA system implemented.

October 2000. NCUA amends its 20-month-old FOM rules to add the Community Action Plan (CAP), derided by critics as "CRA-lite" for credit unions. Ground is broken on Credit Union House in Washington, D.C.

October 2000. NCUA reports 40 low-income FOM expansions for the first nine months of 2000.

November 2000. CULAC reports making $1.7 million in political donations during just-completed election cycle. Five Utah CU reps win in races for the statehouse.

December 2000. Missouri Bankers Association, which has been aggressive in its attacks on credit unions, forces Alliance CU to withdraw an application for a new FOM.

January 2001. NCUA Chairman Norm D'Amours leaves board with appointment of Geoff Bacino. Treasury study on CUs, mandated by HR 1151, comes out but makes few major suggestions for legislative or regulatory changes.

February 2001. Utah CUs try to pass two bills to ease the FOM and MBL restrictions imposed in 1999.

Feb. 15, 2001. Dennis Dollar named NCUA chair. Patelco CU seeks community FOM of seven-million.

April 2001. Missouri Bankers Association files its seventh appeal challenging state-chartered credit unions' expansions as approved by the state regulator.

May 2001. ABA files brief challenging NCUA's FOM and chartering manual.

June 2001. NCUA reports OK'ing 32 expansions covering nearly 1.5 million low-income residents in one month.

September 2001. ABA argues in federal appeals court that NCUA violated the intent of HR 1151 by manipulating restrictions of SEGs.

October 2001. NCUA rejects two separate bids for community FOM requests that would have covered 2.3-million residents in Miami/Dade County, Fla. Missouri regulators approve 1.6-million resident FOM despite the threat of challenge.

November 2001. Appeals court rules against ABA challenge to NCUA's FOM regulations; ABA says it won't appeal the decision.

December 2001. NCUA board votes to repeals CAP.

February 2002. Missouri Bankers Association denied standing to challenge the state's FOM standards; vows to appeal. NCUA opens door to let credit unions provide certain services to non- members within their FOMs, a move expected to create more tension with bankers.

March 2002. Reg relief bill that would roll back several restrictions in HR1151-such as not allowing an FCU to retain its SEGs when it converts to a community charter and the 12.25% MBL cap- is introduced in the House.

July 2002. Michigan legislature considers law that would eliminate the "common bond" requirement for CUs.

October 2002. Minnesota state regulators approves an FOM expansion covering 1.1-million residents in three counties, the largest FOM granted since the state adopted new community chartering allowances.

November 2002. NCUA proposes new changes to FOM rules that woud allow single-sponsor FCUs to serve entire trades, industries or professions (so-called TIPs) within their geographic service area.

December 2002. In Utah, the Resolution Alliance for Strong Banks & Credit Unions emerges. Dubbing itself an "honest broker," all funding is from Utah banks.

January 2003. Utah bankers back legislation to impose tax on state credit unions. Michigan league works on CU reform bill that would allow credit union boards to establish their own FOMs, with the state regulator having the authority to reject the FOM only on the basis of safety and soundness. University of Iowa Community CU announces plan to buy a community bank, sparking controversy-and a debate about taxing CUs-in the state.

February 2003. CU tax bill passes Utah House and heads for Senate. Arizona Legislature considers reg relief bill that wuold allow CU boards to determine new additions to FOM without having to apply for the state's blessing.

March 2003. Utah CUs dodge tax bullet, but restrictions on member business lending and impending study on taxing CUs prompt a number of state charters to consider converting to federal charter. Arizona votes down FOM bill. NCUA approves TIP FOM rule. New Mexico and California consider CU tax bills.

April 2003. NCUA approves Tooele FCU to expand its community charter to serve nearly half of Utah's population. Tax study in California defeated. Proposed MBL rule issued.

May 2003. NCUA approves all three charter conversion requests from America First CU, Mountain America CU and Goldenwest CU, the three largest CUs in Utah.

July 2003. Credit unions commemorate fifth anniversary of ?HR 1151's passage with luncheon at Credit Union House on Capitol Hill. ABA files lawsuit in Federal District Court in Utah objecting to the NCUA's application of its FOM policy.

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