An administrative law judge has denied the Farm Credit System's request for a credit union charter, ruling that its proposed field of membership was too broad.

The decision is a victory for the banks that claimed a tax-exempt credit union run by a government-sponsored enterprise presented unfair competition.

In a June 26 decision, administrative law judge David H. Schwarz said the Farm Credit System is not a single cooperative or association. Rather, it provides products and services in exchange for a fee. This customer relationship does not meet the definition of a common bond established by the National Credit Union Administration, the judge said.

"The users of the products and services provided or the stockholders of the Farm Credit Services Institutions in Wisconsin do not have a common or related bond of occupation or association," the judge wrote. "These individuals also fail to qualify for membership in a credit union because they are not all members of the same cooperative nor are they all rural residents."

The ruling now goes to the Wisconsin Credit Union Review Board, which weather can affirm, amend, or overturn it.

Banking groups praised the ruling. "This slows down the train that we believe was on the wrong track," said Wisconsin Bankers Association executive vice president Harry Argue. "We are very pleased to see this validation of our point."

Kenneth Guenther, executive vice president of the Independent Bankers Association of America, said the Farm Credit System and credit unions take advantage of government subsidies to grab bank business. This ruling prevents the two from combining to be an even tougher foe, he said.

"We were talking about an entity that would have been very hard to compete with," he said. "We are delighted with the ruling of the administrative law judge."

But David Coggins, president of the proposed Countryside Credit Union, said he will urge the Credit Union Review Board to overturn the decision. "This is a proposed decision," he said. "It is not final or binding. We remain confident that the Credit Union Review Board will affirm the commissioner's original decision."

A decision by the review board is expected by the end of summer.

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