The long-running feud between Utah's banks and credit unions is nearing an end.
After weeks of closed-door negotiations in the state capitol-and years of name-calling-the bitter rivals reached a compromise this week on how and where state-chartered credit unions may expand.
In exchange for retaining their tax-exempt status, credit unions agreed to new restrictions on growth. Most notably, a credit union can only accept new members outside its home county if those members belong to groups that it is already serving. For example, electricians in one county may join a credit union in a neighboring county if that credit union is already serving electricians.
At the talks in Salt Lake City, credit unions also agreed to limits on commercial lending, including a provision that places a $250,000 cap on a business loan to a single borrower.
Utah banks support the deal, which was brokered by state lawmakers, though they say it is far from perfect. Specifically, they oppose a grandfather provision that allows some credit unions to continue serving unrelated groups in multiple counties.
"It's about as pretty as a political baby cut in half," said Howard M. Headlee, president of the Utah Bankers Association, "But it's better than what we had."
"It's probably a good compromise because neither the banks nor the credit unions feel like they got what they wanted," added Brent Allen, executive vice president of America First Credit Union in Ogden, Utah's largest credit union.
The dispute dates back to Utah state regulators' decision in 1983 to allow credit unions to solicit members from outside the counties where they are chartered. Banks argued that if credit unions crossed county lines to woo members, they should be taxed like banks.
"As long as you breathed the air in Utah, you could join a credit union," said Mr. Headlee.
Seeking a reversal of the regulators' ruling, the bank industry sued credit unions in 1993. The suit ended in November when Judge William Thorn sided with the banks.
But credit unions were undeterred.
Armed with more than 100,000 signatures from credit union members, the Utah League of Credit Unions asked state legislators in January to overturn the judge's ruling and allow them to continue soliciting members as they have been for 15 years.
They also took their message to the airwaves, launching a series of advertisements that said banks were attempting to bully credit unions.
The banking industry fired back with a campaign of its own. Because credit unions are tax-exempt, banks say they are not doing their part to support public education. In Utah, all personal and corporate income taxes are earmarked for public schools, yet the state spends less per child on education than any other state.
Republican Sen. Al Mansell sponsored the legislation that the two sides agreed to this week. A bill was unanimously approved by the state Senate on Tuesday and is virtually assured of passage in the House next week.
"It's been a very heated battle," said America First's Mr. Allen. "We're just glad it's over."
