House Banking Committee Chairman Jim Leach predicted Monday that lawmakers would protect credit unions from collapse if they lose a legal showdown with the banking industry.

The Supreme Court may rule as early as today on a lawsuit by bankers that seeks to stop the expansion of occupation-based credit unions beyond employees of their original sponsors.

"It is inconceivable to me Congress would allow millions of Americans to be kicked out of the financial institutions of their choice," the Iowa Republican said at the Credit Union National Association's annual governmental affairs conference.

Interrupted by rousing applause from the 4,000-plus attendees, he then added: "We will not allow this to happen."

Despite the boost from Rep. Leach, credit unions were upbraided by the head of the National Credit Union Administration for becoming too competitive and abdicating their social mandate to help the financially underserved.

"Credit unionism in the U.S. seems to be drifting toward becoming a not- for-profit banking sector," NCUA Chairman Norman E. D'Amours said.

"That will cause credit unions to lose the support they now receive from consumer groups, from the U.S. Congress, and from the American public," Mr. D'Amours warned. "That will, in time, bring about taxation and bank-like regulation."

CUNA Chairman E.E. "Buck" Levins also chastised the crowd for not raising enough money for the industry's lobbying offensive.

The trade group's political action committee plans to raise $500,000 this year for congressional campaigns and increase that to $2.5 million annually starting next year, he said. The industry's new "deduct a buck" program would debit $1 annually from the accounts of willing credit union members.

Banking industry reaction to Rep. Leach's comments was mixed.

"We are very disappointed," said Kenneth A. Guenther, executive vice president of the Independent Bankers Association of America. "How far do you want to take this country in the direction of favoring financial institutions that do not pay taxes? It is very tough (for banks) to compete."

But Edward L. Yingling, chief lobbyist for the American Bankers Association, said Rep. Leach's remarks are not inconsistent with the ABA's goals.

"With respect to current customers, we have stated publicly that it is not our intention-should we win-to seek a remedy that would cause any credit union members to lose their account," Mr. Yingling said.

The ABA would want only to stop credit unions from adding new employer groups or adding members to groups that were declared illegal, he explained.

Nor would consumers be robbed of the option of using credit unions as long as larger credit unions pay "their fair share" of taxes and comply with laws akin to the Community Reinvestment Act and other bank-like regulation, he said.

A bill in the House that would let occupation-based credit unions serve multiple employee groups has been stalled while the Supreme Court considers the banking industry's case. A group of North Carolina banks brought the suit in 1990 against AT&T Family Federal Credit Union, which serves employees at more than 150 unrelated companies.

But, if necessary, Congress will act to make sure laws on credit union membership are in the public interest, Rep. Leach said.

Calling credit unions "an integral part of the American way of life," Rep. Leach praised their strong financial track record and the fact that they have never required a taxpayer bailout.

"You have asked nothing of Congress but to keep serving your customers," he said. "What is best is choice-what consumers determine, not what government dictates."

But Mr. D'Amours complained that credit unions were becoming too profit- oriented in part because unpaid directors are ceding too much authority to professional managers.

"Professionals in the credit union world should not dominate policymaking to the virtual exclusion of volunteers," he said.

With more occupation-based credit unions converting to community-based charters, overlapping memberships could prompt "destructive" divisions within the industry, he warned.

Many credit unions are serving the needy, Mr. D'Amours said, but more could be done.

"It is not enough to demonize and attack bankers for their fees and for a lack of commitment to the underserved," he said. "It is what credit unions are doing that should be stressed."

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.