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WICHITA, Kan. – With prodding from the Kansas Bankers Association, state lawmakers have launched a “performance audit” of credit union regulation with an eye toward curbing CU expansion and possibly combining bank and CU regulatory agencies. The Kansas Credit Union Association has called the initial work of the so-called Post Audit Committee of the legislature a new example of the overall bank-attack strategy led by the American Bankers Association through the affiliated KBA. League officials are stressing the need for Kansas CUs to work closely with lawmakers and the public to get out a positive message about the CU community role to thwart any bills that might emanate via the joint House-Senate Post Audit panel. Bills to control CU growth through the Kansas Department of Credit Unions might not come, however, until 2006 since the Post Audit Committee needs 12-14 weeks to complete its auditing work. That would put bill introduction past the deadline for the close of the 2005 legislative session in April, noted state officials. Nonetheless, the Dec. 14 decision to move ahead with the audit spearheaded by the Post Audit Committee and supported by the chairs of both the Kansas Senate and House committees overseeing financial institutions has raised consternation within the League. Vowing credit unions will be treated fairly “and be given a chance to present their case,” the chair of the Senate Financial Institutions and Insurance Committee, Sen. Ruth Teichman (R- Stafford) said the audit is needed to determine “whether credit unions have grown beyond their original mission.” Teichman, who has acknowledged the KBA’s role in asking her to support the departmental audit, hails from a well-connected central Kansas banking family. She said she is a director of the four-bank Farmers National Bankshares, a $70 million Stafford holding company, and also owns stock in Bank of America. Once it gets its final marching orders and completes its work on other state departments, the audit agency is slated to review CU regulation as to whether there are “adequate procedures for ensuring the safety and soundness of credit unions” as well as “the influence of credit unions from outside of Kansas.” Another issue as noted in its “scope statement” is how “Kansas credit union services have changed in recent years and how have they grown in comparison to other industries” plus “are the department’s actions in relation to credit unions’ expanded services consistent with state law.” Teichman said she has long been concerned about the “authority and the products that credit unions offer and how they are able to reach people beyond” their original charter. “Look at Boeing and how they now offer products to everybody,” said Teichman referring to the state’s largest, the $383 million Boeing Wichita CU, whose original member base has been employees of the aircraft manufacturer. Teichman pointed to CU advertising as an example of how CUs have over-reached. “Look at the ads on TV and they even say `we are just like a bank,’ ” charged Teichman, arguing “ something has happened to their exposure and non profit status.” Marla Marsh, president/CEO of the KCUA, said the new interest in CU activity by lawmakers reflects the powerful influence of the KBA agreeing that Kansas has parallels with other states also facing sustained bank attacks including Utah. Marsh noted the KBA has a new president/CEO, Charles Stones, who sources said apparently is eager to make a name for himself among banking trade groups. In addition, Kansas is the home of Hutchinson banker Earl McVicker, who sits on a key committee of the ABA overseeing CU competition. McVicker is also slated to serve as ABA chairman-elect in 2006. Marsh said the audit does provide an opportunity for CUs “to tell their story” and combat the misconceptions about “the lack of regulations, loose supervision, uncontrolled growth, lack of expertise, and straying from our original mission” – all lines touted by the banking lobby. Marsh noted sardonically that the audit panel before it starts working on CUs also has the charge of doing audits on other state agencies: Social Rehabilitation Services, Medicaid and welfare adding “one of the areas includes sexual predators.” Barbara Hinton, who is heading up the post auditing work for the legislative panel, said she is in the process of assembling an audit team and that it would be up to the committee as to whether the CU probe would take precedence over social rehabilitation “but right now we are overloaded with audits” so it might be until February when work could begin in earnest. [email protected]

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