The Virginia Bankers Association asked the state Supreme Court last week to clearly delineate the term "well-defined local community," used by regulators in Virginia and several other states and NCUA to determine the acceptable boundaries for community charters.
In oral arguments before the state's High Court, the bankers insisted a broad community field of membership granted last year by the Virginia Corporation Commission, the state's financial institutions regulator, to DuPont Community CU violated the law limiting such FOMs to "well-defined, local communities."
To accept the five-county and five-city area in western Virginia, known as the Central Shenandoah Valley and which stretches 100 miles from tip to tip, as a single community "simply turns logic on its head," argued Fred Palmore, an attorney representing the VBA. "What the Commission did is an abuse of its discretion."
But lawyers for the state regulator insisted that residents in the sparsely populated region, half of which is forestland in the Shenandoah National Park, qualify as a single community not because they necessarily "interact," a key criteria required by NCUA, on which the state's community FOM rules are based, but economic "integration." While the Virginia credit union statute requires state regulators to look to NCUA's rules for federal charters for guidance, it does not bind them to abide by NCUA's standards, argued Philip DeHaas, who was representing the Corporation Commission before the state's seven justices.
FOM Is Too Far Flung
The 260,000 residents in the region surrounding DuPont Community CU's home in rural Waynesboro, Va., noted DeHaas, share shopping, medical facilities, newspapers, schools, sports leagues, and transportation facilities. This proves a high degree of economic integration, he said.
But the bankers' attorney, Palmore, insisted the far-flung region does not fit any of the criteria in either the state or federal statute setting the requirements for a community. "This is not a community under any definition of that term. It is an assortment of communities," he said. "It fits none of the criteria defined in the applicable statute."
He asserted that the approved community, which includes August, Bath, Highland, Rockbridge, and Rockingham counties, and the cities of Buena Vista, Lexington, Harrisonburg, Staunton and Waynesboro, is a conglomeration of numerous tax jurisdictions, several political subdivisions, various geographic locations and varying school districts. "The plain meaning of the law in the statute does not fit the proposed area that DuPont Community CU seeks to serve," argued Palmore.
But Joanne Nolte, an attorney representing the credit union, said there is precedent for defining the area as a single community. She noted that the Appalachian Regional Planning Commission has determined that the counties and towns granted DuPont Community CU have been qualified as a local development district. The qualification as a regional planning or development district has been used by NCUA to justify granting community charters in the past.
In brief remarks to the justices, Anthony Gambradella, an attorney representing the Virginia CU League, insisted that the meaning of the statute is vague, leaving the actual definition up to the discretion of the state regulator. In addition, he noted that the bankers never objected to the FOM grant during the public comment period, either by submitting a comment letter or requesting a hearing, which is allowed under the Corporation Commission's administrative procedures.
After the hearing, Gerald Hershey, president of the $450-million credit union, said they have not waited until the issue is resolved by the courts and have been marketing to and signing up new members from the disputed FOM. The credit union, chartered 45 years ago to serve employees of the local DuPont plant, recently branched out to serve all of Augusta County before expanding into the broader area. Hershey said the credit union has no plans to change its name to reflect the broader market.
The bankers' appeal of the Corporation Commission's rule went straight to the Supreme Court, skipping the normal process of state court and then state appeals court review, because of the state's quirky administrative rules. A ruling by the High Court is not expected for several months.
