Credit Unions, Banks Argue FOM Case at State Corporation Commission

Credit unions, bankers and the Bureau of Financial Institutions had their day in court Jan. 6, arguing a field-of-membership case with far-reaching implications for credit unions.

Last year, the state Bureau of Financial Institutions approved a field-of-membership expansion for Virginia Credit Union to serve the Medical Society of Virginia, a 10,000-member association offering support and services to medical professionals across the Commonwealth.

The Virginia Bankers Association and several of its member banks objected, petitioning the State Corporation Commission to rehear and reconsider the decision of the Bureau of Financial Institutions to allow Virginia Credit Union to serve the group. The Commission granted the bankers' request to stay the expansion decision until the case is formally heard – or not -- by the State Corporation Commission judges. 

Monday’s hearing was before a hearing examiner who will gather the facts in the case and present a recommendation to the judges of the State Corporation Commission on whether they should review the case. The judges will ultimately decide if the case is reviewed. Your League is a party to the case.

Attorneys for Virginia Credit Union, your League and the Medical Society of Virginia argued several issues before the hearing examiner, including whether or not the Virginia Bankers Association and the banks that joined the action have standing to question the Bureau of Financial Institution’s decision to grant the field-of-membership expansion. The Virginia Association of Community Banks has also joined as a party to the case.

Much of the two-hour-plus hearing focused on the “standing” issue, with Virginia Credit Union’s attorneys characterizing the bankers petition as little more than a “fishing expedition” designed to disrupt the business of a potential competitor. He noted competition doesn’t equal harm and certainly doesn’t provide banks with standing in this case. Bankers, meanwhile, argued that the potential for financial harm to their banks was substantial, if they lose customers or business to Virginia Credit Union. Bankers also trotted out the argument that the Medical Society of Virginia could form its own credit union, rather than join an existing credit union.

Another issue of grave concern for credit unions – and for any entity with business before the State Corporation Commission – is just how far interested parties and potential competitors can carry objections to the decisions of the Bureau of Financial Institutions or any other department under the State Corporation Commission. Attorneys for the League, Virginia Credit Union and the Medical Society of Virginia noted that the SCC has delegated authority to BFI and its commissioner to make decisions in cases like this, based on the construction and language of the applicable statutes.

They argued there is a well-established process by which, in this case, banks could argue against the field-of-membership expansion, allowing the commissioner to consider their points as he reviewed Virginia Credit Union’s request for the field-of-membership expansion. In this case, the commissioner considered all the facts of the request and the comments submitted by bankers, ultimately deciding to grant the expansion request.

Attorneys for Virginia Credit Union noted that essentially, the bankers lost, and now they’re looking for a “second bite at the apple.”

Other issues argued before the hearing examiner involved the hearing record and whether or not discovery would be allowed if the case is reviewed by the SCC judges. That could include depositions, additional records, expert testimony and more.

“It’s safe to say this is an incredibly important case. As was noted repeatedly on Monday, only the DuPont Community Credit Union community charter case in 2002 offers any direct parallels to this case,” noted League President Rick Pillow. “What’s different today is that bankers are attempting to meddle in BFI’s process as it relates to credit union field-of-membership issues in a more profound way than in 2002. We’ve seen cases of bankers trying these state-level attacks – whether field-of-membership or taxation -- in hopes of building momentum for carrying these issues to the federal level. We’re doing all we can to ensure they don’t win here, but this case bears every credit union’s close attention.”