Three Nevada credit unions switch charters

Staff and wire reports

The congressional vote changing membership rules won't affect one Las Vegas credit union.

The 23,000-member WestStar Credit Union was one of three in Nevada that converted to a state charter last year in a bid to hedge its bets on the outcome of the legislation. Following a member vote in January 1997, WestStar became the largest state-chartered credit union.

Bob Geerhart, a supervisory examiner for the Financial Institutions Division of the Nevada Business and Industry Administration, said WestStar, Reno-based Sierra Schools Credit Union and Greater Nevada Credit Union of Carson City opted to secure a state charter to avoid the potential of having to discontinue adding members through small employment groups.

That was the center of controversy in a court case ultimately heard by the U.S. Supreme Court and overturned by Congress.

Geerhart said in terms of charter formation, the state generally follows the same regulatory procedures as the federal government for approvals.

The biggest difference between the way state and federal administrators oversee credit unions is in how they are insured. State-chartered credit unions can be privately insured. In WestStar's case, officials decided to stay federally insured, which means state and federal auditors examine the institution's books every year.

State-chartered credit unions also have higher registration fees, based on membership size and total assets. WestStar estimated the cost to be $20,000 at the time of the transition, which the institution intended to be absorbed as a general administrative cost.

The U.S. House on Tuesday passed -- and President Bill Clinton said he'd sign -- a bill allowing credit unions to continue expanding their memberships.

The bill marks a substantial loss for community banks and thrifts, which argue that credit unions have an unfair advantage because of their tax-free status and because they aren't bound by community lending laws and other banking regulations.

With elections just four months away, members of Congress chose instead to listen to voters. "The credit unions made a case in the eyes of the average citizen," said Diane Casey, bank analyst for Grant Thornton LLP. "I don't think members of Congress saw any downside in opposing the banks on this."

Though they voted for passage, Democrats expressed misgivings because the Senate stripped out provisions in the bill that that would have subjected credit unions to community lending requirements similar to banks. "Credit unions have an abominable record of lending to the poor," said Rep. Joe Kennedy, a Democrat from Massachusetts.

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