LINCOLN, Neb.–Two state banking groups here have filed suit against the Nebraska Department of Banking and MembersOwn Credit Union over the credit union’s plans to expand its field of membership.
The Nebraska Bankers Association and the Nebraska Independent Community Bankers filed the lawsuit last week alleging the regulator’s approval of the FOM expansion is improper, the Lincoln Journal Star reported.
The $100-million MembersOwn applied early last fall to expand its field of membership from Gage and Lancaster counties to a 13-county area in southeast Nebraska, according to the report.
In January, the Banking Department held a hearing on the request and then ruled in May that MembersOwn could expand to Jefferson, Saline, Seward, Saunders, Cass, Otoe, Johnson and Pawnee counties in Nebraska because they "comprise an area that is a well-defined local community for purposes of establishing a community charter credit union,” the Journal Star stated.
The department ruled, however, that Butler, Nemaha and Richardson counties did not qualify as part of that "well-defined local community," and it denied expansion to those areas.
CU Responds
The Journal Star said Linda S. Carter, president of MembersOwn, expressed disappointment with the lawsuit, but quoted her as saying she is "excited that the Nebraska Department of Banking and Finance approved our bylaw request" for expansion.
"Five of these counties aren’t even served by a credit union and we’re pleased to be able to offer them the option of a not-for-profit financial institution," she told the publication.
Bankers’ Allegations
The two banking groups are alleging that neither MembersOwn's membership nor its articles of association meet state membership qualification standards, meaning it only qualifies under federal law, the Journal Star stated, adding federal law limits community credit union membership to people either in a single political jurisdiction or in a federally recognized statistical area.
“Using federal standards, the lawsuit argues, MembersOwn has ‘failed to provide persuasive and compelling evidence that its expanded field of membership area constituted a well-defined local community,’” the Journal Star said.
The lawsuit seeks to have the Banking Department's decision overturned.
Richard Baier, president and CEO of the Nebraska Bankers Association, told the Journal Star his organization and the Nebraska Independent Community Bankers filed the lawsuit because they believe MembersOwn's application goes "above and beyond" what has generally been accepted for parameters of credit union membership expansion.
‘Going Beyond Intended Purpose’
Baier further told the publication there is a bigger issue of “credit unions in general going beyond their intended purpose of serving low- and moderate-income residents in narrowly defined areas and getting more and more into expanded banking activities while also wanting to maintain their tax-exempt status.”
"If they want to act like a bank, they should pay taxes like banks do," he was quoted as saying.
Founded in 1984, MembersOwn CU has approximately 8,400 members.