Help for Federal Credit Unions on Capitol Hill (340)

KNOXVILLE, Tenn. — The recent U.S. Supreme Court ruling which federal credit unions claim would strangle their membership growth won’t be a long-standing problem for the industry.

 Dr. Harold Black, University of Tennessee professor of finance, said Friday the federal credit unions will either get relief from Congress or they will swap their federal charters for state charters that are usually less restrictive.

 Hearings on legislation that would undo the court decision are scheduled to begin March 9 in the House Banking Committee.

 “The Congress is not going to alienate the credit union community,” Black said. “They will write some legislation that’s favorable to them.”

 In 1979 Black was one of three members appointed to the first board of directors of the National Credit Union Administration, which regulates the industry.

 When Black was on the board it did not allow the credit unions to expand membership beyond “common bond” usually based on geography and occupation.

 “There was a lot of pressure to allow it, but as long as I was on the board, we did not permit expansion beyond the traditional common bond,” Black said.

 In the case decided by the Supreme Court, the National Credit Union Administration was sued for allowing the AT&T Family Federal Credit Union to expand its membership to include soda bottlers, cigarette makers and concrete pourers.

 Justice Clarence Thomas wrote, in the 5-4 decision, “….members of an occupationally defined federal credit union must be united by the same common bond of occupation.”

 Black said the decision was a setback for the federal credit unions because the industry has added millions of new members since 1982 by expanding their rolls outside the common bond.

 Before the credit unions must trim their membership lists, Congress will likely change the law to make such action unnecessary, Black said.

 “They did the same thing in the early 1980s when the court said credit unions could not offer share drafts, which are checking accounts,” Black said. “The court gave them a year to divest themselves of those accounts, which gave Congress time to change the law.”

 — Contact: Dr. Harold Black (423-974-1721)