Ruling Allows Outsiders in Credit Unions
Credit unions can continue to accept new members from outside groups, at least for now, a federal appeals court ruled Tuesday.
A three-judge panel of the U.S. Court of Appeals temporarily blocked implementation of a key portion of a lower court ruling banning federal credit unions from offering membership to people at unrelated companies and other outside groups.
The ruling means that credit unions can take in members from those groups until the U.S. Supreme Court takes action on a related case involving a credit union affiliated with AT&T; Corp. The high court is expected to decide whether to hear that case early next year.
Credit union officials have estimated that their institutions were turning away about 4,400 potential customers a day as a result of the lower court ruling. Under Tuesday’s ruling, many of those people would gain at least temporary access to credit unions.
The appeals court left intact another section of the lower court ruling prohibiting credit unions from adding new outside groups. If a group already is part of a credit union, however, the institution can enroll new members from the group, the court said.
Daniel A. Mica, president of the Credit Union National Assn., hailed the ruling as a “great Christmas present for the credit union movement.”
Michael Crotty, general counsel for the American Bankers Assn., countered that the ruling was “the tiniest setback in a glorious string of victories” for the bankers. The ABA has led the attack on the credit union rules.
Bankers have been battling to limit the size of credit unions. Credit unions are seeking to attract new borrowers, a move that could take potential customers from banks. Banks say that unchecked expansion would give credit unions the legal advantages now possessed by banks--without requiring credit unions to give up their tax-exempt status and their exemption from federal community investment requirements.
Credit unions have reeled from a series of court decisions restricting their ability to enroll new members. These decisions have said that all members of a credit union must share a common bond, such as employment with the same company or membership in a community organization such as a church.
In October, U.S. District Judge Thomas P. Jackson ordered the National Credit Union Administration, the regulatory body that oversees more than 7,000 federal credit unions, to stop allowing company-based federal credit unions to accept members who don’t work for the same business. Jackson ordered nationwide application of an earlier federal appeals court decision in the AT&T; credit union case.
