Higher court reinstates credit union membership option for millions of consumers
December 30, 1996

Millions of Americans who had been restricted since Oct. 25 from joining a federal credit union because of a lawsuit filed by banker associations now can join because of a new ruling by a federal appeals court.

This new ruling, issued last week, permits people who are part of employee groups already within a credit union's field of membership to join the credit union.

“This latest federal court ruling is an important victory for thousands of people across Indiana who now continue to have the option of joining a member-owned, not-for-profit credit union, where service is put ahead of profits,” said John W. McKenzie, president of the Indiana Credit Union League. “If the bankers are successful with their lawsuits to restrict consumer loan rates at banks at a time when banking industry profits are running at a record $50 billion per year.”

Millions of people nationally and thousands in Indiana were eligible to join a federal credit union until lawsuits filed by bankers to restrict consumer access to credit unions prompted a federal judge to issue an injunction Oct. 25 against the National Credit Union Administration, the federal regulatory agency for credit unions. That injunction restricted these people, who were from employee groups that were already part of a credit union's field of membership, from joining a federal credit union until Dec. 24, when a federal appeals court granted a partial stay of that injunction.

Now, those people can join a credit union. Millions more, however, still do not have the credit union choice.

Because of lawsuits filed by banker associations, federal credit unions are still restricted in many cases from adding new employee groups to their fields of membership. These groups are not large enough to support their own credit union, so the only way their members could have access to credit union services is to be added to an existing credit union's field of membership.

Credit unions are now awaiting word on whether the U.S. Supreme Court will review the case that deals with federal credit unions with multiple employee groups in their fields of membership. The court is expected to decide by the end of January. If the court takes the case, a ruling isn't expected until this summer, at the earliest.

While efforts to resolve the issue in the courts continue, credit unions are pursuing the matter with Congress. Federal credit unions in Indiana and across the country are asking their members and people who want to join but are restricted by the banker lawsuits to write to their congressmen about the issue or sign petitions. Legislation could be introduced in Congress that would clarify the wording of the Federal Credit Union Act to make sure that people are not restricted from access to credit unions, regardless of what the courts decide.

The NCUA began allowing credit unions to accept multiple employee groups 14 years ago. The regulator began this policy in recognition that credit unions tied to only one employee group were susceptible to plant closings and corporate downsizing, along with recognition that the majority of Americans were becoming employed at companies too small to support credit unions on their own. The banker association lawsuits are against NCUA's multiple-employee-group policy.

This issue affects 152 Indiana federal credit unions, which have multiple employee groups in their fields of membership. It does not apply to Indiana's state-chartered credit unions.

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