"It is ironic that given conditions in today's economy, we are forced not just to stand still but to turn back the clock, and this goes on while predatory lenders can go anywhere they want in Kansas," lamented Gary Regoli, president/CEO of the $555 million Boeing Wichita CU, the state's largest, who echoed other CEO disappointment at the industry's legislative fate.

The FOM bill, outlined by the Kansas Bankers Association in hearings, now seems destined for easy passage in the House and, barring any complications, to be signed by Democratic Governor Kathleen Sebelius.

Parts of the FOM bill would become effective July 1, with statewide branch restrictions coming Jan. 1, 2009.

"The problem here is simple: Is this really the end of the banking wars?" asked Gavin Wittman, president of the $98 million Educational Credit Union of Topeka. "If we give an inch now, my fear is that the bankers will be right back to take the mile."

Like other CU executives expressing unhappiness at the outcome of the bank-CU clash, Wittman said his Topeka CU, as an example of the bill's effect, would have to curtail ongoing membership solicitation of professionals and others associated with education outside of Topeka.

"Where before we could sign up a school attorney in Wichita for a loan, we can't anymore," explained Wittman.

The very precise and technical language in the bill removes the existing patrons or users of education and restricts new educational CU members to current school employees, he said, adding this would have an immediate impact in signing up eligible indirect members.

Similarly, Boeing Wichita's Regoli said there are misconceptions about the extent of grandfathering provisions in the bill, which have to be reviewed and clarified by CU attorneys and the Kansas Department of Credit Unions.

Garth Strand, president of the $110 million Hutchinson CU, one of the nine directly affected CUs, forecasts that his indirect lending business could be reduced, and he agreed that Kansas CUs had to settle for "a pill we didn't really like."

The alternative, however, "might have been much worse or a banker lawsuit," he said, adding however that Kansas consumers will be real losers in this confrontation with banks since the many rural areas of the state that banks have abandoned now will also be precluded from a CU presence.

"There are many sparsely populated counties in Kansas, all underserved areas," which, he said, will have neither a bank nor a CU if the bill passes.

Citing a lengthy court battle or a protracted legislative fight as occurred in neighboring Missouri over FOM language or even in Utah, where classic bank-CU fights resulted in restrictive laws, many Kansas CEOs for weeks have expressed worries about the wherewithal of the KCUA or CUNA to make a Kansas stand over FOMs.

"Lawsuits are not cheap or easy," observed Wittman.

Beside Boeing Wichita, Hutchinson CU and Educational CU, others in the group of nine: Credit Union 1 of Kansas, Topeka; Credit Unions United, Topeka; Golden Plains CU, Garden City; Kansas Super Chief CU, Topeka; Medical Community CU, Wichita; and Mid-American CU, Wichita

In formal press statements on the legislation, the KCUA has acknowledged negative aspects of the bill maintaining that "moving forward, the credit union industry in Kansas will not be able to grow and expand as freely as they have in the past to serve their members and Kansas consumers."

Still, Marla Marsh, the president/CEO of KCUA, has vigorously defended the CU financial role during both Senate and House hearings on the bill making a case that restrictive language is not needed.

"Philosophically, it is my belief and the belief of our industry that credit unions in Kansas have not done anything wrong and that clarification of terms was all that was called for by the Interim Committee," said Marsh in reference to debate on the KCUA's own bill.

A key banking power in the state has been Ruth Teichman, chairman of the Senate Banking Committee and a member of a Stafford banking family with interests in several small Kansas banks, who has often criticized the "bank-like, tax-exempt nontraditional credit union."

Although the bill, now getting cleared for passage, "is a compromise, strategic grassroots efforts by the Kansas credit union movement allowed KCUA to negotiate from a position of strength to secure in the statute FOM options that reflect Kansas' unique situation," said KCUA.

The KCUA noted that CUs "collected and distributed more than 21,000 petitions, held a rally attended by more than 300 members supporting the cause and conducted an extensive legislator contact campaign." KCUA added that the trade group does not now stand in support or opposition to the legislation.

Apart from being a standard, the state's top CU regulator said the FOM bill does present new challenges to the industry in how CUs can expand and merge in the future. Writing in the agency's quarterly newsletter, John P. Smith, administrator of the Kansas Department of Credit Unions, urged CU forbearance as new application forms and procedures are developed.

For one thing, wrote Smith, the nine CUs will have to reconfigure their FOM prior to Jan. 1, 2009, when those provisions limiting future statewide branching take effect.

"Credit union boards of directors and managers must carefully consider adoption of the FOM that will best serve their membership," wrote Smith noting that the FOM bill, if enacted, grandfathers existing FOMs of CUs outside of designated metro areas with population of one million or more.

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