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Justices limit credit union members

The Supreme Court ruled for bankers Wednesday in a high-stakes turf battle with credit unions, saying the government wrongly let credit unions enroll members beyond what federal law allows.

In a 5-4 ruling, the justices threw out a 15-year-old government policy that has let credit unions accept millions of new members from outside traditional membership pools.That policy is contrary to Congress' intent as expressed in the federal law, Justice Clarence Thomas wrote for the court.

However, legislation has been proposed in Congress to retroactively authorize such expansions in credit union membership.

Wednesday's decision upholds a lower court ruling that the Clinton administration had said "threatens nationwide instability and losses in the credit union industry."

Bankers have asked a lower court to force credit unions to drop millions of members who signed up during the past 15 years under the broader membership rule.

"Because we conclude that Congress has made it clear that the same common bond of occupation must unite each member of an occupationally defined federal credit union, we hold that the (government's) contrary interpretation is impermissible," Thomas wrote for the court.

His opinion was joined by Chief Justice William H. Rehnquist and Justices Anthony M. Kennedy, Ruth Bader Ginsburg and Antonin Scalia.

Dissenting were Justices Sandra Day O'Connor, John Paul Stevens, David H. Souter and Stephen G. Breyer. They contended the banks lacked legal standing to sue.

The ruling affects almost 3,600 federally chartered credit unions that hold $132 billion in deposits from more than 32 million members.

Credit unions offer many of the same consumer services as banks but can make better deals on loans and savings rates because they don't pay federal taxes.

The 1934 Federal Credit Union Act says membership "shall be limited to groups having a common bond of occupation or association" or to groups in a geographical area.

In 1982, the National Credit Union Administration expanded its definition of "common bond." Small businesses that lacked enough workers to form their own credit unions were allowed to join existing credit unions, so long as each group of employees had its own "bond."