The government asked the Supreme Court on Tuesday to let occupation-based credit unions serve employees at more than one company.
In the petition, the solicitor general argued that the U.S. Court of Appeals in Washington erred when it ruled on July 30 that members of a credit union must share a single, common bond.
Instead, the government urged the justices to defer to the National Credit Union Administration's interpretation of the Federal Credit Union Act. The regulator has repeatedly found that the act permits credit unions to serve groups of employees at multiple companies, provided everyone within each group shares a common bond. Some credit unions have used this power to add members from more than 100 unrelated companies.
The government has successfully used a similar, so-called deference argument in recent cases challenging the comptroller of the currency's authority to let banks sell insurance and annuities.
The solicitor general also argued that the federal appeals court misread the law when it ruled that all customers must be related to the core membership. Rather, the government contended the law explicitly allows credit unions to serve multiple employee groups.
Finally, the solicitor general is expected to tell the court that the American Bankers Association and the banks lack standing to sue the NCUA. According to this argument, litigants may only challenge laws that were designed to protect them from harm. The Federal Credit Union Act, however, was drafted to protect credit unions, not banks.
The federal appeals court in Washington ruled in 1993 that banks have the right to sue the NCUA over its common bond rules.
The appeal, if accepted, has a good chance of being heard this spring with a decision out by late June.
The NCUA wants to move quickly on this case. The federal judge implementing the appeals court's decision already has prevented 3,586 credit unions from adding new customers who don't share a common bond with their core membership.
The case began in December 1990 when the ABA and four North Carolina banks challenged the NCUA's authority to let AT&T Family Federal Credit Union of Winston-Salem, N.C., expand to serve employees at 150 companies.