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Kentucky FOM suit gets CUNA backing
WASHINGTON (4/3/08)--The Credit Union National Association (CUNA) is arguing that a lower court in Kentucky got it wrong when it applied federal administrative law precedents to a credit union field of membership lawsuit in that state. CUNA this week filed an amicus brief with the Kentucky Court of Appeals in a case filed by Home Federal Savings and Loan Association in May 2006 and referred to as Home Fed. Sav. & Loan v. Kentucky. That suit against the Kentucky Office of Financial Institutions (OFI) alleges that the OFI has no authority under Kentucky law to approve geographic field of membership bylaws for Kentucky credit unions. On Oct. 25, 2007, the Kentucky Circuit Court for Franklin County sided with the plaintiff and ruled that the OFI exceeded its statutory authority when it approved geographic fields of membership for six state-chartered credit unions between 2000 and 2005. CUNA's amicus brief states that the lower court incorrectly applied federal administrative law precedent, instead of Kentucky administrative law, to deny the OFI judicial deference. And the court further erred, CUNA argues, because if correctly applied the federal precedent would have compelled the court to back the state regulator under judicial deference. Under judicial deference, if the statutory language in question is ambiguous, the court is required by law to give deference to the regulator’s interpretation unless the interpretation is unreasonable. A third point in the CUNA brief criticizes the court for failing to consider the actual facts of the case, never having investigated the actual fields of memberships of the credit unions named in the suit. The Kentucky CU League has been involved in the case since it filed an amicus brief in 2007. The plaintiff thrift's complaint was submitted by the General Counsel of the Kentucky Bankers Association. CUNA General Counsel Eric Richard Wednesday explained CUNA’s involvement in the case: “This lawsuit is part of a pattern in which bankers have been challenging community charters in state courts around the country." In addition to Kentucky, Richard noted, multiple cases have been brought in Missouri, since resolved by state legislation, and Pennsylvania. The six credit unions named in the bankers’ lawsuit are:
* Members Choice CU, a $101.7 million asset credit union based in Ashland; * $11.5 million asset C&O United CU, Edgewood; * $77.7 million asset Service One CU, Bowling Green; * $30.7 million asset Beacon Community CU, Louisville; * $57 million asset GTKY CU, Lexington; and * $43 million asset Kentucky Employees CU, Frankfort.


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