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Utah bankers file lawsuit

Groups challenge nation's credit union regulator

The American Bankers Association, Utah Bankers Association and five Utah banks have sued the nation's credit union regulator, alleging it tried to make an "end run" around a 2004 court decision limiting proposed expansion of America First Credit Union.

The lawsuit, filed Tuesday in U.S. District Court for Utah, is the second to challenge the National Credit Union Administration's approval of an application from America First to expand its fields of membership. The prior suit was decided last year by U.S. District Court Judge Dale Kimball, who invalidated the NCUA's approval of a six-county field of membership for America First and sent the matter back to the NCUA.

Following Kimball's ruling, the credit union restated its field of membership to include only those members who "live, work (or regularly conduct business in), worship, attend school or volunteer in Salt Lake County."

However, in the current lawsuit, the bankers argue that the NCUA has begun allowing all credit unions, including Ogden-based America First, to add more geographic areas to their fields of membership — without regard to location or charter — communities that are defined as "underserved areas" in the Federal Credit Union Act.

In May 2005, the bankers allege that the NCUA used that rationale to allow America First to expand back into the Ogden area. Two months later, the NCUA permitted the credit union to go back into Provo-Orem, Logan and St. George.

The effect, according to the lawsuit, is that "in addition to all residents of Salt Lake County and most residents of Cache, Weber, northern Davis, Utah and Washington counties, America First's potential field of membership includes many of the residents of the remaining portions of Davis County and the following neighboring counties: Box Elder, Morgan, Tooele, Summit, Wasatch, Juab, Sanpete, Iron and Kane counties."

As such, the bankers claim they will be "subjected to unlawful competition in their business or potential business, which competition would not exist but for the NCUA's approvals."

The lawsuit asks the court to declare the NCUA's approvals unlawful and void.

UBA President Howard Headlee said the dispute is "the exact same dispute America First has lost time after time in court and no less than four times in the past six years in the state Legislature."

"At some point America First is going to have to realize if they want to operate like a multibillion-dollar cooperative bank, they are going to have to step up to a higher level of responsibility," Headlee said.

Still, he maintained that the lawsuit is not a dispute between banks and credit unions.

"We did not file this action because America First is a credit union," he said. "We filed it because America First continues to do things that real credit unions don't do."

NCUA spokesman Nicholas Owens said the administration had not yet received the lawsuit. However, he said, "I can tell you the credit unions followed NCUA's regulations, and the agency's regulations are in accordance with the federal statute."

In a statement released to the Deseret Morning News, America First called the lawsuit "yet another illustration of the bankers' continuing strategy to limit consumer choices."

"America First Credit Union is adhering to all guidelines and requirements in serving the underserved individuals as outlined by the NCUA," the credit union stated. "Our objective in serving the underserved areas is simply to give all individuals in the area the opportunity to benefit from affordable financial services. America First is currently reviewing the lawsuit with our legal advisors and will continue to serve our members as always."