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Members Own Credit Union

A lawsuit is challenging MembersOwn Credit Union's proposed expansion of its membership field to much of southeast Nebraska.

Two banking trade groups are suing the Nebraska Department of Banking and Finance and a Lincoln credit union over the credit union's plans to expand its reach.

The Nebraska Bankers Association and the Nebraska Independent Community Bankers filed a lawsuit last week alleging that the Banking Department's approval of an expansion by MembersOwn Credit Union was improper.

MembersOwn, which is based in Lincoln, applied early last fall to expand its field of membership from Gage and Lancaster counties to a 13-county area in southeast Nebraska.

The Banking Department held a hearing on the request in January and then ruled last month that MembersOwn could expand to Jefferson, Saline, Seward, Saunders, Cass, Otoe, Johnson and Pawnee counties because they "comprise an area that is a well-defined local community for purposes of establishing a community charter credit union." The department ruled, however, that Butler, Nemaha and Richardson counties did not qualify as part of that "well-defined local community," and it denied expansion to those areas.

Linda S. Carter, president of MembersOwn, expressed her disappointment with the lawsuit, but is "excited that the Nebraska Department of Banking and Finance approved our bylaw request" for expansion.

"Five of these counties aren’t even served by a credit union and we’re pleased to be able to offer them the option of a not-for-profit financial institution," she said.

In the lawsuit, the two banking groups allege that neither MembersOwn's membership nor its articles of association meet state membership qualification standards, meaning it only qualifies under federal law.

Federal law, the lawsuit says, limits community credit union membership to people either in a single political jurisdiction or in a federally recognized statistical area.

Using federal standards, the lawsuit argues, MembersOwn has "failed to provide persuasive and compelling evidence that its expanded field of membership area constituted a well-defined local community."

The lawsuit seeks to have the Banking Department's decision overturned.

Richard Baier, president and CEO of the Nebraska Bankers Association, said his organization and the Nebraska Independent Community Bankers filed the lawsuit because they believe MembersOwn's application goes "above and beyond" what has generally been accepted for parameters of credit union membership expansion.

Baier said there is a bigger issue of credit unions in general going beyond their intended purpose of serving low- and moderate-income residents in narrowly defined areas and getting more and more into expanded banking activities while also wanting to maintain their tax-exempt status.

"If they want to act like a bank, they should pay taxes like banks do," he said.

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Reach the writer at 402-473-2647 or molberding@journalstar.com.

On Twitter @LincolnBizBuzz.

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