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Credit unions air grievances

Do radio, TV ads signal a looming battle with banks?

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Utah's credit unions, unhappy with compromise legislation from 1999 that restricts their growth, have started airing television and radio ads about their legal limitations. Also, the Utah Legislature is meeting.

Hmmm. Coincidence?

Their archenemies, Utah banks, aren't sure. The credit unions say no but with a caveat.

"It's certainly not a coincidence, but at the same time the Legislature is one group we want to educate about the concerns credit unions have," Scott Earl, president of the Utah League of Credit Unions, said Wednesday. "It will be impossible for us, over time, to live with those restrictions."

Banks prevailed in court in an ongoing dispute with credit unions, but the 1999 legislation limited credit union membership to one county and associations of 50 or more people. Existing credit union membership was grandfathered.

Since then, credit unions have tried to refine the compromise. The TV and radio commercials — focusing on rates, fees and service by making parallels to everyday life situations — are designed to increase awareness of credit unions' limitations.

"But at this point, we don't anticipate bringing legislation to the hill this year," Earl said. "But, things can always change."

Howard Headlee, president of the Utah Bankers Association, said legislative changes aren't likely this year and suspects that credit unions may be building public support for a ballot initiative this fall aimed at increasing their membership.

"The courts have spoken pretty clearly on this, and the Legislature has spoken pretty clearly by drawing fairly generous boundaries," he said. "The final challenge will be the public themselves."

"It's certainly something we've considered, and we have not ruled it out," Earl said of an initiative. "We're still weighing our options. We've not given up on the Legislature as a place to solve the issues. All our polling data says Utahns love credit unions and want greater access to credit unions.

"Certainly, going to the people is something we can't rule out, but that is a major undertaking and would pit us publicly against the banking community, something we wouldn't enter into lightly."

In the meantime, the ads will run through at least through February.

"Credit unions are good for Utah," Earl said. "Choice is always good for people, and competition is always good for people. Credit unions' presence sharpens the banks and has them watching their fees and rates. That's what we're trying to let (people) know."

Banks, while generally happy with the compromise legislation, say large credit unions operate essentially as banks but don't face bank encumbrances such as taxes on profits.

"A couple of credit unions in this state aren't credit unions at all," Headlee said. "They want to serve everybody, just like a cooperative bank. These ads show their true colors. Are we surprised they're airing them? No. Are we surprised at the message? Yes. They're basically telling people they want to be banks and serve everybody."

Headlee said the bankers' group research indicates people are happy with the current law and with the number of financial institution choices they have. "It also shows people don't care about banks and credit unions fighting anymore," he said.

"If a credit union wants to be a mutual bank, we welcome them with open arms. But some want to operate like a mutual bank but still call themselves a credit union to avoid paying taxes."

"None want to be banks," Earl said. "We think we serve people a whole lot better than banks do."

If the Legislature acts this year, it could come late in the session. Several bills — some pro-bank, some pro-credit union — were introduced to committees during the last two weeks of last year's session. Ultimately a bill calling for a task force to study the issue for two years died in the House Rules Committee.

E-mail: bwallace@desnews.com