WASHINGTON -- A federal judge hinted Friday that he will uphold the National Credit Union Administration's decision to let a North Carolina credit union add groups that have no connection to its original sponsor.
The "common bond" that unites credit union members was "only for the purpose of ensuring the original creation and growth of credit unions," said Judge John H. Pratt of the U.S. District Court for the District of Columbia, after heating arguments in the case.
Although it is often difficult to predict a judge's decision from remarks delivered at a trial, Judge Pratt's comments echoed the argument of the NCUA's lawyers.
A group of four North Carolina banks, backed by the American Bankers Association, contend that the regulator's actions and liberal common bond interpretation violate the Federal Credit Union Act of 1934. The NCUA maintains it behaved correctly.
Both sides asked for summary judgments. Judge Pratt said a ruling would come in a couple of weeks.
The decision would have national ramifications.
If Judge Pratt decides that the 12-year-old NCUA policy is illegal, bankers could use the decision to break up any credit union that includes multiple employee groups.
Judge Pratt indicated that he recognizes the broad importance of the case. "We would be deluged with lawsuits from across the country," he said.
The dispute revolves around a passage of the 1934 act that says, "Federal credit union membership shall be limited to groups having a common bond of occupation or association."
Michael S. Heifer, representing the bankers, said the language restricts a credit union to a single sponsor.
Kenneth Doroshow, a Department of Justice lawyer representing the NCUA, focused on the use of the plural "groups." He said the wording showed that Congress intended credit unions to have multiple sponsors, or at least that the agency's interpretation is a plausible one and justifiable under legal precedent.
The banks sued the NCUA four years ago for letting AT&T Family Federal Credit Union in Winston-Salem, N.C., expand.
A district court ruled that the bankers did not have standing to bring the suit, but that decision was reversed on appeal.
Since last year, bankers in Michigan, Montana, Nebraska, Texas, and Utah have filed similar suits.