CUs, Banks Square Off in Second Hearing on Years-Long FOM Case

The second hearing in a now years-long credit union field-of-membership case concluded Friday afternoon before a State Corporation Commission hearing examiner. At issue is a field-of-membership expansion request initiated by Virginia Credit Union in November 2018, to add the not-for-profit Medical Society of Virginia, a membership organization for 10,000 medical professionals, to its field-of-membership. That application was re-filed in March and May of 2019, and was eventually granted by the Bureau of the Financial Institutions in July 2019.

The Virginia Bankers Association and seven 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, leading to a two-day hearing in July 2020, with more than 10 hours of arguments and testimony. Your League is a party to the case and has participated throughout the proceedings in support and to protect all credit unions.

“The case obviously holds incredible significance for Virginia’s state-chartered credit unions, but given that the wording and intent of the state and federal laws align so closely, we fear a win for bankers here in Virginia will embolden them to target field-of-membership expansions at the federal level, as well,” notes League President Carrie Hunt. “Over the past several years, we’ve seen state-level banker attacks on credit unions’ field-of-membership and on our tax status. It’s an obvious ploy on bankers’ part to fight these battles at the state level in hopes of building momentum for a fight in Congress.”Your League will vehemently protest attempts by the bankers to thwart competition just for competition's sake.”

League witness Heidi Lewis, the retired former CEO of Riverside Health System Employees Credit Union, which has since merged with 1st Advantage Federal Credit Union, provided her real-world experience of the difficulties facing many small credit unions. Her testimony noted that member expectations, including a desire for mobile banking; challenges in marketing a small credit union; waning sponsorship support; difficulty in recruiting board members; compounded by the realities of today’s marketplace and regulatory requirements, represent significant challenges to the long-term viability of many small credit unions.

League Senior Vice President/Chief Advocacy Officer David Miles also testified in the case, speaking to the challenges of chartering a new credit union – particularly the difficulties in raising the necessary startup capital. His written testimony focused on the long-term viability of de novo credit unions, as well as the credit union business model, operating expenses and Virginia-based small credit unions’ recent financial performance.  

A favorable ruling by the SCC judges might not end the case, however. Bankers would have the option to appeal the case to the Virginia Supreme Court. Almost 20 years ago, the League was party to another key state-level field-of-membership case, involving DuPont Community Credit Union’s community charter expansion. Though the credit union and Bureau of Financial Institutions ultimately prevailed in that case, it was ultimately decided by the Virginia Supreme Court, having been appealed by bankers after unfavorable rulings from the SCC judges.