The Virginia Credit Union League (VACUL) has filed to participate in the state-level field of membership case between the Bureau of Financial Institutions and Virginia Bankers Association (VBA). The matter is currently being argued before the State Corporation Commission (SCC).

At contention is the recent decision by the state regulator to put a hold on Virginia Credit Union’s (VCU) planned expansion to serve the 10,000-strong Medical Society of Virginia (MSV). The move was approved initially by the BFI, however a petition from the Virginia bankers challenged this outcome, asking that the SCC revisit the opinion.

The VACUL’s participation includes the submission of an amicus brief—a legal document often filed in appellate court cases by non-litigant, interested parties to advise the court of further context and relevant information.

The original decision to allow the inclusion of the MSV into VCU’s field of membership was handed down by the Virginia Commissioner of Financial Institutions July of this year. Within two weeks, a “Petition for Rehearing and Reconsideration” was filed by the VBA. In it they claimed, given the MSV’s size, the organization should create a new credit union rather than joining an existing one, writing that the society “does not meet the criteria that a group must in order to permit the inclusion of that group in an expansion of a credit union,” before going on to label the commissioner’s decision “arbitrary and capricious and without foundation.”

Although the stay has been granted, a response in late September from the SCC to the petition held that the commissioner had “fully analyzed the record before him in compliance with his designated authority and the specific criteria required by applicable state and federal law.” Further, the filing reads that the original approval was granted “primarily because he did not believe that the MSV could reasonably establish and operate its own credit union.”

This argument was echoed in a response filed by the MSV, in which it writes, the society “has neither the interest nor practical ability to start its own credit union to provide the broad range of services that are currently available from Virginia CU,” nor does it “have its own financial resources to devote to the formation of a start-up credit union.”

The VACUL declined to comment with the case pending, but in its official response to the petition states its involvement in the proceedings is “to protect the interest of its members, including Virginia CU.”

The support filing goes on to note that although by law, “the SCC must ‘encourage the formation of a separately chartered credit union instead of adding a new group to the field of membership of an existing credit union,’ that charge only applies when formation of a new credit union would be ‘practicable and consistent with reasonable safety-and-soundness standards.’”

These are norms that, given rising costs, have become increasingly difficult to meet, as the brief duly notes, “The creation and survival of new credit unions has become exceedingly rare. The Commission has not issued a charter for a new state credit union since 1986.”

Banks in general have long held they are at a competitive disadvantage due to the exemptions credit unions receive on certain federal and state income taxes. This is the backdrop that ultimately hangs over this case. The Virginia league concluded in its filing, “Credit unions are exempt from certain taxes because they are not-for-profits serving a limited field of membership; their membership is not limited because they are exempt from taxes.”

Field of Membership Expansion

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