[Congressional Record Volume 143, Number 158 (Monday, November 10, 1997)]
[Extensions of Remarks]
[Pages E2295-E2296]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           RESOLVING THE CREDIT UNION MEMBERSHIP CONTROVERSY

                                 ______
                                 

                          HON. JOHN J. LaFALCE

                              of new york

                    in the house of representatives

                        Sunday, November 9, 1997

  Mr. LaFALCE. Mr. Speaker, a year has passed since the U.S. District 
Court for the District of Columbia issued its order, on October 25, 
1996, barring occupation-based credit unions from adding any new 
members from employer or trade groups that are not part of the core 
common-bond group in their original

[[Page E2296]]

charter. The ruling placed a cloud of uncertainty over the operations 
of nearly 3,600 credit unions that continues to this day.
  The credit union case, National Credit Union Administration versus 
First National Bank & Trust, et. al., is now before the Supreme Court 
with a decision expected sometime early next year. At issue in the case 
are conflicting interpretations of the definition of credit union 
membership in the 1934 Federal Credit Union Act. Since 1982 the credit 
unions have interpreted this definition as permitting them to 
incorporate multiple common-bond groups within their membership. The 
banks interpret the same provision as limiting credit union membership 
to the core common-bond group in a credit union's original charter.
  While the difference between these interpretations may seem minimal 
from the outside, it is extremely important to credit unions, like many 
in my district in western New York, that have a core membership in 
companies that have downsized in recent years or that have tried to 
reach out in their community to serve residents and groups who 
otherwise might have limited access to financial services.
  Like many of my colleagues, I strongly support credit unions and 
believe they play a significant and necessary role in meeting the 
banking and credit needs of a huge segment of our population. While I 
believe credit unions require new opportunities to grow and compete, I 
am sensitive to complaints that larger credit unions not be allowed to 
exceed their original charter and simply duplicate the role and 
services of banks.
  The issue for public policy is now to balance the need for continued 
membership growth by credit unions with the need to assure that credit 
unions do not simply duplicate the role of banks or compete unfairly 
with other local financial institutions.
  Unfortunately, it appears that few in Congress want to address this 
issue and prefer to let it be resolved by the Supreme Court. I 
disagree. It is Congress' responsibility, not the Court's, to update a 
depression-era statute to conform with today's market realities.
  Over the past several months I have worked to develop a legislative 
proposal to effectuate the best public policy on this issue. I do not 
intend to introduce the proposal at this time. Instead, I wish to offer 
it as a vehicle for discussion and as a guideline for future action, if 
needed.
  I do not presume that the approach I am proposing is necessarily the 
right or only answer to the membership controversy. It is certainly not 
an approach that either the credit unions or the banks are likely to 
welcome or support at this time. But either party that loses the court 
decision will certainly view this as an extremely reasonable proposal. 
And it is possible that the Court may deny standing in the current 
case, leaving all parties in the same position of uncertainty as a year 
ago.
  I believe that now, before the Court acts, is the time to discuss 
policy options and to determine what makes good public policy. Waiting 
until after a decision will only harden the positions of both parties. 
I would encourage the credit unions and the banks to come together and 
consider options for resolving the issue in legislation rather than 
additional years of litigation. The approach I am outlining or 
somewhere close to it, could well be where we end up on the issue.
  Mr. Speaker, I have inserted a copy of my proposal elsewhere in 
today's Record. I offer it for the consideration of my colleagues as a 
beginning point for future discussion.

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