Judge Rejects Most of Lawsuit Over Broad Membership Rules for Credit Unions.

WASHINGTON - A federal judge has rejected most of a banking industry lawsuit that sought to overturn broad membership rules for credit unions.

At issue is a 1998 law that would let federally chartered credit unions with multiple "common bonds," or membership groups, serve unrelated companies or associations provided they have fewer than 3,000 members. The law, a major defeat for the banking industry, overturned a Supreme Court decision earlier that year that would have severely restricted expansion of the nonprofit financial institutions.

Judge Colleen Kollar-Kotelly of the U.S. District Court for the District of Columbia rejected nearly all of the suit filed in January 1999 by the American Bankers Association, which argued that the National Credit Union Administration's implementing regulations had exceeded congressional intent.

For instance, the ABA accused the NCUA of only counting employees of company toward the 3,000-member limit instead of including spouses, children, retirees, and others, too. The trade association also argued that the law clearly stated that groups with more than 3,000 eligible members should be forced into forming their own credit unions unless they could not be operated safely, but that NCUA had made it too easy to skirt this requirement.

"The judge ruled in most of these areas that the law is not explicit and therefore NCUA has discretion to adopt any reasonable interpretation," explained Eric Richard, general counsel for the Credit Union National Association. "She found their interpretations were all reasonable."

The ruling was dated March 30 but not released until Monday. Credit union industry leaders immediately claimed another victory over the banking industry, while ABA deputy general counsel for litigation Mike Crotty said his organization still has to review the opinion before deciding how it should proceed.

"Today's ruling is essentially a clean sweep for credit unions," Daniel A. Mica, president of the Credit Union National Association, said in a statement.

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