The lead attorney handling a Federal Reserve Bank application by the Iowa Credit Union League to buy a wholesale Arizona credit card bank said the proposed transaction needs to be viewed narrowly as offering legal options to the industry and should not be seen as any kind of "Trojan horse" to compete with banks.
"We're operating here on a very narrow precedent," in submitting applications to form a bank holding company and acquire CrediCard National Bank of Tucson, said Minneapolis attorney Steven J. Johnson of Lindquist & Vennume.
The Iowa League through its Members Group affiliate has applied to the Chicago Fed and the Comptroller of the Currency to buy the $19 million CrediCard NB and broaden its service portfolio to include check processing, investment and lending as a cushion against a liquidation or merger of the $94 million Iowa Central Corporate CU of Des Moines.
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In its Sept. 18 application to the Chicago Fed, the Iowa League warns that because of the corporate's small size it is in danger of being merged as NCUA pursues a reduced number of corporates and thus the Arizona bank could represent a viable alternative to keep small CUs in business. An inability to find "an alternative provider" could spell dire consequences for CUs because of higher costs.
Johnson, hired by the league a year ago to look into the bank concept, said the bank application may "take several months at least through year-end" before the Chicago Fed or the Comptroller acts on it. The Iowa Bankers Association, voicing skepticism about a CU owning a bank even though Texas has a limited credit card institution, said it "would review the application before making any determination."
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