Missouri bankers win battle in on-going credit union fight

Northwestern Financial Review, Jan 15-Jan 31, 2004 by Dullum, Justin

A Missouri Supreme Court ruling has bankers in the state optimistic about increasing their ability to fight field of membership rules that expand the markets for credit unions.

Until the ruling, state courts have always backed the credit union argument that banks do not have standing to challenge field of membership rules. So has the state's Credit Union Commission, which renders the final ruling on field of membership decisions.

The ruling, which gives banks this previously denied standing, stated that the Missouri Bankers Association and Century Bank of the Ozarks in Gainsville, representing the economic competitors of credit unions, can challenge a field of membership granted for Telcomm Credit Union in Springfield. Telcomm is undertaking an effort to expand service to 800,000 residents living within one area code. Because of the ruling, the case has been sent back to the Circuit Court of Cole County for a hearing on the merits of the bankers' appeal.

"At this point, we go back to square one," said Bill Ratliff, executive vice president of the MBA's government and legal wing. "Now that we have standing, we can move forward on a number of lawsuits we have pending."

Credit unions have pushed past the field of membership boundaries agreeable to the MBA in the past. "We're fine with the fields being limited to a community. But the 417 area code is a huge area," said Ratliff. "It's a quarter of the state. For a small credit union to say we want to take anyone in that area, it just seems ridiculous to us."

The ruling at least gives banks a chance to plead their case. "We think this was a major step forward, but this is a slow process that could take years to resolve," said Ratliff. "The courts move very slowly."

In court, Ratliff said the argument starts by discussing the limitations of a tax-paying bank. "I asked the people at a $25 million bank, which had a staff of six, if they market in 12 cities and service a number of counties. They, of course, said there is no way they could do that. How can a comparably sized credit union serve 10 counties? There's no way."

In addition to grinding through the courts, MBA is keeping an eye on the capitol. Although fields of membership at credit unions continue to expand, Ratliff said the group would rather keep the issue in the courts and out of the capitol. "We don't want a big legislative fight," said Ratliff. "Then the issue becomes more public and very contentious."

By Justin Dullum