VACU Loses Three-Year Battle to Bankers Over FOM Expansion & More Latest News Here – Up Jobs

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One of Virginia’s largest credit unions said Monday it hasn’t decided yet whether to appeal a recent ruling by the State Corporation Commission denying its request to open its field of membership to the Medical Society of Virginia, which bankers strongly opposed for more than three years.

“We are disappointed by the decision. We believe that extending membership eligibility as an option for members of the Society was reasonable,” Virginia Credit Union (VACU) Director of Public Relations Glenn Birch said in a prepared statement. “We’ve made no decisions about an appeal.”

While not directly expressed by VACU or the bankers, what both groups were apparently fighting so fiercely over was the many members of MSV who are high-income earners — medical doctors and physician assistants.

Nevertheless, Christopher Shockley, president/CEO of the $4.9 billion VACU in North Chesterfield, testified during a hearing that MSV requested to join VACU after a two-year study that found its members were stressed with the business side of practicing medicine and suffering from burnout due to a variety of reasons, including the financial stress caused in part by medical school debt and the cost of establishing a medical practice.

“MSV wants to join VACU so that MSV’s members can have immediate access to a broad scope of financial education and tools to reduce stress, not to add stress by forming a new business outside its members’ core competency,” Shockley said. “I understand that MSV’s members do not have the available time, desire or knowledge of complex accounting and business functions to form a credit union.”

But lawyers representing the Virginia Bankers Association and seven other banks weren’t buying Shockley’s explanation.

They argued VACU needs to play by the rules, and one of them is a state law that prohibits credit unions from adding new groups to their FOMs with 3,000 or more members. MSV has more than 10,000 members.

“There is an exception to the rule. But, in order to take advantage of that exception, VACU bears the burden of proving that MSV — a large association of highly educated, affluent professionals — cannot feasibly or reasonably establish a new credit union of its own,” lawyers wrote in their filings. “That is a steep hill to climb. The hill is made even steeper by the fact that MSV enjoys an array of other advantages that few groups can emulate, including millions of dollars in unencumbered assets, (more than enough to fund the start-up), the likely ability to raise even more from third parties, and the track record of operating another successful business (the MSV Insurance Agency).”

The State Corporation Commission agreed with the bankers’ central argument.

Virginia law requires the Commission to encourage the formation of separately chartered credit unions instead of adding a new group to the field of membership of an existing credit union.

“If the Commission finds that the formation of a separate credit union by a group desiring such services is not practicable or is not consistent with reasonable safety-and-soundness standards, it may authorize the group to be included in the field of membership of a state credit union,” the Commission wrote in its final order issued on Aug. 3. “Thus, VACU must first establish that ‘the formation of a separate credit union by [MSV] is not practicable or is not consistent with reasonable safety-and-soundness standards’ before the Commission may authorize MSV to be included in VACU’s field of membership,” the state agency added. “The Commission finds that VACU has not met its burden to show that the formation of a separate credit union by [MSV] is not practicable or is not consistent with reasonable safety and soundness standards.”

Interestingly enough, Virginia Commissioner of Financial Institutions E. Joseph Face Jr. approved VACU’s expansion request to serve MSV in 2019, after which bankers filed a petition to have that decision reconsidered. This opposition led to what seemed like a never-ending series of virtual and in-person hearings, reams of documents, reports and exhibits, and dozens of direct testimonies from bankers, credit union professionals and other experts.

What’s more, following two days of hearings that included testimonies from VACU and bankers in October 2021, Virginia Chief Hearing Officer Alexander F. Skirpan Jr. recommended in a report released last February that VACU’s expansion application should be approved.

“While I find VACU failed to prove MSV does not have the financial resources to form a new credit union, based on the level of donated capital required to form a new MSV credit union, coupled with the unlikelihood of success, I find that MSV could not feasibly or reasonably establish a new credit union,” Skirpan wrote.

Read More: State Corporation Commission’s final order.

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