[Congressional Record Volume 144, Number 39 (Tuesday, March 31, 1998)]
[Senate]
[Pages S2874-S2875]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        CREDIT UNION MEMBERSHIP

 Mrs. BOXER. Mr. President, on February 25, the Supreme Court 
issued an opinion invalidating the National Credit Union 
Administration's (NCUA) multiple group policy. I am concerned that the 
Court's ruling may require some current credit union members to divest 
their credit union membership. Let me explain.
  Section 109 of the Federal Credit Union Act of 1934 provides that 
``federal credit union membership shall be limited to groups having a 
common bond of occupation or to groups within a well-defined 
neighborhood, community or rural district.'' Accordingly, prior to 
1982, federal credit unions were chartered to serve a single group 
affiliated by either occupation, association, or residency in a well-
defined community.
  In 1982, however, the NCUA altered its interpretation of section 109 
to allow federal credit unions to comprise not just one, but multiple 
occupational groups. For example, a credit union formed by and serving 
the employees of a clothing store, could also, pursuant to the NCUA's 
1982 interpretation, serve the employees of a grocery store or a 
pharmaceutical company. In 1990, a group of North Carolina Banks, as 
well as the American Bankers Association filed suit against the NCUA 
arguing that the NCUA interpretation was contrary to the Federal Credit 
Union Act. The Supreme Court recently issued an opinion in which they 
found on behalf of the five North Carolina banks and the American 
Bankers Association.
  I think it is important to ensure, however, that no current credit 
union member be forced to give up their membership if they are 
multiple-group credit union members. I know that my friend and 
colleague Senator Kerry is also concerned about this issue.
  Mr. KERRY. Mr. President, I thank Senator Boxer and I share her 
concern that the Supreme Court ruling could require some credit unions 
to remove some individuals from credit union membership. The credit 
unions operated in good faith when they extended membership to members 
of unrelated groups. However, the Supreme Court found that such actions 
have gone beyond the bounds of the Federal Credit Union Act.
  The U.S. District Court, to which the Supreme Court returned the 
case, can choose from a number of alternatives to provide the required 
relief in National Credit Union Administration v. First National Bank & 
Trust et al.  The Court could choose to expel current credit union 
members who are not affiliated with the original occupational group, 
grandfather all current members of credit unions but prevent credit 
unions from adding any new members who are not affiliated with the 
original group or allow credit unions to add new members from any 
employer groups represented by current credit union members but 
preclude adding members from other unrelated occupation groups.
  I believe the members of all current multiple-group credit unions 
should be allowed to continue in the credit unions they have chosen. 
Dislocating approximately 10 million credit union members not 
affiliated with their credit union's original occupation group could 
potentially have serious effects on the safety and soundness of the 
credit unions in Massachusetts and across the nation. It would also 
limit the credit and financial services options for millions of working 
families who have come to depend on their credit unions.
  I am not prejudging precisely how the Congress should legislate a 
final resolution of this matter. It deserves careful consideration by 
Senators and Representatives. But, I believe strongly that until that 
resolution is determined and enacted into law, it would be a grave 
mistake for the Court to force existing credit union members out of the 
affiliation with their credit unions. Such a step would be counter to 
the public interest.
  Mrs. BOXER. I would add that the American Bankers Association, to its 
credit, has said that, despite the Court's ruling, it has no intention 
of trying to force credit union members who currently belong to 
multiple-employer group credit unions to divest their membership. I am 
hopeful, therefore, that Judge Jackson will allow all current credit 
union members to remain with their respective credit unions.
  Mr. KERRY. I agree with my good friend and also applaud the American 
Bankers Association decision not to seek action to force dropping 
credit union members from credit union rolls. All working families in 
the United States, whether they live in urban or rural areas, deserve 
access to fairly priced credit and other financial services. Credit 
unions serve as a way for people of average means, without easy access 
to affordable credit, to pool their savings in order to make credit 
available to themselves and their fellow credit union members at 
competitive interest rates. In the Commonwealth of Massachusetts, for 
example, there are more than 300 credit unions serving approximately 
1.7 million people. These credit unions have helped launch and sustain 
small businesses. Some of them have played a key role in the 
development and revitalization of economically distressed communities. 
In dozens of ways, credit unions have proven themselves to be a vital 
component of our financial services industry. We must not take 
precipitous action that could result in grave damage to this portion of 
the industry. That is especially important until the Congress can pass 
legislation.
  Mrs. BOXER. I could not agree more. In my home state of California, 
there are 500 federal credit unions and more than 5 million credit 
union members. So credit unions have been an extremely valuable 
resource to millions of residents of my state as well.
  Finally, Mr. President, I think it is important to put into some 
context the multiple-group charters that the NCUA began approving in 
1982. Beginning in 1982, as a result of the economic conditions of the 
time--the downsizing of companies, the closing of plants, and slumping 
U.S. industries--the stability and viability of a number of individual 
credit unions was threatened. Simultaneously, we started seeing the 
beginnings of an upsurge in the number of

[[Page S2875]]

small businesses. Those small businesses wanted access to credit union 
services, even though many did not meet the 500 employee threshold for 
a charter.
  Thus, multiple group charters became a means of ensuring that those 
small businesses, as well as low-income consumers lacking access to 
more traditional financial services, were able to access the services 
of credit unions. I believe that these groups should to continue to 
have access to credit union services, whether through individual or 
multiple group charters.

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