Clash of the cash titans: credit unions and banks prepare to take to the arena once again.

• Author: Dibble, Marcia C.

It's that time of year. Not just for colorful falling leaves and cooling autumn breezes. Time to prepare for the November runoffs and the upcoming legislative session. Time for the ongoing battle between banks and credit unions to really get roaring again.

This year's combat actually got off to an unusually early and contentious start, when banks and credit unions poured tens of thousands of dollars into the 1st Congressional District race before the June 25 Republican primary. That district offers a good opportunity for credit unions to practice flexing their political muscle, because it has the largest population of credit union members of any in the nation. But banks and credit unions also are duking it out in other legislative races in the state.

THE BACKGROUND

Why all the political clashes? It's about money, of course.

Credit unions say it comes down to protecting the rights of consumers to access financial advantages offered by credit unions (such as lower interest rates on loans). To banks, it's about the earnings that large credit unions, in particular, get to retain, untaxed.

Banks insist they have no problem with credit unions as long as they adhere to what bankers consider their limited mandate: to provide services to unified groups of people underserved by banks, which bankers interpret to mean groups belonging to one company or field, or to a small geographic area, such as one county. For this definition, banks refer to the 1934 Federal Credit Union Act, which stated, "Federal credit union membership shall be limited to groups having a common bond." But by the early '90s, more liberal interpretations of credit unions' purpose and limitations had allowed many to grow to serve many counties, or even entire states, as a dozen Utah institutions did. Credit unions were encroaching onto banks' territory--and potential profits--in never-before-seen ways. Understandably, bankers took notice. (See January's Utah Business for details on the 1983 Utah decision that broke the state open to credit unions, the Utah Bankers Association lawsuit in response, the credit unions' reaction, and 19 99's resulting legislative battle.) What came out of it all was 1999's Senate Bill 237.

Bill 237 affects about 100 state-chartered credit unions, while Utah's 40-some federally chartered credit unions follow a similar but different set of rules spelled out in the Credit Union Membership Access Act passed in 1998. (These federally chartered credit unions...