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SALT LAKE CITY – Though not unexpected following the narrow defeat of the state’s credit union tax bill in March, the dual chartering system in Utah started unraveling at a quickened pace following NCUA approval of three federal charter applications including the state’s largest, the $2.6 billion America First CU of Ogden. The regulatory action on America First as well as on the $260 million Goldenwest, also of Ogden, and the $1 billion Mountain America CU of Salt Lake City comes amidst heightened state and national attention focused on NCUA’s April 24 approval of a broad field of membership bid by a suburban Salt Lake CU, Tooele FCU. The spotlight on Tooele Federal Credit Union’s six county FOM expansion was brought both in Washington and in the Utah capital by banker groups charging the agency has “arrogantly” overstepped its authority on Tooele and on America First and Goldenwest by granting similar FOM powers across the six Utah counties. The American Bankers Association warned anew it was prepared to bring court action against NCUA to halt what was described as an “outrageous” circumvention of the law in first approving Tooele, “used as a stalking horse,” and then later approving applications by America First CU and Goldenwest CU with a similar FOM reach. NCUA Chairman Dennis Dollar, responding to harsh comments appearing in the Salt Lake City media over the weekend voiced by the ABA’s affiliate, the Utah Bankers Association, defended the agency’s action as legitimate and in keeping with all federal law “Any time a regulatory agency makes a compliance decision there are those who agree with it and those who disagree,” said Dollar. “I have never engaged in verbal jousting with credit unions who are directly affected by our compliance decisions when they disagree with them, so I have no intention of engaging in a public debate with someone who only feels he is impacted by an NCUA decision because of his competing financial interests.” The ABA said it was waiting on NCUA to fulfill its freedom of information request “to gather all the documentation from the files of the three applications” before deciding when and if legal action might be brought against the agency. “We would hope to get all the FOA requests to NCUA filed by Memorial Day at least,” declared Keith Leggett, ABA’s senior economist The ABA and the UBA have specifically charged that the FOM powers granted in the Tooele application “have dealt a death knell for community banks and small credit unions” in Utah. “It’s simply hilarious and an outrage,” declared Howard Headlee, president of the UBA, in how the NCUA has reinterpreted “well defined” communities for Tooele to include resort and vacation areas far distant from its main office 35 miles west of Salt Lake. Steven Christensen, the president and CEO of Tooele, defended the expansion for his CU as a means of reaching members who have left the area and relocated to other parts of the state. “You know our application was submitted a year and a half ago and follows all the NCUA guidelines,” said Christensen, noting the CU achieved “maximum penetration” in its home county and now seeks to reach its 32,000 members who live and work in metropolitan Salt Lake City or in the communities of Bountiful and Park City. The UBA has ridiculed that rationale, claiming Tooele has no business expanding into six new counties. “You mean to tell me the social and culture makeup of Tooele is the same as Park City,” declared Headlee, referring to the popular mountain ski resort town on the east side of Salt Lake. The last time the ABA sued the NCUA in 1999 over FOM “we did not win,” observed Leggett, the ABA economist, but that was because “we sued over interpretation of the rules,” but in Utah “we can look at individual cases and how the NCUA applies the law.” The UBA also accuses the NCUA of “violating the will” of the people of Utah as expressed through its state legislature when it passed a two-year CU tax study law plus a moratorium on member business lending and limits on real estate and personal loans. The Utah League of Credit Unions maintains it has by no means skirted the law, but that state-chartered CUs “cannot operate in this kind of hostile environment” to serve their members and have no choice but to opt for a federal charter adding they have a legal right to do so to conduct business. All three of the Utah CUs-America First, Mountain America and Goldenwest-receiving their federal charter from NCUA’s Region Six office in California, were targets of the defeated tax bill, and all maintain their actions in seeking conversion were taken reluctantly. “A number of years ago it become clear that the environment in Utah was shifting from a model of consumer-friendly credit union regulation to the opposite,” said Fred Nydegger, senior vice president of Mountain America. “We can now offer more and better products and services than we could before” with a mention of the increase in loan size loans under the federal charter. In its application, Mountain America, the state’s second largest CU, said it was switching from “a community based association” to one concentrating on SEG groups. “We will continue to support and be involved in our local communities and schools,” said Mountain America, noting however that it would be supporting its 100 SEGs. Though it now had a federal charter, Mountain America said in a statement it remains committed “to maintaining the dual charter system” in Utah. However, the health of the dual system was certainly in question as initially perhaps 20-25 more middle-sized, state chartered CUs in Utah have already filed or are expected to file this year for federal charters. There are more than 80 SCCUs in Utah. America First in discussing its decision to convert, also cited the hostile environment but said a federal charter would give the CU flexibility in reaching new members in three new counties, Morgan, Summit and Tooele. “Under this new federal charter, our field of membership will continue to include Weber, Davis and Salt Lake counties” and in the new counties, “the charter allows us to offer membership who live, work, worship, attend school or volunteer in any of these counties.” “This definition of eligibility is considerably more broad than the Utah definition, which states that you must live in a particular county to be served in that field,” said America First. The Salt Lake City-CU added that “no changes are anticipated in our service to the Mesquite, Nevada area, although the broadening of the field of membership may give a few more families access to credit union service.” In acting on America First, the NCUA Regional office in Concord, Calif. did limit future FOM expansion for two other Utah counties, Box Elder and Utah, which includes the communities of Provo, Orem and Brigham City. America First has branches in both of those counties. The conversion also permits America First to continue business lending in all of the counties, a development that under the Utah law would have closed down operations May 5. “We are pleased that we can continue business lending in all of the counties where we are now located,” said Brent Allen, executive vice president. Orla Beth Peck, the superintendent of credit unions in the Utah Department of Financial Institutions, said the May 5 date for terminating business loans by America First and the other two CUs, become “moot” in light of the conversions. The halt in business lending had been a key demand in the tax bill sought by banker groups which complained that large Utah CUs were “acting and operating like banks” without paying their fair share of taxes. She said the loss of the three CUs from the state system will cause a $200,000 drop in revenue, “but we don’t expect any layoffs” from the 30-member examiner corps. “We already had a few vacant positions so they will not be filled for the time being” she said Meanwhile, the state’s 13-member Financial Institutions Task Force, set up under the March law to investigate a future tax on state-chartered CUs, was slated to begin its work its work May 8. The task force includes powerful bank executives and bank-friendly legislators which the CU industry contends will push for taxing CUs in 2004-2005. -

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