TOPEKA, Kan. -- Kansas has a new landscape for credit union growth, and the affected are still fretting over the outlook.
"I do agree that we got a law that is not the best but not the worst either--we could have had new Kansas taxes and CRA," declared Lee Williams, CEO of Central Star CU in Wichita.
As it turned out, Williams, a member of the state's Credit Union Council, had one of the ringside seats to the legislative drama that played out the last three months in the Kansas legislature, climaxing in the enactment of the restrictive field of membership-merger law by Kansas Gov. Kathleen Sebelius.
The Democratic governor, as expected and without comment, signed on April 11 the amended FOM bill that was originally drafted by banking interests. It takes effect in two phases, the first on July 1 with rules on how and where CUs can open new branches or pursue mergers based on metropolitan statistical areas with population of one million or more, principally Kansas City, Wichita and Topeka.
The second phase, effective Jan. 1, 2009, requires nine CUs with statewide branching operations to curtail their programs and to expel members, particularly those acquired through indirect lending.
Many of the provisions contain grandfather clauses, and on that front, attorneys were meeting with CU boards and state examiners to go over the fine print to determine the limits based on CU structure, whether occupational, association or geographic.
As for Williams, who heads a $60 million CU with an FOM covering five counties, there would be no change for the interim because the contiguous counties are grandfathered. But she emphasized that in the long run there are negatives.
For one, "consumers will suffer," she said, for lack of choices and now such options are so important considering "we seem to have the perfect storm" of a mortgage meltdown, a credit crunch and a declining stock market at a time when the pubic needs the financial cushion that CUs can provide if they were not shackled by the new law.
"For the most aggressive credit unions in Kansas," she said the law is indeed a setback, but for others it is bearable but perhaps "down the road" we'll find CUs stymied by "banker mischief."
She said the law has a plethora of public notice and application requirements that could open the door to the banking lobby to block CU expansion plans. That is a point raised by the Kansas Credit Union Association, which reluctantly agreed to the FOM law in the face of costly litigation.