Bankers are trying to stop a Maine credit union from expanding its customer base to include 16 communities in the southern part of the state.

Saco Valley Federal Credit Union is trying to widen its reach to scattered towns in York County, including towns more than 25 miles apart.

Bankers are objecting, claiming the expansion does not constitute a "well-defined community," as field of membership rules require.

The bankers will argue their case before Maine Banking Commissioner H. Donald DeMatteis at a hearing June 22.

The Maine Bankers Association is being supported by the Independent Community Bankers Association of Maine and the Community Bankers Association.

"Our contention is that there is a very limited relationship between people who live in these areas and Saco," said Joseph J. Pietroski Jr., executive director of the Maine Bankers Association. "There's no lack of financial services in those communities and I don't know what the justification is."

Carrie Shaw, manager of Saco Valley, would not comment on the application or claims that the credit union's expansion plans are illegal. As of Dec. 31, 1993, the credit union had $14.8 millions in assets.

Seeking State Charter

Saco Valley's expansion bid is part of its application to switch to a state charter, which is why the hearing is at the state level, Mr. DeMatteis said.

The credit union wants to switch charters because Maine's field of membership regulations are more liberal than federal laws, he said.

Maine state credit unions can combine community-based and occupational fields of membership. Federal credit union rules prohibit such mixed charters.

Also, expansions are easier in Maine because the growing instutition does not need the consent of competing credit unions. When federally chartered credit unions expand, regulators require the consent of other credit unions in the market.

Three federal credit unions have switched to state charters and widened their customer base in the past 18 months, Mr. DeMatteis said.

The Maine Bankers Association requested a hearing for one of those expansions.

Mr. DeMatteis said he denied the request because the trade group's opposition focused on the institution's tax-exempt status.

"The taxation of credit unions is an issue for legislatures," Mr. DeMatteis said. "Whether there is a common bond in an expansion is a legitimate reason for a hearing."

Mr. DeMatteis said he also expected Saco Valley officers and representatives of the Maine Credit Union League to testify.

ABA to Intervene

On June 10, the American Bankers Association filed an application for intervention in the credit union's expansion.

"It gives us the opportunity to be heard by the department and gives us the right to appeal" if the expansion is granted, said Michael Crotty, deputy general counsel for litigation for the ABA. The ABA said it plans to submit a brief at the hearing.

Mr. DeMatteis said he expected to make a decision on the charter conversion, and the expansion, within 60 days of the hearing.

The issue of credit union expansion in Maine has strained relations between the two industries, Mr. Pietroski said.

"State and federally chartered credit unions are expanding beyond their original charters, and the regulators haven't checked this movement and we're very concerned about that," Mr. Pietroski said.

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