Credit unions petition for new law Measure would overturn '98 court ruling on access

What the credit unions lost in state court in 1998 they will try to regain in the state Legislature in 1999 when they introduce the "The Credit Union Access Act" at this year's legislative session, which begins Monday. The bill would, in effect, reverse a court ruling made in November 1998 that said state-chartered credit unions must operate only in a single county, an interpretation of current law that the Utah League of Credit Unions says would "severely restrict" credit union growth in the state. The league, a trade association for the state's 143 credit unions, needed 35,000 signatures on a petition to get the bill introduced. As of Monday, they had 100,042, of which some 70,000 had been certified, as required by law, said spokeswoman Lisa Howell. "All (the bill) does is bring us back to where we were before Nov. 4. We're not asking for anything new, it simply overturns the court ruling," said Howell. It affects only the 99 state-chartered credit unions in Utah, not the 44 that hold federal charters. On Nov. 4, 3rd District Judge William A. Thorne ended a five-year court case in favor of Utah's banks and against the credit unions. The bankers, through their trade group, the Utah Bankers Association, had filed a lawsuit in August 1993 contesting the right of credit unions to operate outside of the county in which they are based. The league's bill seeks to rewrite the law and thus overturn the ruling. Howard M. Headlee, president of the UBA, is fairly sure that won't happen. "I presume that common sense will win the day and that such an extreme proposal will be rejected by well-informed legislators who are concerned about the long-term economic interest of Utah and Utahns," said Headlee. The bankers contend that the state's largest credit unions -- America First Credit Union is cited most often -- are really nothing more than mutual savings banks or member cooperatives, but ones that don't pay taxes on their retained earnings, as such member-owned banks do in other states. (Credit unions use their retained earnings to grow their operations and keep down fees, loan rates and other expenses for members.) Thus, if the law is rewritten to allow unfettered expansion of tax-exempt credit unions the banks contend this would be "unprecedented law" and would make it very difficult for tax-paying community banks to compete in the marketplace. "Under this legislation, the uniqueness of credit unions would disappear," said Headlee. "It favors larger (credit unions) and would allow them to compete openly in the marketplace." The bankers' suit grew out of a 1983 interpretation of the law by the Utah Commissioner of Financial Institutions to the effect that credit unions could expand into multiple counties throughout the state. The UBA said that was not the intent of the legislation and filed suit. The lawsuit had taken a half-decade to make its way through the court system. In March 1994, a district court judge had dismissed the UBA's suit, saying the group had no standing, but the bankers appealed. In February 1996, the Utah Supreme Court reversed the District Court decision saying the UBA did have standing in the matter and it denied some defenses put up by the credit unions. For the next three years, various motions were heard. In May 1998, Judge Thorne heard motions for summary judgment and in November ruled in the banks' favor.