Pennsylvania Bankers v. Dept. of Banking
| Decision Date | 28 September 2009 |
| Docket Number | No. 157 C.D. 2005.,No. 98 M.D. 2005.,No. 42 M.D. 2005.,42 M.D. 2005.,98 M.D. 2005.,157 C.D. 2005. |
| Citation | 981 A.2d 975 |
| Parties | PENNSYLVANIA BANKERS ASSOCIATION and the Pennsylvania Business Bank, Petitioners v. PENNSYLVANIA DEPARTMENT OF BANKING and TruMark Financial Credit Union, Respondents Pennsylvania Bankers Association, Pennsylvania Business Bank, Fulton Bank, and Premier Bank, Petitioners v. Pennsylvania Department of Banking, Pennsylvania Department of Revenue, The Attorney General of the Commonwealth, and Freedom Credit Union, Respondents Pennsylvania Bankers Association and the Pennsylvania Business Bank, Petitioners v. Pennsylvania Department of Banking, Respondent. |
| Court | Pennsylvania Commonwealth Court |
Raymond P. Pepe, Harrisburg, for petitioner, Pennsylvania Bankers Association.
Linda Carroll, Deputy Chief Counsel, Harrisburg, for respondent, Department of Banking.
Francis Crowley, Philadelphia, for respondent, Freedom Credit Union.
Daniel T. Fitch, Philadelphia, for respondent, Trumark Financial Credit Union.
BEFORE: SIMPSON, Judge, and FRIEDMAN, Senior Judge, and McCLOSKEY, Senior Judge.
OPINION BY Judge SIMPSON.
TABLE OF CONTENTS
These consolidated cases raising questions of first impression in our appellate jurisdiction are here on remand from the Supreme Court. This is the fourth Commonwealth Court decision, and the seventh appellate court decision spawned by a complex dispute between banks and credit unions in Pennsylvania.
Here, the Pennsylvania Department of Banking (Department) permitted two state-chartered credit unions to convert their fields of membership from employer group-based to community-based, pursuant to recent amendments to the Credit Union Code, 17 Pa.C.S. §§ 101-1504. Several banks and a bankers' association appealed the orders allowing conversion. We are generally asked whether the Department erred in allowing the conversions or denied due process.
In a prior decision, explained below, we examined the history and purposes of credit unions. See Pa. Bankers Ass'n v. Pa. Dep't of Banking & TruMark Fin. Credit Union, 893 A.2d 864 (Pa.Cmwlth. 2006) (Pa. Bankers-Appellate I), rev'd and , 598 Pa. 313, 956 A.2d 956 (2008)(Pa. Bankers-Appellate II). Since inception, Pennsylvania credit union legislation required membership based upon a common bond of association identified in the articles of incorporation.1 In 2002 however, the General Assembly extended the powers of credit unions by providing federal parity. A credit union may now engage in
the activity of creating, amending or expanding its field of membership as authorized by section 109 of the Federal Credit Union Act (48 Stat. 1219, 12 U.S.C. § 1759), subject to reasonable conditions, limitations and restrictions as may be imposed by the [D]epartment, including, but not limited to, conditions, limitations and restrictions based upon safety and soundness.
17 Pa.C.S. § 501(e)(2). In turn, Section 109 of the Federal Credit Union Act provides that a community credit union, as proposed here, shall be limited to "[p]ersons or organizations within a well-defined local community, neighborhood, or rural district." 12 U.S.C. § 1759(b)(3). The Federal Credit Union Act requires the National Credit Union Administration Board (NCUA) to prescribe by regulation the definition of a "well-defined local community, neighborhood, or rural district." 12 U.S.C. § 1759(g)(1).
The NCUA promulgated rules setting forth the requirements for establishing a "well-defined local community" as follows: the geographic area's boundaries must be clearly defined; the charter applicant must show the area is a "well-defined local community, neighborhood, or rural district;" and, the residents must have common interests and/or interact. 63 Fed.Reg. 72037 (December 30, 1998). As more fully discussed below, at the heart of this matter is whether the expanded area for credit union service constitutes a "local community."
In 1939, employees of Bell Telephone Company founded Bell Telephone Employees Credit Union, which later became Philadelphia Federal Credit Union. After converting from a Federally-chartered credit union to a state chartered credit union, it changed its name to the Philadelphia Telco Credit Union. It now operates under the name TruMark Financial Credit Union (TruMark).
Headquartered in Bucks County, TruMark's field of membership consists of 500 select employer groups located throughout Bucks, Chester, Delaware, Montgomery and Philadelphia Counties. As discussed below, these same five counties comprise the "local community" proposed for membership conversion. TruMark maintains branch offices in Chester, Montgomery and Philadelphia Counties, and it employs 200 people to serve 76,491 members. Its assets total $760 million.
In November 2003, TruMark filed with the Department an application for charter conversion to serve a community field of membership (Conversion Notice). The amendment to TruMark's articles of incorporation would allow TruMark to convert its field of membership from employer-based memberships to geographic, or community, based memberships. In particular, TruMark sought to convert its field of membership to persons who live, work, worship, or attend school and businesses and other legal entities in Bucks, Chester, Delaware, Montgomery and Philadelphia Counties (proposed community). The Department published notice of TruMark's Conversion Notice in the Pennsylvania Bulletin.
Freedom Credit Union (Freedom) was established in 1934 as the Philadelphia Teachers' Credit Union. Throughout the years, Freedom's field of membership grew to include Delaware and Montgomery County teachers as well as administrative and teaching employees of universities, colleges and tax-supported schools. It employs 82 people, and its current field of membership includes 173 select employer groups. Freedom's assets total $265 million. It maintains branch offices in Bucks, Montgomery, and Philadelphia Counties.
In October 2003, Freedom submitted to the Department a community charter application (collectively, Conversion Notices). It sought to convert its field of membership from employer-based memberships to a community field of membership consisting of persons who live, work, worship, perform volunteer services, attend school, or participate in associations headquartered in, and businesses and other legal entities located in the same five counties proposed in TruMark's Conversion Notice as well as in the New Jersey Counties of Burlington, Camden, and Gloucester. The Department published notice of Freedom's Conversion Notice in the Pennsylvania Bulletin.
After publication of the Conversion Notices, the Pennsylvania Bankers Association and the Pennsylvania Business Bank (collectively,...
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