Scott Simpson, president of the Utah League of Credit Unions, said he hopes to avoid conflict with the state's bankers, but he added that getting the restrictions loosened would be a priority when the Legislature meets again early next year.

"I'm not sure our members are ready for another fight - there's not much blood left in that turnip - but this is important to us. It speaks to the issue of how we [credit unions] can best serve our members."

At the urging of Utah's bankers, legislators in 2003 placed a $250,000 limit on the size of individual business loans that state-chartered credit unions can offer. They also restricted, to a small percentage of its assets, the total amount of business loans that any one credit union can issue.

Also, any business loan, regardless of size, must be counted toward the total amount of that any credit union can offer. That is in contrast to federally chartered credit unions that are required to count only business loans of more than $50,000 as part of their business loan portfolios.

Moroni Feed Credit Union President Ilene Rollo said those business-lending restrictions are burdensome, particularly for small credit unions based in rural areas.

"If we were a federally chartered credit union we would only have 10 business loans on our books" and would still have money to lend, she said. "As a state-charted credit union we're maxed out."

The controversy in Utah reached its peak in 2003. That year bankers scored a major victory against their long-time credit union rivals when the legislature passed a measure to tax and rein in the expansion of Utah's largest credit unions. The state, though, continues to feel the effects of that legislation.

Since then, 14 credit unions, with total assets of approximately $6 billion have switched to federal oversight, leaving just 62 credit unions under state supervision, said Orla Beth Peck, supervisor of credit unions at the Utah Department of Financial Institutions.

"And I've heard that at least three more are in the process of converting [to federal charters]," Peck said.

Moroni Feed Credit Union, which claims nearly 6,000 members and $26 million in assets, is one of them.

"We're in the process of going federal," Rollo said. "We've waited several years to see if the state would ease up on its [business lending] regulations but so far they haven't done so. We hope to be federal by year end."

Credit unions that operate under federal charters are subject to slightly different regulations than those enforced by the state. But for most members, there is no difference in the products or services offered by state or federally chartered credit unions.

Utah's bankers lobbied hard against expanded credit union business lending in 2003, arguing that business lending is traditionally a activity conducted by banks. And they do not appear to be ready to give up the gains they achieved.

"It is usually only the larger credit unions that work hard to compete with banks on business loans. Given that they have a 40 percent tax advantage [because of credit union's nonprofit status] we don't consider the competition fair," said Jim Anderson, chairman of the Utah Bankers Association and president of Bank of Utah.

In 2002, Utah Bankers Association president Howard Headlee said bankers had no problem with credit unions sticking with their traditional products, such as home-improvement or automobile loans. "But they have no business funding strip malls," he said.

steve@sltrib.com