Utah credit unions reject banks' offer

The Utah Bankers Association made an offer Thursday morning to the Utah League of Credit Unions on proposed changes to state credit-union law, but the credit unions have rejected the offer.

After a week of negotiations, the bankers promised to help the credit unions get a law passed in the Legislature that would give state-chartered credit unions the same regulations enjoyed by federally chartered credit unions, Utah Bankers Association President Howard Headlee said.

While the credit unions want some aspects of state charters to change and mirror federal charters, the league members don't want everything to mirror the federal charters, said league president Scott Simpson.

Under current regulations, state-chartered credit unions cannot lend businesses more than $250,000. The credit unions want to increase the cap to the federal charter limit on business loans. The federal limit caps a credit union's loan portfolio in business loans to no more than 12.25 percent.

State-chartered credit unions now also cannot make loans to a business until at least five months after the business joins the credit union. But credit unions believe members should qualify for loans immediately after they join.

And state-chartered credit unions under current rules cannot loan more than 1 percent of a credit union's assets. Credit unions prefer a federal formula of roughly 10 percent of a credit union's assets.

Headlee told the credit unions Thursday that if they wanted three aspects of federal charters, they should have all aspects of federal charters, including the same "field of membership" or geographical limitations that federal charters impose on credit unions. The credit unions also should promise to not ask the Utah Commissioner of Financial Institutions to change state charter freedoms and restrictions for five years, Headlee said.

Credit unions balked.

"He's offered what we asked for and more — and it's the more part that's incredibly distasteful," Simpson said. "It's a step backwards."

Headlee disagreed, saying credit unions are asking for a combination of liberal state and federal law that would go beyond both.

"We are giving them what they've asked, and now they're moving the goal posts," he said. "It looks like their greedy negotiation tactic would give them even more power than Congress has chosen to grant them."

Both sides said Thursday that they are committed to continuing negotiations.

But Simpson reiterated that if credit unions cannot get a favorable law passed during the legislative session, they will approach voters with an initiative for a sweeping change in credit-union law .

"There are 1.3 million credit union members, and they vote and love their credit union," he said.

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