DATE: February 25, 1998
LETTER
NO.: 98-FCU-2
TO ALL FEDERAL CREDIT UNIONS:
This letter is intended to inform you
of an important decision issued today by the United States Supreme
Court. In NCUA v. First National Bank & Trust Co.,
et al., plaintiffs challenged NCUA's longstanding
select employee group policy. This policy, first adopted in 1982,
permitted multiple groups, each having a separate common bond,
to be part of a single Federal credit union. Plaintiffs alleged
that this policy was contrary to the plain language of the field
of membership provision of the Federal Credit Union Act. The
Court agreed. This means that NCUA's select employee group
policy is invalidated, unless Congress changes the field of membership
provision of the Federal Credit Union Act.
The case will now be returned to the
lower court for a determination of appropriate relief. NCUA has
appealed several issues relating to the scope of relief provided
for in the Federal District Court's injunction. These issues
relate to the application of this decision to select employee
groups which were added to credit unions prior to the Court of
Appeals decision in July 1996. These appeals will have to be
decided before the scope of the relief can finally be resolved.
For the time being, you should continue to comply with the terms
of the October 26, 1996, injunction as partially stayed on December
24, 1996. This means that you may continue to admit new
members from existing select groups.
We regret that the Court's ruling invalidates
NCUA's select employee group policy. We support the expedited
consideration by Congress of this matter to change the language
of Federal Credit Union Act to expressly permit multiple group
credit unions.
In order to minimize the effect of this
decision on the safety and soundness of credit unions, NCUA is
taking the following steps:
> We will immediately ask the D.C.
Circuit Court of Appeals to continue its partial stay of the District
Court's injunction while we pursue our appeals of the appropriate
scope of any relief. If granted, this motion will allow credit
unions to continue to operate as they have since the partial stay
was issued on December 24, 1996.
> We are reviewing lawsuits challenging
other aspects of NCUA's chartering policy which have been brought
in various districts around the country. Where appropriate we
will continue to vigorously defend these actions.
> We will be issuing a revised
chartering manual consistent with the Supreme Court's ruling for
notice and comment in the near future.
For further information contact your
regional office.
For the National Credit Union Administration
Board,
__________________________________________
NORMAN E. D'AMOURS
Chairman