President Bill Clinton signs H.R. 1151 in the oval office in 1998.
When President Bill Clinton signed into law H.R. 1151—the Credit Union Membership Access Act—on Aug. 7, 1998 it was the culmination of a hard-fought battle.
The battle started in the lower courts, went to the U.S. Supreme Court, rallied a national grassroots campaign, and ended in landmark legislation.
The former AT&T Family Credit Union, now $2.3 billion asset Truliant Federal Credit Union in Salem, N.C., and its President/CEO Marc Schaefer were at the heart of the fight 20 years ago. Schaefer is now Truliant Federal's CEO.
The American Bankers Association and local banks were unhappy that AT&T Family Credit Union opened a branch in Asheboro, N.C., to serve employees of its sponsor company.
Thirteen finance companies, including some owned by big banks, were located in the town of 30,000 people. Bankers took the issue to court.
‘There was no question. We had to fight this fight.’
“These banks were charging much higher interest rates for loans and they were charging fees for services that were free at AT&T. We felt responsible to this community and the companies that were asking us to serve their employees. There was no question. We had to fight this fight,” Schaefer says.
And while the banking industry had money on its side, credit unions had a potent and powerful messenger: credit union member-owners.
Significant stakes
The stakes for credit unions and their members were significant.
A Depression-era law, the 1934 Federal Credit Union Act, specified that credit union members must have a “common bond.” Relevant bonds could relate to occupation, association, or residence in a geographic area—but only one bond could unite members at each credit union.
Most credit unions were formed through single employers, such as AT&T Family Credit Union. But when an employer closed or moved production elsewhere, regulators were forced to close the credit union and pay off the depositors. During the economic turmoil in the 1970s and ‘80s, these closures and moves became common and strained the credit union insurance fund.
To resolve this issue, regulators adjusted their interpretation of the 1934 Federal Credit Union Act and started allowing credit unions to form around more than one “bond,” enabling the merger of many credit unions. It was this consolidation process that worried the American Bankers Association and led to court fights.
Supreme Court rules
One of the lawsuits was initiated in 1990 by the First National Bank & Trust in Asheboro, three other North Carolina banks, and the American Bankers Association.
They sued NCUA after the agency approved a membership expansion for AT&T Family Credit Union, allowing it to serve employer groups not related to AT&T. The bankers said the membership expansion was a violation of the 1934 law.
‘Our attorney was John Roberts, now Chief Justice of the Supreme Court, so we had really good representation.’
The case eventually wound its way to the Supreme Court. In February 1997, the Supreme Court agreed to hear the case, and on Feb. 25, 1998, it issued a 5-4 decision in "NCUA vs. First National Bank & Trust."
The Supreme Court ruled credit unions could not consist of more than one occupational group as their common bond.
“I was very disappointed,” Schaefer says. “Our attorney was John Roberts, now Chief Justice of the Supreme Court, so we had really good representation.”
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