Missouri FOM Case Could Reverberate

JEFFERSON CITY, Mo. (03/31/06) – A state court ruling striking down the state’s field of membership rule could have broad ramifications around the country as two federal courts begin to deliberate the FOM issue, one, in Pennsylvania, over similar issues. In its decision, the Cole County Circuit Court struck down many of the constricts that have allowed credit unions, both state and federally chartered, to establish ever broader areas community FOMs.

The court overruled the authority of the state’s CU Commission, made up by a majority of credit union executives, to define what would be considered a valid geographic area for purposes of setting an FOM and asserted that boundaries accepted by the Commission, such as counties, townships, zip codes, telephone area codes and even cities do not qualify under the state's statute--which is based on NCUA's--to delineate community FOMs.

In fact, Judge Richard Callahan said the broad community grants awarded the state chartered credit unions did not fit the definitions of "well-defined," "local neighborhood" or "rural district," on which both the federal law and the state's, adopted in 1998 just before the passage of HR 1151, the CU Membership Access Act, rely to approve community FOMs.

The ruling comes as a federal court in Pennsylvania is deliberating on whether NCUA violated the federal statute in granting a broad six-county community charter for two local credit unions. In a separate case, a federal court in Utah is also reviewing whether NCUA violated the law in granting underserved expansions to community chartered credit unions. (CU Journal)