The three-year legal battle between statewide banks and Richmond’s largest credit union is over, at least for now.
The Virginia State Corporation Commission on Wednesday ruled against the Virginia Credit Union in its attempt to expand by offering membership to the 10,000-member Medical Society of Virginia.
The ruling is a victory for the Virginia Bankers Association and the seven banks that are denying VACU a chance to win the MSV ranks business, which consists primarily of physicians, a profession that is often a coveted customer segment for banks.
Wednesday’s decision by SCC commissioners contradicts an earlier recommendation by an SCC examiner, who suggested in July that VACU should emerge victorious in the case.
The commission’s decision focused on one of the main arguments in the case: whether MSV is able to form its own credit union, which industry groups have often done in the past.
“The Commission found that VACU failed to demonstrate that ‘the formation of a separate credit union by (MSV) is not practicable or does not meet reasonable standards of safety and soundness’.”
The controversy began in 2019 when the VACU applied to allow MSV in their member area. This was done at the request of MSV, the document says.
The application was originally approved by Financial Institutions Commissioner Joe Face before being denied by a group of bankers.
The PLA-led group argued that the VACU’s requirement to expand membership to 3,000 potential new members at a time went far beyond the legal limit. Due to the size of the group and its nationwide reach, an MSV request from a Virginia credit union is by far the largest such request.
With total assets of more than $4 billion and 300,000 members, VACU is a not-for-profit credit union that banks say has become too large and “bank-like,” but without the same tax burden as its for-profit counterparts.
The banks that have signed with VBA as applicants are Farmers Bank at Windsor, American National Bank and Trust at Danville, First Bank and Trust at Abingdon, First National Bank at Altavista, Chesapeake Bank at Kilmarnock, the Bank of Charlotte County and the Blue Ridge Bank. Chesapeake Bank, First Bank and Blue Ridge Bank each have a presence in the Richmond market.
The group of bankers argued that Virginia law requires groups of 3,000 or more people to form their own credit union. The VACU and its camp have stated that this should only be done if a credit union can reasonably be built within the safety and soundness standards expected of regulated credit unions.
MSV admitted during the proceedings that it had not attempted to form a credit union itself.
After the verdict came in on Wednesday, a VACU spokesman said in an email: “We are disappointed with the decision. We believe it was appropriate to extend membership eligibility as an option to members of the Society.”
The SCC’s decision not only rejected the expansion of the VACU, but also formally dismissed the case. However, the credit union has an opportunity to appeal to the Virginia Supreme Court. VACU said it has yet to decide whether to appeal.
A group of bankers called the decision a victory.
“We are pleased with the SCC’s decision and it is consistent with our original interpretation of Virginia law and the reason for initiating this appeal in 2019,” VBA CEO Bruce Whitehurst said in an emailed statement Explanation.
MSV said it had no comment on the decision.