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CUs win Ky. Supreme court FOM case
WASHINGTON (5/21/10)—A field-of-membership lawsuit that has been winding its way through the Kentucky court system since 2006 was decided favorably for credit unions by that state’s Supreme Court. The state high court overturned a lower court ruling that came as a blow to credit unions when it sided with bankers’ arguments that the Kentucky Department of Financial Institutions (DFI) lacked authority to grant FOMs based on the state's Area Development Districts (ADD). The case was brought by Home Federal Savings and Loan Association against the Kentucky regulator and is known as Home Fed. Sav. & Loan v. Kentucky. The bankers in the case argued that state law does not permit community-based FOMs for state-chartered credit unions. They argued that the ADD would equal a community charter. While the lower court agreed that when the state legislature narrowed the language of its definition of who can be a credit union member it meant to expressly forbid community charters, the Supreme Court on May 20 said the argument “is not convincing.” The court noted that the broader language existed in the Model Credit Union Act for 60 years before the General Assembly streamlined it. The decision said: “Rather, the difference between the former and current versions of the statute is the primary indicator of the legislature's intent to change the statute's meaning. “ When the legislature amended the statute in 1984, it moved from specific, narrow allowable categories to more generic language. This indicates a legislative intent to broaden the allowable categories of membership, which would include at least those areas previously allowed, so long as they could reasonably be understood to fit within the current language of the statute.” The Credit Union National Association (CUNA) filed a "friend of the court" brief in April 2008. General Counsel Eric Richard said at the time that CUNA got involved in the case because the lawsuit was part of a pattern in which bankers were challenging community charters in state courts around the country. In addition to Kentucky, Richard noted, multiple cases had been brought in Missouri, since resolved by state legislation, and in Pennsylvania. Richard said of the May 20 ruling, “Credit unions can really welcome this court’s push-back of the bankers’ misguided attacks trying to throw up unnecessary obstacles in front of Americans who want to enjoy the benefits of credit unions membership. Richard said Thursday, “The Kentucky court ruling is even more important now than when the case started in 2006 as so many Americans have reacted to the turbulent economic and financial conditions by moving their money to credit unions for safe, reliable financial services.” He added, "The Kentucky Supreme Court's decision shows that the court looked at the history of the credit union movement in great detail, both in Kentucky and elsewhere. It is not surprising that court concluded that the Kentucky legislature's amendments in 1984 were intended to broaden opportunities for geographic fields of credit union membership, not to eliminate geographic fields of membership as the bank plaintiff had argued." Wendell Lyons, president of the Kentucky CU League added, “It’s a great day for credit unions in Kentucky and for the dual chartering system in Kentucky--but more importantly for the millions of Kentuckians that will now be able to join a credit union.”


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