Credit unions would be allowed to continue drawing new customers from outside their basic membership pools under a bill overwhelmingly approved by the House.
By a 411-8 vote Wednesday, the House passed the bipartisan bill to supersede a recent Supreme Court ruling that had been sought by the banking industry. Under the measure, federal credit unions could continue to include more than one group in their memberships, with-in limits.The Utah Bankers Association said Thursday the House bill will undermine the structure of the U.S. banking system by allowing credit unions to expand "without any meaningful limits."
It also will have a negative impact on Utah schools, said Howard M. Headlee, UBA president.
"This policy will result in the loss of millions of dollars to the Utah State School Fund over the next few years, as more and more consumers partake of tax-free financial services," Headlee said.
"Even some tax-paying banks will likely pursue strategies to take advantage of this favorable tax treatment."
Last month, Zions Bank said it would apply for a credit union charter that the bank would operate within its existing structure for the benefit of employees and, perhaps, customers.
Headlee said Utah credit unions currently "escape" some $2.5 million in state income taxes that would otherwise go to schools. He termed the bill an "extreme measure" and said he is hopeful the U.S. Senate will "take a more balanced approach."
Six major banking industry groups issued a statement describing the House vote as "an unfortunate rush to judgment." They said the bill would allow "the unbridled expansion of large credit union conglomerates in an industry already subsidized by taxpayers to the tune of $1 billion a year."
The legislation would let all current credit union customers keep their accounts. The Supreme Court decision in February restricting the credit unions' customer base had provoked worry among 20 million or so current members made ineligible because they are outside a credit union's immediate group.