Utah: Big 3 Apply For Fed Charter

The three credit unions targeted by the recently concluded tax fight here made good on their threat and have moved to flee their state charters.

NCUA officials said last week they have received applications from the three credit unions: America First CU, Mountain America CU and Goldenwest CU. "The people in the (West Coast) Region Six office are working with them to determine whether they qualify for federal charters," said Clifford Northup, spokesperson for NCUA. A final decision on the applications are expected within the next 60 to 90 days, he said.

All three credit unions will have to amend their fields of membership (FOM), all of which combine community charters with occupational groups, in order to qualify for federal charters, which prohibit the blending of the two charter types.

In addition, the vast geographic areas served by the two giants, $2.4-billion America First, which serves five Utah counties, and $1.1-billion Mountain America, which covers seven counties, may exceed NCUA's own limitations on "well-defined local communities," officials said.

Mountain America has indicated it will give up the geographic component of its FOM in order to retain the more than 100 select groups it currently serves, while America First is expected to try to retain some kind of community base.

It is not clear what the $260-million Goldenwest Credit Union, which serves two counties and several select groups under state rules, is requesting for its new field of membership. Officials from all three credit unions did not return The Credit Union Journal's phone calls seeking comment.

The three credit unions were targeted under an unsuccessful effort to apply the state's 5% corporate franchise tax to large credit unions operating in multiple counties.

The tax bid was delayed indefinitely when the legislature agreed to create a task force to study the matter. But in the interim, the activities of the three were greatly curtailed by a ban on new business lending and limits on other loans.

The chief legislative proponent of the credit union tax, Rep. Jeff Alexander, R-Provo, was named last week as co- chair of the legislative task force.

The conversions are being watched closely by the banking community, which fought for the Utah tax proposal, now relegated to a study for the next two years.

Howard Headlee, president of the Utah Bankers Association, said they believe the multi-county FOMs of America First CU and Mountain America CU exceed the limitations NCUA has on community fields of membership.

"If their fields of membership conform with the federal charter, we don't have any problems," he said. "We're just going to be watching them very carefully."

If NCUA approves the two FOMs under its newly passed rules for community charters it could serve as the basis for a court challenge to the new FOM rules, said Headlee.

"I think it would be very offensive if NCUA were to unwind the actions of a locally elected political body," he asserted, referring to the credit unions' attempts to escape the state's new law.