Emboldened by the public school coalition that got enough signatures to secure a ballot referendum repealing the voucher bill, credit union advocates who have felt bullied by a banker-friendly Legislature are contemplating a similar tactic.
For years, credit unions have been fighting a losing battle at the Legislature, which counts a number of bank employees among its membership. Now the credit unions are threatening to go directly to the people. A proposed "financial freedom" initiative would ease lending restrictions that the Legislature has imposed on state-chartered credit unions. It also would contain several consumer-friendly provisions that might make it as popular among voters as the anti-voucher referendum was in November.
"There are just two ways to get a law changed," says Scott Simpson, director of the Utah League of Credit Unions. "You can either have the Legislature do it, or you can have the people do it."
The Legislature has not been particularly open to the suggestions of credit union leaders, so the alternative is a ballot initiative this November, Simpson said.
This could put some heat on legislators who are trying to repair the damage they sustained from having ignored the wishes of a majority of their constituents in passing the voucher law, and then fighting furiously to defeat the referendum that repealed it.
The credit union initiative would contain several provisions that most consumers would find attractive. And, in a ballot initiative campaign, voters would be constantly reminded that their legislators rejected those popular provisions in the first place.
Simpson said the proposed initiative would put caps on returned-check fees, ATM surcharges, and payday loan companies' interest rates. It also would prohibit financial institutions from dishonoring a gift card if it wasn't used within a year of its purchase.
The main reason for the initiative, though, goes more directly to the needs of state-chartered credit unions. Currently, credit unions regulated by the state cannot make business loans for more than $250,000. Federally chartered credit unions can make loans valued as much as 12.25 percent of their total assets, which in many cases can be in the tens of millions of dollars.
State-chartered credit unions cannot make individual loans for more than 1 percent of the institution's assets. For many such credit unions, that means they can't even make a home loan that would cover the average mortgage in Utah.
Credit union advocates have had discussions with banking leaders about changing those restrictions, but the banks, having a heap of influence on Capitol Hill, have resisted. Four legislators work for Zions Bank and Senate President John Valentine sits on its board of directors. Sen. Bill Hickman and Rep. Kevin Garn own their own banks.
Most Utah credit unions dropped their state charters and went to federal charters a few years ago when it appeared the Legislature was leaning toward stricter regulation of credit unions and repeal of their tax exemptions as non-profits. But several remained in the state system and now they're asking for relief.
The threat of an initiative could put constituent pressure on legislators who have resisted granting that relief. The last thing they want in an election year is a repeat of their 2007 vouchers debacle.
