The MIT Employees' Federal Credit Union (MITEFCU) is tracking developments following a US Supreme Court decision that could affect membership and services of credit unions.
On February 25, the Supreme Court decided a case that charged federally chartered credit unions with exceeding their legal market boundaries. The complaint was brought by a group of North Carolina bankers who questioned the eligibility policy, known as the "select employee group policy," of the National Credit Union Administration as implemented by the AT&T Family Credit Union. The suit argued that expanding credit union membership eligibility beyond employees of AT&T was in conflict with the Federal Credit Union Act. The charge implied that such expansion constituted unfair competition with banks.
While the court's 5-4 decision favored the bankers, the ruling is not expected to affect the current eligibility policy of the MITEFCU, which restricts membership to employees of MIT, MIT/Lincoln Lab, and close affiliates Draper Laboratory and Whitehead Institute. Families of primary members are also eligible.
The House of Representatives also recently passed the Credit Union Membership Access Act (HR 1151). If approved by the Senate, the bill would in effect reverse the Supreme Court ruling by restoring the right of all consumers to join a credit union.
There is, however, concern among CEOs of all credit unions that the court decision could set the stage for future challenges from the banking industry and negatively affect other aspects of credit union membership.
"Because we are member-owned and not-for-profit, our members can obtain most financial products and services from us at a significantly lower cost than they would pay elsewhere in the financial services industry," said Paul L. Bergonzi, chief executive officer and treasurer of MITEFCU. "We want to preserve that unique cost advantage and other member benefits from future court challenges. With regard to the current decision, we emphatically take the opposing position that all consumers should have the option to do their financial business with a credit union, if they choose."
The Supreme Court decision on member eligibility has been remanded to the district court for implementation. An injunction that allows credit unions to continue their present select employee group policy remains in effect until the lower court's interpretation.
Mr. Bergonzi suggests that MIT community members write Senators Edward M. Kennedy and John F. Kerry and ask them to support fair market competition in the financial services industry by voting "yes" for the Credit Union Membership Access Act. The Senators' addresses are available from the credit union at x3-2845.
MITEFCU is located on campus in Rm E19-437 and at Lincoln Laboratory in Building A, Rm 100.
A version of this article appeared in MIT Tech Talk on April 8, 1998.