JUSTICES PUT CHECK ON CREDIT UNIONS; SUPREME COURT'S RULING WILL LIMIT SCOPE OF ENROLLMENT.Byline: Gregory J. Wilcox Daily News Staff Writer In a big victory for the banking industry, the U.S. Supreme Court on Wednesday restricted the ability of federally chartered credit unions to increase their membership roles. The justices, in a 5-4 ruling, negated a 16-year-old government policy that allowed credit unions to draw customers from beyond their traditional market of like-minded businesses or associations, such as trade or fraternal groups. The decision might affect the financial choices for millions of Americans and sets the stage for a congressional fight over credit union regulations. Nothing will change overnight, but credit unions eventually could see their possibilities for expansion limited and the status of some current members could become clouded. The majority opinion, written by Justice Clarence Thomas Clarence Thomas (born June 23, 1948) is an American jurist and has been an Associate Justice of the Supreme Court of the United States since 1991. He is the second African American to serve on the nation's highest court, after Justice Thurgood Marshall. , said the National Credit Union Administration The National Credit Union Administration (NCUA) is responsible for chartering, insuring, supervising, and examining federal credit unions (FCUs) and for administering the National Credit Union Share Insurance Fund. let these financial institutions expand in ways not originally intended by Congress. Chief Justice William H. Rehnquist and Justices Anthony M. Kennedy, Ruth Bader Ginsburg Ruth Joan Bader Ginsburg (born March 15 1933, Brooklyn, New York) is an Associate Justice on the U.S. Supreme Court. Having spent 13 years as a federal judge, but not being a career jurist, she is unique as a Supreme Court justice, having spent the majority of her career as an and Antonin Scalia joined in the opinion. Justices Sandra Day O'Connor Sandra Day O'Connor (born March 26 1930) is an American jurist who served as the first female Associate Justice of the Supreme Court of the United States from 1981 to 2006. She was considered a strict constructionist. , John Paul Stevens John Paul Stevens (born April 20, 1920) is currently the most senior Associate Justice of the Supreme Court of the United States. He joined the Court in 1975 and is the oldest and longest serving incumbent member of the Court. , David H. Souter and Stephen G. Breyer dissented, contending that banks lacked the legal standing to sue. Since 1982, the NCUA NCUA National Credit Union Administration (US government) NCUA Nbcs Control Unit Atm permitted federal credit unions to be composed of multiple unrelated employer groups, each having its own common bond of occupation. ``Because we conclude that Congress has made it clear that the same common bond of occupation must unite each member of an occupationally defined federal credit union, we hold that the (government's) contrary interpretation is impermissible im·per·mis·si·ble adj. Not permitted; not permissible: impermissible behavior. im ,'' Thomas wrote in part. The banking industry, which claimed that credit unions enjoy an unfair competitive advantage because of their tax-exempt status, said it was just trying to level the playing field and that credit unions have overstepped their bounds. ``These are not mom-and-pop operations but financial conglomerates that bear no resemblance to the niche institutions that Congress envisioned when it created the federal credit union charter in the 1930s,'' the American Bankers Association The American Bankers Association (ABA) is comprised of banks and other financial institutions. It seeks to promote the strength and profitability of the banking industry by Lobbying federal and state governments, building industry consensus on key issues, and providing products and said in a statement. The association, and representatives of various banks, said there will be no attempt to force current members to close their accounts. ``I think that is very appropriate,'' said Doug Stewart Doug Stewart is a cohost of the radio show 2 Live Stews with his brother Ryan Stewart.[1][2] References 1. ^ Shaw, Jody. "“Two Live Stews” heat up airwaves with new style", The Technique, 2004-02-13. , executive vice president in the marketing and delivery support group at Sanwa Bank California. ``But going forward, it's an open market and it should have fair rules. The credit unions had a distinct advantage that were not enjoyed by banks.'' The credit union industry, which controls about 2 percent of consumer deposits nationwide, said it was not surprised by the ruling and is prepared to press its case in Congress, where a nonpartisan bill has been introduced that would allow credit unions to serve groups that are not related. ``Certainly we wish it had been otherwise but this is not totally unexpected,'' said David Chatfield, president of the California Credit Union League A credit union league (League) is a United States state-level trade association for credit unions, which are non-profit financial cooperatives. Credit union leagues hold a primary interest in the Credit Union National Association (CUNA). . ``I've been telling credit unions for quite some time that we could not expect the courts to solve the problem for us. We have to solve it ourselves and work with Congress, and that is exactly what we will do,'' he said. At stake