Va. Credit Union loses bid to expand membership

The Virginia State Corporation Commission ruled Wednesday that the Chesterfield County-based Virginia Credit Union cannot expand its membership to the Medical Society of Virginia, possibly resolving a three-year battle between the credit union, the Virginia Bankers Association and several community banks in the state.

The credit union issued a brief statement Wednesday: “We are disappointed by the decision. We believe that extending membership eligibility as an option for members of the society was reasonable.” Under state law, VACU has the option to appeal the decision to the Virginia Supreme Court, but spokesman Glenn Birch said Wednesday that the credit union has not decided whether it plans to appeal.

The dispute started in August 2019, when the VBA and seven small community banks appealed to the SCC in protest after the state Bureau of Financial Institutions in July 2019 approved VACU’s request to offer membership to the medical society’s 10,000 members. The banks contended that with 10,000 more members, VACU would have too great an advantage over community banks, which operate under different rules than nonprofit credit unions and could potentially lose tax revenue. In March, the banks summed up their case, declaring that “credit unions have a sweet deal,” with “no [federal or state] income taxes … and no obligations to invest in the community.” Credit unions are, however, responsible for paying real estate and personal property taxes.

Ultimately those arguments meant less in Wednesday’s ruling by SCC Commissioners Jehmal T. Hudson and Judith Williams Jagdmann, who found that VACU did not meet the required burden of proof that the medical society was unlikely to be able to form its own credit union — which is preferable under state law, as opposed to allowing a large organization’s members to join an existing credit union. The society has more than $3.52 million in securities and more than $1 million in equity in its building that could help fund a new MSV credit union, according to research by economic analyst Christine Chmura on behalf of the banks. Also, the society’s CEO, Melina Davis, is a member of the credit union’s board and “could provide valuable expertise” to an MSV credit union, according to the ruling, citing Chmura’s report.

VBA President and CEO Bruce Whitehurst said Wednesday that his organization is “obviously pleased with the ruling, which is consistent with state law.” Steven C. Yeakel, president and CEO of the Virginia Association of Community Banks, echoed Whitehurst’s comment, saying, “We are obviously pleased with the ruling.”

However, Virginia Credit Union League President and CEO Carrie Hunt said, “It remains disappointing and frustrating that the bankers continue to thwart credit unions from providing provident credit to Virginians. The reality is, credit unions are not in competition with community banks. Large banks are. The Virginia Credit Union League will continue to zealously fight for the interests for all credit unions in Virginia to do what they do best — provide the best in consumer financial services to citizens in the commonwealth.”

Virginia Credit Union is the third largest credit union based in Virginia, with about $5.04 billion in total assets as of March and more than 300,000 members. In 2019, the credit union said that the medical society approached it about joining, and the matter was brought before the Bureau of Financial Institutions, which is required to approve any membership expansion of more than 3,000 under state law. VACU, like many credit unions, has expanded its scope for membership over the years. It started as a service only for state employees, but its charter was changed to include city and county employees, students at state universities and people who live in several localities in Virginia, including Fredericksburg, Petersburg and Richmond.

The case took longer than expected, as an original SCC hearing took place in July 2020, with a decision expected later that year. However, Whitehurst noted, the COVID-19 pandemic, which forced most work to take place virtually at first, and the commissioners’ decision to hold a second hearing last year, caused the ruling’s delay. SCC spokesperson Andy Farmer said Wednesday that “this was a complex case with multiple parties participating and a significant amount of evidence. In their deliberations, the SCC commissioners review the entire case record.”