Kansas Senate Advances Compromise Bill Limiting CU FOM Expansion
TOPEKA, Kan. -- The Kansas legislature appeared headed last week toward passing compromise--and perhaps milestone--legislation putting new limits on field of membership and merger expansion by state-chartered Kansas CUs. The measure stops short of using the language in federal FOM statutes.
A proposed bill drafted by the Kansas Bankers Association and agreed to by the Kansas Credit Union Association would restrict future statewide branching by CUs in certain metro areas of the state based on population size.
An earlier version of the bill would have restricted new CU branches to those with 3,000 members.
Agreement to the FOM bill, pushed hard for the last two years by the KBA as a means to throttle expansion by so-called "large nontraditional credit unions," apparently puts to rest for the time being any protracted court battle like one that stymied CUs in neighboring Missouri.
A 2007 Missouri FOM law, which also restricted FOM growth based on geography, was enacted last January with initial CU applications and was also viewed as a compromise measure agreed to by the bank and CU trades in that state.
"There are definite parallels between Missouri and Kansas on the issues agreed to, but you also have to remember that in the proposed Kansas bill, as in Missouri, there are plenty of opportunities for credit unions to grow," said Chris Johnson, CUNA's vice president of state government affairs.
Nonetheless, the Kansas bill, which was passed out March 18 by the Senate Financial Institutions and Insurance Committee and was due for a Senate floor vote, does limit future statewide branching for certain CUs based in counties with million or more "potential members" in MSA designations.
The president/CEO of KCUA, Marla S. Marsh, said if the bill becomes law, nine credit unions will be affected immediately. Those CUs are those in the state's largest cities like Wichita and Topeka but also medium-sized CUs with statewide operations in Hutchinson and Garden City.
"We'll have credit unions that won't be able to expand in a way they could have before," Marsh said.
"Yes, it's a political compromise, and it all depends on the definition of compromise since we were able to retain grandfathering and other features, which clarify field of membership," said Erich Schaefer, KCUA chairman and president/CEO of Golden Plains CU, Garden City.
For his CU, with 10 branches in western Kansas, there would be no immediate disruption "but we could not branch statewide in the future, and that would have an impact on our indirect lending program that we have with dealers."
In a prepared statement, the KCUA noted that the bill was introduced by the KBA to "limit the geographic area served by credit unions as well as create new regulatory standards for branching, mergers and field of membership changes. The bill has been extensively amended and approved by the Senate Financial Institutions and Insurance Committee to reflect language agreed upon by the Kansas Credit Union Association."
Officials of the Kansas Bankers Association said there was "give and take on both sides" since that trade group for years had sought far more restrictive language patterned after NCUA FOM rules governing CU structure.
Marsh told the Kansas City Star in an article covering the legislation that Community America CU, which has Kansas facilities, would not be affected by the bill because it was chartered in Missouri.