Academic journal article ABA Banking Journal

Utah Banks' Court Victory Pushes State-Chartered CUs into New Strategies

Academic journal article ABA Banking Journal

Utah Banks' Court Victory Pushes State-Chartered CUs into New Strategies

Article excerpt

Credit unions typically like to wrap themselves in the mantle of "by the people, for the people" institutions. In Utah they are taking a recent court defeat to the people for redress.

In early November, a long-pending state case, Utah Bankers Association v. America First Credit Union et al, was decided in the bankers' favor. State-chartered credit unions there hadn't been subjected to meaningful common bond restrictions for some time, and, under a 1980s interpretive ruling from the state regulator, who was also sued, there have been no effective geographic restrictions on state-chartered community credit unions either. America First is the largest Utah-chartered credit union.

"The plain language of the Utah Code ... is quite clear," wrote William A. Thorne, the state judge, in his opinion. "Membership in a credit union with a geographic field of membership is limited to an identifiable neighborhood, community, rural district, or county.' ... This court finds that geographically chartered credit unions are prohibited from seekng and enrolling as members, people who live outside of a single county..." The judge did not require divestiture of current members.

Even as the details of the injunction the banks wan against further unrestricted marketing was being hammered out, the credit unions looked for an out. Two strategies were eventually employed. …

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