WASHINGTON -- Credit unions in 12 states will begin to provide services to each other's customers on July 1, effectively establishing an interstate branching system.

As envisioned, the network will serve six million customers of 450 credit unions in states from New York west Colorado and south to Florida.

The plan was first reported in Washington Watch, a newsletter published by American Banker.

250 to 300 Offices

The network will have 250 to 300 offices within five years, according to Rick Scali, president and chief executive of the Credit Union Service Corp., Atlanta, which is coordinating the shared branch system. About a half dozen more states are considering joining the system, he said.

The states already signed up are New York, New Jersey, Pennsylvania, Virginia, North Carolina, Georgia, Tennessee, Alabama, Florida, Illinois, Louisiana, and Colorado.

This will be the first time that credit unions from different states have shared facilities on a large scale. Limited efforts to share branches have taken place for 20 years. Credit unions in Michigan, California, and Texas have long serviced each other's customers.

"What we've really done for the first time is formalized the sharing of facilities across state lines," Mr. Scali said.

No Regulatory Problems

The network will allow credit unions to offer their customers deposit, withdrawal, and even loan services when they travel to any state in the system.

The network does not face any regulatory hurdles, according to Robert Fenner, general counsel at the National Credit Union Administration.

In fact, Mr. Fenner praised the development. "The reason it works in credit unions is because, for the most part, their customer bases do not overlap so they are not in competition with each other," he said.

Under federal law, credit unions are permitted to share facilities.

"These are really innovative steps," said Doug Duerr, president of the National Association of State Credit Union Supervisors, Arlington, Va. "It's the humanization of ATMs."

The idea irritates banking industry leaders.

"It is just another example of how the myth of the local credit union has nothing to do with reality," said Ed Yingling, executive director of government affairs at the American Bankers Association.

"In reality, many of these credit unions are major financial services providers offering a full range of banking services and now they are starting to do so nationwide."

"With this competitive advantage, they can enhance their market share," added Ken Guenther, executive vice president of the Independent Bankers Association of America.

Noting the fact that credit unions are not taxed by Uncle Sam, he added: "As they move interstate, it means the government loses more money."

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