ST. PAUL, Minn.–Three credit unions and the Minnesota Credit Union Network have filed suit against Minnesota’s state regulator after it barred credit unions from acquiring banks.
The lawsuit, filed in September, was reported by SPG Global.
The three plaintiffs include Eau Claire, Wis.-based Royal CU, Melrose, Minn.-based Magnifi Financial Credit Union and Apple Valley, Minn.-based Wings Financial CU, along with the MnCUN. The defendant is the Minnesota Department of Commerce and its commissioner, Grace Arnold. The suit alleges the regulatory agency incorrectly interpreted Minnesota state law when it denied Lake Area Bank permission to sell to Royal CU, according to SPG Global.
The credit unions claim the decision has invited regulatory confusion and created a "chilling effect" on state-chartered bank acquisitions by credit unions.
As CUToday.info reported earlier, after the Minnesota Department of Commerce rejected the acquisition of Lake Area Bank by Royal Credit Union, the two entities restructured the transaction so that the credit union acquired certain branches and the bank's business banking and mortgage division, SPG Global reported. Lake Area Bank sold its charter to another bank.
‘Inconsistent’ Interpretation
According to the report, the plaintiffs are claiming the regulator "inconsistently and incorrectly interpreted and applied Minnesota law, claiming that state law permits credit unions to purchase the assets and liabilities of federal banks but prevents credit unions from purchasing the assets and liabilities of state banks."
Instead, Minnesota credit union and bank parity laws do allow state-charted banks to sell to credit unions, the lawsuit argues, SPG global stated. The lawsuit also pointed out that the Minnesota Department of Commerce approved Royal CU's acquisition of Minnesota-based and chartered Capital Bank in 2016, the report added.
The lawsuit goes on to claim the regulator's decision in Royal CU's bank transaction "has created a roadblock for such transactions and regulatory confusion and upheaval," according to SPG Global. The suit further alleges that Royal CU, Magnifi Financial CU and Wings Financial CU would like to engage in transactions to acquire Minnesota-chartered banks in the future, and that at one point, Magnifi Financial CU was in the middle of negotiating a transaction, but it withdrew "because of concern that the Department would block the transaction.”
Wings Financial Continues Acquisitions
Wings Financial CU acquired Brainerd Savings and Loan Association in Minnesota in June 2021 without any issues from the state regulator, as the bank was federally chartered. As CUToday.info reported last week, the $8-billion Wings Financial CU has entered the Wisconsin market with the acquisition of the $390-million Settlers Bank in Appleton, Wis.
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