Utah Credit Unions Making Best of NCUA Interim Rule; Changing FOMs Will Likely Affect their Marketing Plans

SALT LAKE CITY – The best that could be said for Utah credit unions suffering the loss of new members because of that rather unfavorable federal court ruling here: they’re coping. “We’re certainly not happy about how we are definitely restricted to Salt Lake County but at least this is doable,” said a spokesman for America First FCU which has had to put on hold its expansion plans for branches and new member recruitment in a six county area of central Utah. The same goes for three other Utah CUs – Goldenwest FCU of Ogden, University of Utah FCU of Salt Lake and Tooele FCU-all impacted by U.S. District Court Judge Dale Kimball’s Dec. 9 ruling invalidating NCUA’s 2003 approvals of the six-county expansion. The judge, in siding with the plaintiff – the American Bankers Association and Utah banks – criticized “as troubling” the NCUA approvals, calling them an apparent over-reach of “well-defined local” community definitions. He remanded the NCUA action back to the agency for a review and it was uncertain when that might happen or if the intervenors in the case, CUNA, NAFCU, the Utah League of Credit Unions or the CUs themselves might appeal before the 60-day deadline in February. NCUA attorneys have said they do not plan to appeal but would deal with the judge’s remand. CUNA lawyers were still mulling an appeal but a decision “will be coming shortly,” sources said. In the interim, NCUA was allowed to grant “interim fields of memberships” to the four CUs based on a system in which each CU had a choice of opting for a single county, a specific metropolitan statistical area or SEGs or various combinations thereof. Like America First, University of Utah has chosen a single county – Salt Lake – while Goldenwest has decided to seek multiple SEGs in a throwback to its original state charter. All three CUs had converted to federal charters in 2003 as a consequence of a restrictive banker-backed Utah law enacted that year barring business loans and narrowly imposing a 30% “competitive equity” tax. Goldenwest management has previously maintained that it can live with the new NCUA interim rule but what marketing moves it is making to deal with the new scenario were not known at press time. The same goes for both University of Utah and Tooele, though that CU has been told by NCUA to limit any expansion to its home county, Tooele. Scott Simpson, president/CEO of the Utah League, repeated the League’s contention that while Judge Kimball’s ruling was a setback “and a loss” for CUs “this is not an event but a process” apparently referring to the NCUA remand or legal appeals. The judge did not “decide for the bankers,” something that he could have done but instead sent the case back to the NCUA Board on the FOM issue, Simpson said. In the meantime, Utah CUs “are evaluating how to move forward and we just have to watch the process unfold,” he said. Jeff Sermon, president/CEO of the $420 million Utah Community FCU in Provo, said Judge Kimball’s ruling is probably “a red flag” to CUs in Utah seeking to expand on FOMs but CUs across the state are in a “wait and see” mode. Maintaining a state charter in the current hostile environment in Utah “would be a death wish”, he said. Though Sermon’s CU, like University of Utah, dropped out of the Utah League during the height of the 2002-2003 tax fight, Sermon lauded the League for “doing a pretty good job in getting out the credit union story” particularly in light of an anti-CU resolution already in bill form and ready to be introduced in the Utah House Jan. 17. That resolution passed by the bank-friendly joint House-Senate Financial Institutions Task Force seeks Congressional intervention to impose taxes on CUs and halt “arbitrary and illegal” NCUA policies. The bill is to be introduced by Rep. Jeff Alexander, the majority leader and a leading CU antagonist. Simpson added that “it is simply a shame” that Utah lawmakers like Alexander “will be putting the legislature through another ugly political fight” that pits banks and CUs. -