A federal judge in Michigan has upheld a decision by the National Credit Union Administration last March to dramatically, expand the membership base a Michigan credit union.

Four Michigan banks had filed a suit to block the change in the 9,000-member credit union's field of membership from a geographic area of 16,000 people to one of between 47,000 and 48,000 in a county of about 75,000.

The decision appears to support a liberal interpretation of the common-bond definition used by the NCUA to determine who may belong to a credit union. Under the law, credit union members must share some common interest.

|A Subjective Concept'

"It's a significant case for credit unions and the agency in that the court recognizes a field of membership is a subjective concept," said James Engel, the NCUA's deputy general counsel. "It supports that the NCUA acted reasonably and our intention is to continue to interpret the field of membership the way we have."

Judge Wendell Miles of the U.S. District Court for the Western District of Michigan in Grand Rapids denied the banks' claims that the NCUA didn't follow its own rules in approving a charter that would have expanded the membership base of Portland Federal Credit Union.

The institution is a federally chartered community credit union based in the city of Portland in Ionia County. On March 1, 1993 NCUA approved a charter that expanded its membership base in Ionia County.

|Wasn't a Common Bond'

Michigan bankers cried foul.

"We showed that there wasn't a common bond [for the expansion" by pointing out that, among other things, there were different area codes and political jurisdictions in the affected area, said Michael Magee, president of Independent Bank in Ionia, one of the four plaintiffs.

Helped by marketing data and surveys, the NCUA prevailed by arguing that the roughly 75,000 people of the rural Michigan county did view themselves as a distinct community.

Michael Crotty, deputy general counsel for litigation for the American Bankers Association, which assisted the banks in the case, remains unconvinced.

"The requirement is is that the community is well defined"' he said. "Just because they draw a map [of the common bond expansion) that's well defined? You can draw a map of the Milky Way and call it well defined."

The original suit named the NCUA and Portland Federal as defendants, but in June Judge Williams dismissed the credit union as a defendant at the same time he ruled that the banks had standing to bring suit.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.