Colorado bankers are going to the courts to block a credit union expansion.
The Colorado Bankers Association is suing the state banking agency for permitting $84.4 million-asset Gates Credit Union to expand its membership base to include the southern metropolitan area of Denver - nearly 300,000 people.
Craig Umbaugh, a lawyer representing the bank trade group, said the expansion runs roughshod over state laws that restrict community expansions to no more than 25,000 or to the regulator's discretion.
"The Department of Financial Institutions has exceeded the clear language of the statute," Mr. Umbaugh said. "I think this expansion has wiped away half the statute."
The association filed suit last Thursday against the Colorado Financial Services Board, which has some oversight over the Division of Financial Services. The five-member board - which includes three credit union executives - approved the Gates expansion on Nov. 28 despite bankers' objections at a public hearing.
"It's not unexpected," said David L. Paul, commissioner of the division. "They had been fairly forthright with our legal counsel that that's where they were headed."
Steve Newell, chairman of the Financial Services Board and president of Colorado State Employees Credit Union, said the board considered all the evidence, including that submitted by bankers in Gates' proposed expansion area, when it approved the expansion.
"The issue boiled down to whether or not the area of expansion was a defined community," he said. "Overall, the board felt that the credit union itself should be able to define what they consider to be a community."
Gates Credit Union was seeking to expand out of uncertainty over the future of its membership base, employees of Gates Rubber Co., said Carroll Beach, president of the Colorado Credit Union League. The company had been cutting employees for years.
Bankers object to the size of the expansion, saying it does not represent a distinct community, as required by statute.
Donald Childears, president of the Colorado Bankers, said the credit union's new membership base included several political districts and a spectrum of income and demographic groups.
Robert Wilson, a Denver lawyer who represents Gates Credit Union, would not comment on the bankers' objections.
"We're still in the process," he said.
