Supreme Court to Hear Case on Credit Union Membership

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WASHINGTON -- The U.S. Supreme Court will step into a heated dispute over whether federal credit unions can accept members from outside companies and other groups.

The justices Monday said they will hear an appeal of a lower- court ruling that prevents an AT&T Corp. credit union in North Carolina from accepting membership applications from employees of other companies.

Banking groups have won a series of court victories in their effort to restrict credit union membership. The high court's decision to take the case gives credit unions a chance to reverse their legal fortunes in a battle that could ultimately affect as many as 20 million credit union members. Credit unions are seeking to attract new borrowers, a move that could take potential customers from banks. Banks say unchecked expansion would give credit unions the legal advantages now possessed by banks -- without requiring credit unions to give up their tax- exempt status and their exemption from federal community investment requirements. A defeat at the high court could cut the long-term growth prospects for the credit union industry. The NCUA has estimated that lower court rulings have cut the number of people eligible to join credit unions in half, by more than 100 million people. Credit unions could also be forced to close the accounts of an estimated 20 million of the 70 million current federal credit union members, if the courts order retroactive application of the rulings. The dispute stems from a 1982 ruling by the National Credit Union Administration, allowing multiple groups to form a single company- based credit union, so long as each group shared a common bond. The regulatory agency's ruling stood until last July, when a Washington, D.C.-based federal appeals court said that all members of AT&T's Family Federal Credit Union must share a single common bond, not a series of separate bonds. A lower court then applied that rule nationwide, overturning the NCUA rule and blocking credit unions from affiliating with new groups. The credit unions, joined by the NCUA and President Bill Clinton's administration, say the appeals court misinterpreted the 62-year- old governing statute, which limits membership in company-based credit unions to "groups having a common bond of occupation or association. …


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