Utah's bankers, fortified by a state Supreme Court ruling, are pushing ahead with a suit to limit credit union membership.

The lawsuit by the Utah Bankers Association is seeking to block credit unions from having members from more than one county.

Such extended membership "just isn't right," said Lawrence W. Alder, the trade group's president. "It flies in the face of the very basics of their charter.

"It's not what credit unions are all about, which is serving a select community."

The trade group sought a permanent injunction ordering each defendant credit union to select a county as its "limited field of membership," stop soliciting elsewhere, and drop nonresident members.

In late February the state Supreme Court reversed a lower court's dismissal of the suit, which had been filed against Credit Union Service Centers of Utah Inc. and G. Edward Leary, Utah's commissioner of financial institutions.

The case has now been remanded to district court, where the association will refile it, Mr. Alder said.

"We sued credit unions for what we perceived to be a violation of state law," he said.

In the mid-1980s, then-Commissioner Elaine B. Wells adopted a policy of authorizing credit unions with geographically limited fields of membership to expand to include members from more than one county.

Since then, at least 17 credit unions have expanded their fields of membership, and at least three have moved into every county in the state.

Utah has 155 credit unions, more than twice the number of banks and thrifts.

Christine Willmore, director of communications for the Utah League of Credit Unions, said the issue had been blown out of proportion.

"Credit unions in no way compete with banks. Their earnings are nowhere near that of banks," she said. "We don't think what already exists should be taken away.

Ms. Willmore noted that about half of all credit unions have less than $5 million in assets, compared with only 0.05% of all banks.

"We feel there's room for both," she said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.