Va. Supreme Court Upholds FOM
In what makes for lightning speed in the world of plodding legal proceedings, the Virginia Supreme Court issued a ruling last week validating the state's community chartering rules just a month after hearing oral arguments in the case.
The case has tremendous ramifications for dozens of state credit union statutes, as well as NCUA's chartering and field of membership rules, all of which require that community FOMs be made up of a "well-defined, local community, neighborhood or rural district."
Gerald Hershey, president of the Waynesboro-based DuPont Community Credit Union, said he was pleased with the court's ruling, which clears his $450-million credit union to expand into the new markets. "This is a victor for state chartered credit unions in Virginia and for credit unions all over the country; to see that the (FOM) decision was tested in, and in the end, the decision stood," said Hershey. "We were pretty confident, but when things are unclear, as they were, then you're confident, but cautious.".
In its ruling, the state High Court concluded the state's Bureau of Financial Institutions, in granting a broad community charter to DCCU, was within the provisions of the state's credit union statute, which is based on NCUA's field of membership rules.
At issue is whether the five-county and five-city area in western Virginia, known as the Central Shenandoah Valley and stretching 100 miles from tip to tip, qualified as a "single, well defined" community. The Virginia Bankers Association, which challenged the FOM grant, insisted that it is not a single community, but many communities.
But the State Corporation Commission, which ratified the BFI's grant, maintained that the vast rural area, most of which encompasses forestland that makes up the Shenandoah National Park, does qualify because the different subsections of the community interact, a key criteria required by NCUA.
The High Court found the SCC's order ratifying the BFI's FOM grant, was "just, reasonable and correct."
"The record in this case shows that the Commission applied (the law), including the directive of that statute to 'give consideration to the definition of the term that has been adopted by the National Credit Union Administration and become legally effective,' to its finding of fact and determined that the Bureau of Financial Institutions' approval of the credit union's application to expand its field of membership was appropriate," the court found.
Hershey said despite the pending legal challenge, the credit union had been publicizing the new FOM, albeit on a limited basis. "Now we can work on a more definitive plan and strategy and we can look at building new facilities or purchasing existing ones in those areas," he said.