The banking industry's battle against credit unions shifted to the regulatory arena Friday when President Clinton signed a law expanding the nonprofits' membership.

The National Credit Union Administration will issue a slew of rules to implement the law. Among the agency's tasks: defining a community charter, limiting benefits for a member's relatives, and detailing exemptions to commercial lending restrictions.

The NCUA will also have the power to override the law's central premise: that credit unions may serve unrelated groups only if they have fewer than 3,000 members.

"The fat lady hasn't sung yet," said Keith Leggett, senior economist for the American Bankers Association. "There are still issues that have to be worked out on the regulatory front."

The ABA expects the NCUA "to push the frontier as far as it can," Mr. Leggett said.

The new law counters a Feb. 25 Supreme Court decision requiring credit union members to share a single, common bond. The ABA brought that lawsuit in 1990, challenging the NCUA's decision to let occupation-based credit unions accept members from unrelated companies.

After losing the lawsuit, the NCUA and the credit union industry turned to Capitol Hill where they quickly won overwhelming majorities in both the House and Senate.

In an interview Friday, NCUA Chairman Norman E. D'Amours said the agency plans to move swiftly. Indeed, the NCUA will probably introduce a proposal on membership rules at an Aug. 31 meeting, he said.

Regulators, however, must balance the desire to roll out regulations quickly with the need to insulate their plans from lawsuits by the banking industry, he added.

"You cannot stop the bankers from litigating," Mr. D'Amours said. "But I think, with proper care and attention to the rulemaking process and to congressional intent, we could make extremely remote the possibility of such suits being successful."

After hosting credit union industry officials, lawmakers, and regulators at a morning signing ceremony in the Oval Office, President Clinton said the law "will help extend greater credit to those who need it most."

The Credit Union Membership Access Act does impose new limits on credit unions. It restricts commercial lending to 12.25% of credit union assets, and it establishes a 7% capital requirement and "prompt corrective action" supervisory procedures.

But bankers have complained for months that these are token provisions.

"There's nothing in this bill that I see that is going to do anything but increase the activity of credit unions in the marketplace," said Jerry W. Spencer, executive vice president of the Alabama Bankers Association. "They have been given a platinum card to do what they want to do with a lot less restrictions than we have."

Banking industry officials say the rulemaking process could make matters still worse for banks.

For instance, the law bans community-based credit unions from accepting members or organizations outside a "well-defined local community, neighborhood, or rural district"-and the NCUA still must define those terms.

The law lets people in the "immediate family or household" of an eligible member to join a credit union, but the agency will have to decide what that phrase means.

NCUA officials also must clarify exemptions in the law that allow credit unions to add unrelated employee groups, provided they have fewer than 3,000 employees. Under the law, groups that exceed the limit could be served if financial or supervisory reasons prevent them from supporting their own credit union.

Mr. D'Amours said that he expects the agency to tackle this question first so credit unions can start serving groups outside their common bond. Next, the agency will issue a proposal on the business lending cap as early as Sept. 23, Mr. D'Amours said. The law allows several exemptions to the limit, including credit unions that have a history of "primarily making" business loans.

Such vague language sets the stage for controversy, predicted Tim Pryor, associate general counsel for the National Association of Federal Credit Unions. "That is certainly an area that could cause some litigation."

Congress gave the NCUA nine months to propose a rule implementing the bill's capital requirements and clarifying its enforcement procedures. The final rule must be in place within two years.

The law diminishes NCUA authority in one area, lifting the requirement that credit unions file an application with the agency to convert to mutual thrifts. Whether the credit union law will dry up the demand for conversions remains unclear.

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