A federal judge in Madison, Wis., on Thursday refused to block a proposed credit union for farmers in the dairy state.

Chief U.S. District Judge Barbara B. Crabb dismissed a suit by the Independent Bankers Association of America against Countryside Credit Union, which the Farm Credit System is trying to establish to serve the banking needs of its members.

The judge said the association did not allege any violations of federal law in its complaint, so she dismissed the case.

Karen Thomas, the association's director of regulatory affairs, said the setback was only temporary. "This decision is only on technical, procedural grounds," she said. "The judge doesn't get to the merits of the case."

The association has charged that the government-sponsored Farm Credit System should not be allowed to create a credit union to compete against community banks. The group asked both the federal courts and the state credit union administration to block the credit union.

The judge's action effectively kills the association's federal court challenge, but its battle before state regulators continues. An administrative law judge ruled in June that the proposed credit union's field of membership was too broad, saying members of the Farm Credit System do not have a strong enough common bond. The Wisconsin Credit Union Board must decide whether to accept or reject that decision. A ruling is expected in September.

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