The Utah Bankers Association confirmed Tuesday it will support legislation addressing the long-running dispute between banks and credit unions.
Under the banner of competitive fairness, the association will propose that credit unions be allowed to expand into new markets if they choose, as long as they agree to pay taxes on profits not returned to members. Credit unions that choose to stick to their traditional roles will retain their tax exemption.
A rough draft of the bill specifies credit unions with more than $100 million in assets and serving more than one county will be affected, but those numbers are subject to debate and likely will change by the end of the legislative season, UBA President Howard Headlee told the Deseret News editorial board.
The bill, sponsored by Rep. Jeff Alexander, R-Provo, probably will affect only the two largest credit unions, Mountain America and America First, Headlee said. Those two organizations have about 450,000 members.
"With Mountain America and America First, it's hard to establish that 'commonality of routine activity' " that forms the backbone of traditional credit unions, Headlee said. "Mountain America is in seven counties and includes over 100 groups. They've gone well beyond what the federal charter would allow and anything that the state charter should allow."
The "tax advantage" credit unions enjoy translates into a $12 million annual competitive advantage over banks, Headlee said. Banks aren't looking for special treatment, he said, just a level playing field.
"It's an issue of fairness. For some credit unions, this whole notion of meaningful affinity and common bond is really becoming a farce," Headlee said. "We recognize that and are willing to welcome them as competitors — as long as it's fair competition."
That sounds good, said Scott Earl, president of the Utah League of Credit Unions. If only it were true.
"It's not the credit union members that banks want, it's that they don't want to have to compete against lower-cost auto loans and lower fees," Earl said. "If they can get credit unions to be taxed like banks, then maybe they'll eventually make credit unions into banks."
Banks like to pick on Mountain America and America First because of their size and their assets. But size doesn't determine identity, Earl said.
"When does a credit union cease to be a credit union? Because it's bigger or serves more people? No," he said. "It never ceases to be a credit union unless it moves from its core principles — from being a cooperative, where one member has one vote and the beneficiaries and decision makers are the members."
To which bankers might respond, "Duh."
"It's no mystery that they should be able to price better than us," said Kelly Matthews, executive vice president of Wells Fargo's Intermountain Region. "That's obvious. But we know that the subsidies that are passed back to you as a credit union member are nowhere near the amount you're giving up as a taxpayer. You don't see what you're giving up. You only see the tiny slice of the pie you're getting."
Both sides of the rancorous debate pledge to fight on for the good of their constituents. Amid a palate of familiar arguments and comebacks, they agree on one thing: It won't be easy.