Emboldened by a federal appeals court ruling, credit unions are rolling out the welcome mat to thousands of new members.
The ruling, issued Tuesday by the U.S. Court of Appeals for the District of Columbia Circuit, allows so-called occupation-based credit unions to resume broad membership recruitment efforts. A lower court had blocked these efforts in October, throwing out membership rules that the National Credit Union Administration had expanded over seven years.
Some of the 3,600 occupation-based credit unions have already kicked recruitment efforts into high gear.
"We were turning away 75 people a day and others didn't even bother applying," said Marcus B. Schaefer, president of AT&T Family Federal Credit Union, Winston-Salem, N.C. "We hope to add these people now."
Charles W. Thomas, president of Mid-Atlantic Federal Credit Union, said he sent a fax Tuesday afternoon to the 66 companies his Gaithersburg, Md.,- based institution serves. It announced that the credit union could once again sign up their employees as members.
"This means we can now provide a service to those people who we want to serve and who want our services," said Mr. Thomas, whose credit union had been turning away an average of five new customers a day.
In total, occupation-based credit unions are expected to add more than 1,500 new members a day, according to an official at the Credit Union National Association.
A sizable chunk of those new members could come from banks and thrifts. A recent Gallup Organization poll for American Banker found that 59% of credit union members had transferred their accounts from a commercial bank and 8% from thrifts. Only 13% did not previously use a financial institution. The remainder either came from another credit union or a finance company.
The appeals court ruling is the latest decree in a lengthy legal battle between the banking and credit union industries. The American Bankers Association sued the NCUA in December 1990 for letting AT&T Family serve more than 150 unrelated companies.
The federal appeals court in Washington sided with the banks, ruling in July that all members of a credit union must share a single, common bond. The court ordered U.S. District Judge Thomas P. Jackson to implement its decision.
Judge Jackson ruled in October that occupation-based credit unions could not add customers who were unrelated to their core membership.
NCUA appealed, asking the Supreme Court to decide whether all members of a credit union must share a single, common bond. It also urged the appeals court to stay Judge Jackson's order until the Supreme Court acts, noting that he was preventing 1.4 million people a year from joining credit unions.
The appeals court on Tuesday granted part of the request, giving credit unions the right to add new members from companies they already serve. But it rejected a request to let credit unions add new companies to their fields of membership. The Supreme Court is expected to decide on Jan. 17 if it will accept the case.
"This is just fantastic news," said Robert M. Fenner, general counsel at the NCUA. "It is going to enable credit unions to go back to serving the folks they are authorized to serve."
Banking industry lawyers downplayed the ruling, saying they expect the appeals court will reconsider once the Supreme Court rules on Jan. 17.
"This is not a big setback," said Michael F. Crotty, the ABA's deputy general counsel for litigation. "Even bad boys get Christmas presents."
