HARRISBURG, Pa. (9/30/09)--Monday's ruling by a Pennsylvania court--which upheld the state Department of Banking's decision to grant five-county field of membership (FOM) expansions to two credit unions--is significant, according to the Pennsylvania Credit Union Association (PCUA). "This ruling is significant because it is the first time in all of the state litigation that the courts have addressed the 'well-defined local community' analysis employed by the banking department," said Rick Wargo, general counsel for PCUA. In a 54-page opinion, the Commonwealth Court of Pennsylvania upheld the expansions granted by the banking department to Freedom CU, Warminster, and TruMark Financial CU, Trevose, in 2003. They sought to expand to five counties--Bucks, Chester, Delaware, Montgomery and Philadelphia Counties, all within the Philadelphia metropolitan area. The opinion addressed the evidence the credit unions presented to the department in support of their community charter notices. It held that the evidence given by the credit unions supported the banking department's conclusion that the credit unions' notices contained evidence that the expansions constituted a "well-defined local community." The ruling also addressed other banker arguments in the context of litigation. The court found in favor of the banking department and the credit unions on all arguments. (Use resource link to access News Now's
article in Tuesday's edition on the decision.) "It's been a long, hard battle, but worth the cost to establish this type of precedent in the community chartering area for Pennsylvania credit unions," said Jim McCormack, PCUA president/CEO. "Advocacy involving these types of issues is specifically why trade associations exist and is why the association committed its resources and support in this important litigation," he added. He thanked the association's legal staff, Rick Wargo and Laurie Kennedy, for their "outstanding work on this case," and the credit unions "for persevering and remaining committed to this case during the past five years. This is a win for all Pennsylvania credit unions," McCormack concluded. The court ruling "may have implications for states with 'wildcard' provisions in their statutes that give state-chartered credit unions parity with the Federal Credit Union Act's field of membership provisions," said Michael Edwards, counsel for special projects at the Credit Union National Association (CUNA). However, that depends on state law. Many of the state 'wildcard' statutes give wildcard parity for only for "powers"--such as making loans, accepting deposits-- rather than powers and field of membership, as Pennsylvania's statute does, Edwards told News Now
. "The 'well-defined local community' issue has been extensively litigated in federal court with regards to federal credit union FOM expansions, including in federal court in Pennsylvania in a case that concluded last year," Edwards said. But the court "endorsed the Pennsylvania Department of Banking using the NCUA Chartering Manual as, in the words of the court, 'guidelines' instead of following all of the provisions of the manual--which the banks tried to argue the Pennsylvania Banking Department should have done, but the court did not agree." A number of cases have been brought by Pennsylvania's bankers in state court challenging the validity of the new community charters of credit unions and administrative procedures the state regulator used to approve those charters. All the cases have ended in a final disposition or been dismissed unless the banks choose to appeal the Commonwealth Court's decision to the Pennsylvania Supreme Court. Other issues were resolved earlier, including:
* On May 21, the court issued an order in the Freedom CU and Trumark Financial CU case that "discontinued" the bankers' challenges on two credit union state taxation issues--whether the state legislature had authority to confer tax-exempt status on credit unions and whether the state's Constitution required "uniformity of taxation" between credit unions and banks. * On Dec. 18, 2008, in a case involving the community charter application of Belco CU, Harrisburg, the Pennsylvania Supreme Court rejected most of bankers' argument--that they had a right to a hearing and discovery as part of the community charter application process under state regulations. In late March 2009, the Commonwealth Court dismissed the remaining aspects of the matter, effectively ending the case.