The Utah League of Credit Unions is negotiating with the Utah Bankers Association on a possible bill that would loosen restrictions on state-chartered credit unions.

The state's bankers, however, believe that credit unions are trying to strong-arm them into an unfair compromise of state law. Utah Bankers Association president Howard Headlee warns that the credit unions won't be successful in their efforts.

"When you break down the facts of the matter and study it, they're really out on a limb, and there's not a lot of support for what they're trying to do," Headlee said.

Utah League of Credit Unions president Scott Simpson says that if the credit unions cannot get the law changed this legislative session, they plan to seek an initiative at the ballot box that could overhaul the state's credit-union laws.

State-chartered credit unions have complained to the Utah Legislature since 1999 changes in law capped business loans at $250,000 and required credit-union members to wait six months after joining to apply for a loan.

Simpson would like the cap to be lifted to a higher limit that is allowed under federal regulation. The federal limit caps a credit union's loan portfolio in business loans to no more than 12.25 percent.

New members ought to be able to apply for loans as soon as they join, Simpson said. "If they qualify for membership, they ought to be served."

Credit unions also want a change in an earlier law that limited loans to 1 percent of a credit union's assets, meaning that small credit unions with $10 million in assets could only lend customers $100,000 for mortgages. The law made sense when passed years ago, Simpson said, but with inflation, it needs to be changed.

The Utah League of Credit Unions proposes that the law be aligned to a federal formula that limits loans to about 10 percent of assets.

About 57 credit unions in Utah have state charters. The number has dwindled by 15 since 1999, as many of the credit unions have abandoned their state charters for more liberal federal charters, Simpson said.

If credit unions don't get results at the Legislature, they'll begin the process of getting an initiative on the ballot that will create more comprehensive reform.

"If we're going down that road and take this debate to the public, we're going to do more than these three things," Simpson said. "We're going to restore the state credit union charter to a competitive charter."

Bankers, who last battled credit unions at the Legislature three years ago, don't want any changes in the state law. Headlee said that credit unions have tax-exempt status and shouldn't operate like for-profit businesses.

At credit unions, interest on commercial loans "drop off the tax rolls," Headlee said. "The tax exemption was meant to help poor people get credit and not subsidize a commercial loan."