The Utah Supreme Court has ruled that banks have the right to challenge the composition of a credit union's membership.
This is the sixth court to find that banks have the legal right to sue credit unions trying to expand their membership bases. The case, decided Feb. 28, reverses a lower court's ruling in favor of the credit unions.
The dispute now returns to a trial judge, who must decide if credit unions can include members from more than one county.
The Utah court said bankers in the state suffered a "distinct and palpable" injury that gives them a personal stake in the future of the credit union industry.
"Utah was the only jurisdiction inconsistent with everyone else on the legal right-to-sue issue," said Michael Crotty, deputy general counsel for litigation at the American Bankers Association. "The fact the state supreme court has ruled the way it has augurs well for the Utah bankers in their suit on the merits of this case."
Bankers in North Carolina, Texas, and elsewhere have challenged the credit union industry and its regulators in court. They contend the regulators are permitting credit unions to illegally expand their membership bases to include people who do not share a common bond.