Should NAFCU let state-chartered credit unions join? A decade of indecision is long enough, the trade group's chairman says.

The National Association of Federal Credit Unions may begin accepting state-chartered institutions as members.

The question has nagged at NAFCU for a decade, but the trade group's chairman David A. Miller said the time has come to make a decision.

"One of my big goals is increasing membership," Mr. Miller said. Admitting state chartered institutions - if acceptable to the board - would be one way to do that, he said.

The trade group represents 750 federally chartered credit unions that hold 52% of federal credit union assets. Its membership has held steady the past four years. It recently surveyed its members to see if a majority wants to accept state chartered groups. The association also is testing the interest of potential new members.

As he traveled the country speaking at credit union meetings this past year, Mr. Miller said he sensed a demand.

"I was always being badgered, 'Why don't you we take in statechartered, federally insured credit unions.' It was a hot topic everywhere I went."

Mr. Miller, 55, will start his second one-year term as chairman of the trade group on July 13, at the close of its annual convention in Atlanta. In the credit union business since 1971, Mr. Miller is president of $24 million-asset Kalamazoo (Mich.) District Bell Federal Credit Union.

Addressing Other Matters

Besides testing the waters for expansion, in the coming year NAFCU plans to help its members comply with a growing number of regulations and fight proposals out of Washington to bring credit unions under the Community Reinvestment Act or a single regulator.

Disputes between banks and credit unions - which loomed large last year - have fizzled out, Mr. Miller said.

The group's survey caught the attention of its main rival, the Credit Union National Association and its affiliated state leagues.

But Mr. Miller said it's too early for CUNA to get excited.

"It's too early to tell whether it's going to happen," he said. "We're not going to jump the gun and take on CUNA head On."

NAFCU is in a "fact-finding mode" and won't act until survey results are in later this month, according to Mr. Miller.

The trade groups bumped heads last month when they took opposing sides on a National Credit Union Administration proposal that would ban corporate credit unions and CUNA from sharing management.

"We feel there's a lot of smart people in credit unions, and we don't need a few people representing everybody," Mr. Miller said. "Of course that puts us against CUNA."

Although there's potential for sparring between the two leading industry trade groups, tension between bankers and credit unions has fallen from the fever pitch it reached last year, Mr. Miller said. Last summer and fall, banks filed three lawsuits against expanding credit unions.

"Tensions have died down," he said. "Now we're just waiting to see how the lawsuits turn out."

Mr. Miller thinks a series of talks he had with fellow Kalamazoo resident Daniel Smith, president of the American Bankers Association, helped bring about the detente.

"He agreed with me that, in the direction things were going, there wasn't a dividend that would benefit either of us," Mr. Miller said. Both men said the meetings did not resolve any disputes, but they did serve as get-acquainted sessions.

"I recognized he wasn't an ogre and he recognized that I wasn't an ogre, that we're just a couple of people trying to make a buck in this world," said Mr. Smith, president of First America Bank Corp. "We're still a ways apart on the taxation and common bond issue."

Interstate Branching an Issue

Credit unions might start complaining more about bank competition if the interstate branching bill goes through, Mr. Miller said.

"It will create real competition for credit unions that have never really had to compete before," he said.

The two trade group chiefs found common ground on some issues, including concern about being buried by government regulations.

To help credit unions manage new rules - including NCUA's final rule on the Truth in Savings Act, which takes effect Jan. 1, 1995 - NAFCU this year hired two attorneys for its compliance department, bringing the total to three.

"Credit unions that don't have compliance officers can call NAFCU and get direct answers to their questions," Mr. Miller said. "This helps the smaller credit unions that don't afford a compliance officer."

A self-described "plain, old Midwestern guy," Mr. Miller said credit unions can compete in an increasingly competitive and regulated marketplace by sticking to their specialty - consumer lending. They should stay away from service fees and non-traditional lines of business.

'Don't Try to Be a Bank'

"When credit unions start wanting to be a bank, they get into trouble," he said. "Sometimes credit unions grow too fast and get into programs they're not too aware of. They'll get into a business they shouldn't be in, and the next thing you know, NCUA is in there closing it down.

"I firmly believe credit unions should let banks have the commercial end and stay on the consumer side," he said.

Because the industry is in good health and is sticking to its traditional mission of providing affordable credit, Congress shouldn't try to "fix" it by bringing it under CRA or a single regulator, he said.

He said House Banking Committee Chairman Henry B. Gonzalez's investigation of the industry is spurred by a desire to bring the NCUA into a single regulator.

"His big goal in life is to create a superregulator," Mr. Miller said, vowing that the trade group will oppose any such move.

"I think credit unions have done a good job without costing the taxpayer any money," he said. "If it ain't broke, don't fix it."

Rep. Gonzalez, D-Tex., launched a probe of the industry after disclosures that U.S. Central Credit Union invested $255 million in a troubled Spanish bank. U.S. Central only avoided a loss because the Spanish government guaranteed the investment.

Hearings on the industry are expected later this summer.

Opposes CRA Burden

Mr. Miller also opposes bringing credit unions under the Community Reinvestment Act, an action favored by both Rep. Gonzalez and Rep. Joseph P. Kennedy 2d, D-Mass.

"CRA isn't necessary for credit unions because they lend to their members," Mr. Miller said.

NAFCU rules limit a member to two terms as chairman, so this is Mr. Miller's last year in the top spot.

"It's something you get to do once in a lifetime," he said.

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