Michigan bankers have rallied to help four of their peers fight a credit union expansion.

The four banks, strapped by the costs of an earlier legal fight, now have a "war chest" to resume the battle - thanks to a fund-rasing drive led by two state banking groups.

The technical dispute will focus on the National Credit Union Administration's definition of a "community," and Michigan bankers believe the fight is well worth their while.

Competitive Threat

"Credit unions are a big competitive problem to the banks in Michigan," said Justin Moran, spokesman for the Michigan Bankers Association. "The banking industry will feel that money for the appeal is money well spent."

The bankers' group, along with the Michigan League of Savings Institutions, spearheaded the drive to back up the banks, whose fight started in March - when the National Credit Union Administration approved in a charter application that tripled the potential membership of community-based Portland Federal Credit Union in Portland, Mich.

The three banks and one savings institution filed a complaint in May asking a federal judge to invalidate the NCUA's decision. On Aug. 24, a U.S. district judge denied their request.

On Sept. 7, the two trade groups passed the hat to help fund an appeal and, on Sept. 13, the drive was declared a success.

The appeal will be filed in the U.S. Court of Appeals for the Sixth Circuit, Cincinnati, by Oct. 24. It is expected that the two trade groups, as well as the American Bankers Association, will file friend-of-the-court briefs.

Under its amended charter, Portland Federal's potential membership in Ionia County was raised to 47,000 to 48,000 from 16,000. The county has a population of 75,000.

The four banks argue that the expansion was invalid because the wider membership field did not fit the NCUA's definition of a compact community, and that the NCUA did not provide a reasoned explanation for its decision, Mr. Moran said.

Judge Wendell A. Miles of the U.S. District Court for the Western District of Michigan in Grand Rapids ruled otherwise on Aug. 24.

Appeal |Not Unexpected'

Robert Loftus, director of public and congressional affairs for NCUA, said the decision to appeal was "not unexpected."

However, Mr. Loftus added, "it's up to NCUA to determine rules and regulations for credit unions, not banks," he said.

The four plaintiffs are Independent Bank; Community First Bank in Lansing, a savings institution: Ionia County National Bank of Ionia; and Union Bank in Lake Odessa. They have spent nearly $100,000 in legal fees since filing the complaint, Mr. Moran said, and don't want to shell out any more.

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