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Multiple-Group Federal Credit Unions: An Update

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Abstract:

Multiple-group federal credit unions (FCU) and litigation challenging the structure and membership in these FCUs have been the focus of much media attention and congressional concern. On February 25, 1998, the U.S. Supreme Court ruled in favor of the banking industry, invalidating the NCUA’s policy regarding multiple-group fields of membership. The court case is the most recent effort by the banking industry in an ongoing battle. Bankers claim that credit unions have outgrown their founding principles and no longer deserve the competitive advantages of federal tax exemption and less stringent regulatory procedures. On April 1, 1998 the House passed credit union legislation, H.R. 1151. The legislation would grandfather all current FCUs and all current credit union members. In addition, the bill provides for future multiple-group formations subject to limitations that the NCUA must consider when authorizing charters. On April 30, 1998, the Senate Banking Committee passed H.R. 1151 with amendments. The Senate version contains provisions for stricker supervisory and commercial lending requirements.