Client pool for credit unions is limited

In a ruling that could affect the University of Pennsylvania Student Federal Credit Union, a federal District Court judge recently ruled to continue restricting the number of people eligible to bank at credit unions across the nation. Citing a provision in the 1934 Federal Credit Union Act limiting a credit union's services to the single client group specified within its charter, a Washington District Court judge denied AT&T; Family Credit Union's attempt to serve customers other than AT&T; employees. Credit unions, by definition, represent a larger body -- an agency, institution or business seeking to offer financial services for its members -- which look out for the union, according to UPSFCU employee Jennifer Wong. The Wharton junior added that those larger bodies also protect the union's interests. Run entirely by students seeking experience in the fields of banking and finance, UPSFCU has a beneficial relationship with the University that has given it a competitive edge over local banks, according to Wong. Such advantages include a rent-free area on the 3rd floor of Houston Hall, greater advertising and access to students during CUPID and the school year, and the ability to offer its clients freedom from the $1 surcharge incurred by using on-campus PNC money acces center (MAC) machines. "Although we are independent of the University, it remains interested in us and makes sure we succeed because we represent and protect the interests of the students investing here," Wong said. These advantages, however, help explain why there are restrictions placed on the number and type of people to whom a credit union can offer services. "Credit unions began in corporations when businesses wanted to offer low cost banking and financial services to their employees, but the field has grown to include credit unions for students and small businesses," Wharton senior and UPSFCU employee Scott Braun said. As a result of the growth of the field, several credit unions have begun to accept members not falling within the limits of the client base specified within their charter. Nearly 3,600 credit unions nationally and 300 within the state of Pennsylvania have membership bases that extend beyond their original association group. As a result of the December 4 ruling, those members previously utilizing credit unions in violation of the institution's original charter will have to turn to the higher-priced loans and larger fees of a bank instead of a non-profit credit union. According to the Pennsylvania Credit Union League, the ruling largely impacts consumers, low-income communities and small businesses. The ruling, however, provides security and insurance for UPSFCU against other unions whose success have lead them to seek customers outside their legal client base. "Credit unions have been known to change areas geographically in order to expand their client base and this law provides insurance against that," Wong said.