is tens of billions of consumer dollars. ``This is World War III World War III (abbreviated WWIII), or the Third World War, is a term used to describe a hypothetical conflict on the scale of World War I and World War II, or even larger, such as a nuclear holocaust. within the financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. industry,'' said Bert Ely, a banking consultant based in Alexandria, Va. And the two sides soon will find themselves back in court. They must return to a federal appeals court within 30 days to get several questions resolved, among them the status of current members, and then go to district court in Washington, which will decide how to implement the ruling. Credit Unions vs. banks and thrifts Category Credit Unions (x) Banks (x) Thrifts (x) No. of institutions 11,478 9,895 1,272 Assets $349.6 billion $5 trillion $770 billion Income $1.8 billion $30.6 billion $3.4 billion States with the most credit union members State Total Total assets Percent of membership (x) (in billions) (x) U.S. total (x) California 7.6 million $48 13.90 Texas 5.6 million $25.7 7.44 Michigan 4 million $17.7 5.13 Virginia 3.7 million $20.6 5.96 New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of 3.4 million $18.75.41 Largest credit unions in California NAME HQ ASSETS (in MEMBERS millions) (xxx) (xxx) Golden One CU Sacramento $1,899 311,256 Orange County Teachers FCU FCU Federal Credit Union FCU Florida Credit Union FCU Fan Coil Unit FCU Fuel Control Unit FCU Flight Control Unit FCU Flexor Carpi Ulnaris FCU Familial Cold Urticaria FCU Fire Control Unit FCU Fused Connection Unit FCU Flow Control Unit Santa Ana Santa Ana, city, El Salvador Santa Ana (sän'tä ä`nä), city (1993 pop. 129,873), W El Salvador. It is the second largest city in the country and the commercial and processing center for a sugarcane, coffee, and cattle region. $1,729 153,368 Hughes Aircraft FCU Manhattan Beach Manhattan Beach, city (1990 pop. 32,063), Los Angeles co., S Calif., on Santa Monica Bay; inc. 1912. It is a residential and beach community with an oil refinery and nearby factories that produce transportation and electrical equipment, computers, and pottery. $1,718 164,500 Star One FCU Sunnyvale $1,327 52,445 Patelco CU San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden $1,262 130,156 Largest credit unions in Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. County NAME HQ ASSETS (in MEMBERS millions) (xxx) (xxx) Hughes Aircraft FCU Manhattan Beach $1,718 164,500 Wescom CU Pasadena $1,112 139,793 Lockheed FCU Burbank $966 105,260 California CU Los Angeles $557 89,160 Long Beach Schools FCU Westminster $413 67,923 (x) As of June 30, 1997 (xx) Averages as of Feb. 11 (xxx) As of March 31 SOURCE: California Bankers Association; National Credit Union Administration; Bauer Financial Reports, Coral Gables, Fla.; Bank Rate Monitor, North Palm Beach, Fla.; National Credit Union Administration; California Credit Union League. Q and A The U.S. Supreme Court decision against credit unions could have a wide-ranging impact on consumers nationwide. Here's what it means to you: What is it all about? The high court handed down its interpretation of ``common bond'' as set forth in the Federal Credit Union Act In 1934, the U.S. Congress passed the Federal Credit Union Act, which President Roosevelt signed into law. The purpose of the federal law was to make credit available and promote thrift through a national system of nonprofit, cooperative credit unions. of 1934. The act, which officially created federally chartered credit unions nationwide, says credit union members must share a ``common bond.'' Originally, that meant a group of farmers or members of one company. But that changed in 1982. As layoffs occurred, credit unions felt their viability threatened. They started to accept other companies' workers, what they call select employee groups, to increase their ranks. The National Credit Union Administration supported this new interpretation of ``common bond.'' Bank officials objected to credit unions' expansion, saying it violated the meaning of ``common bond'' and took their case to the U.S. Supreme Court. The justices agreed, 5-4. Are all credit unions affected? The decision specifically addresses federal credit unions, not state-chartered credit unions. These are institutions that have a federal charter and are regulated by the federal government. But credit union leaders say lawsuits are pending that will affect state-chartered ones as well. Will many current credit union members lose their membership? Not in the near future, if at all. For now, credit unions are allowed to keep existing members and accept new members from companies or organizations that already belong. However, a recent ruling stopped them from taking in new companies or groups. It's still not clear how the Supreme Court ruling will play out. What is Congress doing that might affect me? There's a bill pending in Congress that will reverse the Supreme Court's decision. Thus far, more than 150 representatives back HR 1151. Rep. James Leach, R-Iowa, chairman of the House Committee on Banking and Financial Services, will take up the issue in early March. --- Deborah Adamson, Daily News CAPTION(S): Photo, Box PHOTO (Color) Linda Hannick, president of Marquardt Federal Credit Union in Van Nuys. Terri Thuente / Daily News BOX: Q and A (see text) |
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