TOPEKA, Kan. - A bill that could lead to substantial field of membership (FOM) restrictions on state-chartered credit unions in Kansas passed the State Senate by a 35-2 vote last Wednesday.
The Kansas Bankers Association introduced the legislation, which would limit the geographic area served by credit unions as well as create new regulatory standards for branching, mergers and field of membership changes. The bill has been extensively amended and approved by the Senate Financial Institutions and Insurance Committee to reflect language agreed upon by the Kansas CU Association.
If the bill becomes law, nine state-chartered credit unions would be affected immediately by having to restrict their current geographic fields of membership.
Marla Marsh, president of the Kansas CU Association, said she expects the legislation will have a hearing in the Kansas House Insurance and Financial Institutions Committee next week.
“We are in the process of looking at what will happen next,” she told the Credit Union Journal immediately after the Senate vote. “The House has to act upon it, so it has not been accepted by both chambers yet.”
Asked if the KCUA expects the governor to sign the bill if it passes the Kansas House, Marsh said it is too early to know. “We have not gotten that far yet. We have met with the governor’s office, but the bill has changed drastically since that meeting.”
The banker-proposed initial version of SB 535 was “very, very restrictive,” according to Marsh. She said the field of membership sections mirrored the original Federal Credit Union Act. “We sat down and worked on compromise language, so it is now referred to as Substitute SB 535.”
Many CUs in Kansas have statewide fields of membership, Marsh explained. If the bill were to become law, nine credit unions would be hit with restrictions (see related item).
“Six of those nine have statewide fields of membership,” Marsh explained. “Those with statewide fields of membership would have to divest themselves of geographic territories. They do not have to divest current members of record, but they will have to restrict the number of counties they will be able to serve, and the other three also will have to identify what counties they will serve. They would be restricted to a geographic area that encompasses a maximum of 1 million in population.”
Marsh declined to speculate if the legislation would push CUs to switch from state to federal charters. “We are still evaluating, and I know our credit unions are evaluating what the best direction for their credit union will be in the face of these changes to our credit union statutes.”
Asked if she was surprised the Kansas Senate approved a bill that would place substantial restrictions on CU growth in the state, Marsh said: “I am not surprised that they voted for something they felt was a compromise. Legislators are reluctant to put themselves in the middle of a bank/credit union issue.
“The Senate subcommittee chairman who worked on this bill presented it as a compromise position that the subcommittee felt was fair,” she continued. “We agreed to not oppose the compromise language, but I stated that philosophically we did not believe there was a problem to begin with. Any time you are dealing with a legislative body, there is always the unknown and the potential of a less favorable outcome.”
