The Utah Department of Financial Institutions issued a warning this week to consumers about a credit union it says "slipped through the cracks," registering in Utah as a corporation without obtaining the proper credit union charter and insurance.
The Utah Division of Corporations called the incident a "fluke," but the man who registered the credit union said someone owes him an apology — and a refund.
"New Century Technologies Credit Union Inc." registered with the state via the Utah Division of Corporations' Web site, according to Orla Beth Peck, supervisor of credit unions for the state's Department of Financial Institutions.
Normally, when a business registers with the state and its business or company name suggests it plans to operate as a financial institution, the corporations division and financial department coordinate to make sure that the proper procedure (obtaining a charter and insurance, for example) is followed.
In the case of New Century Technologies Credit Union Inc., Peck said, "for some reason, the procedure didn't work," and the company was registered as a corporation in good standing.
Jim Barrus, chief executive officer of New Century Technologies Inc., said he followed the registration instructions on the division's Web site.
"We followed the procedure outlined on the Web site and followed all the steps," Barrus said. "We got it set up and got the certificate of good standing."
Christine Keyser, public information officer for the Utah Department of Commerce, called the New Century case a "fluke."
"We've run over five thousand names through the system we have now, which we think is a good online application system, and this is the first time we've had anything like this happen," Keyser said. "We have checks and balances in place so that if something like this happens, we catch it."
The day New Century registered was "an extremely busy day," Keyser said. The registration was caught within four hours of being posted on the division's Web site and has since been canceled.
Kathy Berg, director of the state's Division of Corporations, said financial institution applicants are supposed to be sent to the Department of Financial Institutions for approval, because the division does not have the capacity to confirm whether applicants are going through the appropriate chartering/insurance process.
Barrus said he was the one who told the department there was a problem.
"I knew that we had to come under the Department of Financial Institutions, so I went in and asked them for the forms to fill out, and that's when they found out that there was a problem," Barrus said. "I'm the one who brought it to their attention. I bought their little book that tells you all the rules and regulations, and I got their forms to fill out."
Barrus maintained that the credit union never took any deposits and never solicited members.
Neither the department nor the division alleges any fraudulent motives on the part of New Century Technologies Credit Union Inc. Though no customers were at risk, Peck reminded Utahns to be careful when choosing a financial institution.
"Our concern was that someone might put a deposit in a financial institution that isn't chartered," Peck said. "But just in general, people ought to be cautious about who they're doing business with."
Barrus, on the other hand, said he thinks the state should apologize and refund the $52 incorporation fee and $24 for copies of New Century Technologies' certificates of good standing. And, he said, though he still intends to launch a credit union, it won't be through the state of Utah.
"We're going through the feds, make it a federal credit union," Barrus said. "We're not interested in dealing with the state of Utah. And the federal documents are easier to fill out. They're not as onerous."