For Mid-Atlantic Federal Credit Union, the stakes in the on-going legal battle over credit union expansion are crystal clear.

Five customers a day.

That is the number of people the $100 million-asset institution will turn away each day if the Supreme Court restricts membership to employees of the institution's original business sponsor.

The credit union already knows how painful it will be to lose new customers. A federal judge prevented all 3,586 occupation-based credit unions in November and December from adding customers who do not share a common bond with the core membership. The judge also said credit unions may not add new companies to their fields of membership.

An appeals court overturned part of that decision, giving credit unions the right to add new members until the Supreme Court weighs in.

But the second half of the ruling still stands. For Mid-Atlantic, that has meant the loss of a major new sponsor, the Humane Society for the United States.

Human resource director Robert G. Roop said he choose Mid-Atlantic after focus groups revealed the society's 200 employees wanted the benefits of a credit union, including free checking and favorable loan rates.

The Humane Society's application was pending before the National Credit Union Administration when the court injunction was issued. Mr. Roop said his employees were expecting the benefit, and were "very disappointed" when it didn't come.

In a world where it's hard enough to hold on to current customers, this is not the way Mid-Atlantic wants to do business.

"This is very painful to us," said Charles W. Thomas, Mid-Atlantic's president and chief executive officer. "It's hard to quantify the losses, because we don't know how much business these (lost customers) would have done with us, but it hurts."

But Mid-Atlantic, chartered in 1967 to serve IBM, is fighting back by trying to enlist rejected members in a campaign to convince Congress to ease the restrictions on who can join a credit union. It also has contributed $8,000 to fund lobbying efforts by the industry's two largest trade groups.

The legal troubles stem from a 1990 lawsuit filed by four North Carolina banks against AT&T Family Federal Credit Union in Winston-Salem, N.C. The banks argued AT&T Family illegally expanded its membership by serving companies that didn't share the "common bond" required by the Federal Credit Union Act of 1934. Credit unions say the law's wording is vague, and that banks are twisting it to put them out of business.

Mr. Thomas called the court losses a "tragedy," saying it will prevent most businesses from enjoying credit union services because the law requires a minimum of 500 employees to start a federal credit union.

For Mid-Atlantic, a loss of the court battle would block off all but two avenues for legal growth. The credit union could continue to add employees at IBM-the credit union's original sponsor.

More promising, Mr. Thomas said, would be adding relatives of its existing 20,000 members. Mid-Atlantic already is pursuing these accounts, mailing promotional materials to eligible customers in December that promised a holiday tin of popcorn for each family member who signed up.

Starting in this month, the credit union also is working on retaining members, offering Internet banking to keep customers who move away.

Mid-Atlantic also is requiring anyone who wants to close an account to talk to a manager. "And the manager will always ask, 'Is there something we can do for you?' Since we started doing that, we've saved many, many accounts," Mr. Thomas said.

Mid-Atlantic's 50 employees may waive fees if customers feel they are unfairly charged. Mr. Thomas said this could add up to $1,000 in some months.

Kimberly Cimino, Mid-Atlantic's chief operating officer, updated employees on the effects of the court fight. "They were concerned," Ms. Cimino acknowledged. "They thought, 'Man, that's a rotten deal for customers, because credit unions are a good choice.' But they realize this is their future, too."

The future could come to this: If the Supreme Court declines to hear the appeal filed by the NCUA, and if the lower courts continue to rule in favor of the bankers, federal credit unions may be forced to divest select employee groups, or SEGs.

While NCUA argues such an order could put many federal credit unions out of business, Mid-Atlantic would survive.

The $100 million-asset institution only began expanding by taking on members from unrelated companies three years ago. And while more than a third of its members belong to one of 66 select employee groups, just 9% of Mid-Atlantic's assets is vulnerable to divestiture.

"We've done some budgeting on a cursory basis, and we don't see much of an impact if it happens," Mr. Thomas said.

But it would be a hassle.

"With the deposits, I guess you'd say, 'Take your money back.' Or you'd send the money back. The difficulty comes with the certificates of deposit. Can you break a contract with a member? I'd say no. As far as loans, if it's immediate divestiture, clearly the credit unions won't buy them, so I guess we'd sell them to the banks. But we'd never get 100 cents to the dollar for them."

Mr. Thomas thought about the scenario for a moment, shook his head, and said, "The whole thing is ludicrous."

The fight will be won, not in a courtroom, but on Capitol Hill, he predicted.

"We have 70 million credit union members in this country, and people will testify and write letters for us." He hopes some of them remember the times when Mid-Atlantic employees spent two hours with them, balancing their checkbooks for no charge. Or driving more than a mile to help someone learn how to use an ATM machine. Or approving an unsecured $1,300 loan so they could take a vacation to Hawaii.

"We treat people better than banks, that's the bottom line," Mr. Thomas said. "These banks are being greedy (by forcing the lawsuit), and I don't imagine the American people are going to see things much differently."

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