House OKs Bill Giving Leeway to Credit Unions

The House gave the credit union industry a big victory on Wednesday, overwhelmingly approving a bill that would allow credit unions to keep recruiting aggressively for new members among different business groups.

The measure would, in effect, negate a Supreme Court decision in February that ruled federal officials had given credit unions too free a hand under current law in seeking new groups of members beyond their original base. The House bill, which passed 411 to 8, would allow credit unions to continue enrolling members of different employment groups, a policy that enabled the industry to grow rapidly over the years.

This meant, for example, that an entertainment industry credit union in California also could enroll members of the California Angels baseball organization, according to Patrick Keefe, vice president of the National Assn. of Federal Credit Unions, a major trade organization.

Credit union expansion, which had been on hold since the Supreme Court ruling, could resume if the House measure becomes law.

The banking industry, which competes vigorously with credit unions, had sought the recent Supreme Court decision that said federal regulators had overstepped their authority in permitting credit unions to enroll multiple groups of members.

The banks maintained that the credit unions, which do not pay federal income taxes, had been given an unfair competitive advantage in being allowed to sign up many groups of new members.

On Wednesday, the banking industry denounced the House action, calling it “an unfortunate rush to judgment.” A statement by six banking industry groups said the House bill would permit the “expansion of large credit union conglomerates in an industry already subsidized by taxpayers to the tune of $1 billion a year.”

But credit union officials signaled that they will continue their determined lobbying drive to have the bill become law.

“We still have a way to go to get this passed in the Senate and signed” by President Clinton, Keefe said. The new challenge for credit union officials, he said, is to “get on the telephone and let senators know about this and get it passed.”

Under the legislation approved Wednesday, credit unions would be allowed to keep all their current members. But if they enroll members from new groups or organizations, there will be a limit of 3,000 on the size of the new group.

The bill would also apply to credit unions the same obligations banks have under federal laws to make loans and other financial services available to poor people.

“It was a concession; we were willing to take it and felt we could live with it,” Keefe said.

The bill’s key sponsors were Rep. Steven C. LaTourette (R-Ohio) and Rep. Paul E. Kanjorski (D-Pa.).

Wednesday’s debate was filled with tributes from members eager to cast a vote for credit unions.

“Credit unions represent democracy at work in the marketplace and this legislation will go a long way toward ensuring they remain an integral part of the American way of life,” said Rep. James A. Leach (R-Iowa), the chairman of the House Banking Committee.

From the Democratic side, Minority Whip David E. Bonior of Michigan declared: “I love my credit union. I got my washing machine, my dryer, my car, my kids’ education, all from my credit union.”

The bill won swift approval after House GOP leaders decoupled it from a controversial measure to allow banks, securities companies and insurance firms to move into one another’s fields of business. Congress has been trying, and failing, for 20 years, to dismantle barriers between financial institutions.