Credit unions, which have been growing briskly as bank consolidations have alienated more and more traditional banking customers, may soon be able to expand their reach even further.
Late last month the National Credit Union Administration, the industry's federal regulator, proposed far-reaching regulations to liberalize the "field of membership" rules that govern who is allowed to form or join a credit union.
The changes are technical and perhaps obscure to those unfamiliar with the workings of credit unions, but "the practical implication will be better access to credit unions . . . and to the services that credit unions provide," said Fred R. Becker Jr., chief executive of the National Association of Federal Credit Unions.
Historically, credit unions, which are nonprofit cooperatives, have been open to certain groups with a "common bond," such as employees of a company or those living in a specific community. A credit union can accept as members only persons who fall under its membership rules.
The new rules would redefine common bond to include members of trades, industries and professions. So a credit union could include plumbers or lawyers or employees of an entire industry, though the regulating association indicated that in most cases it would impose geographic limitations -- all lawyers in the Washington area, for example.
The rules would also allow cities, counties and lesser jurisdictions to automatically qualify as communities. Larger areas could also qualify, all the way up to a metropolitan statistical area, if regulators are convinced that they qualify as communities.
And, since credit unions are required to have facilities in reasonable proximity to groups they wish to add as members, the rules would allow an ATM to qualify as a facility.
The rules continue a regulatory trend toward granting credit unions more freedom to diversify, which in turn contributes to their safety and soundness, said Eric Richard, general counsel of the Credit Union National Association, also a trade group. Richard noted that in the past many credit unions limited to a single company went under when the business did.
In fact, regulators began allowing a single institution to have members with more than one common bond as an effort to preserve failing institutions.
Banks are far from thrilled by all this.
"It appears that the NCUA wants self-determination -- just allow credit unions to decide who they want to serve and to serve them without restriction. We don't think you can do that," said Charlotte Birch of the American Bankers Association.
Banks and credit unions have had daggers drawn for more than a decade, with banks complaining that credit unions -- which are tax-exempt -- have an unfair advantage.
"The reason for credit unions back when they were chartered was to fill a specific niche" serving small savers, but now many credit unions are bigger than some local banks that compete with them, Birch said.
Banks would very much like to end credit unions' exemption from taxation, arguing that it is unfair. Credit unions say that as nonprofit cooperatives they return earnings to their members in the form of lower fees, lower interest rates on loans and higher interest on savings.
In the late 1990s banks scored a major court victory over credit unions and their regulators on field-of-membership issues, but that win is proving increasingly pyrrhic. After the decision, Congress rewrote the law governing credit unions, passing the Credit Union Membership Access Act of 1998, which granted them and their regulators wide new flexibility.
Credit unions have some 80 million members nationwide.
Credit unions can operate under federal charters and in many states under state charters. Clearly another factor in the rule proposal is a desire to keep federal credit unions from defecting to state charters, which sometimes offer even more freedom. In some cases, credit unions have converted to thrift institutions or banks.
How's your 401(k) plan doing? If you're like a lot of workers, you've been spending some time worrying about that question.
Well, your employer is probably worrying, too, according to a survey by benefits consultant Hewitt Associates LLC. Specifically, the employer may be worrying that you -- or someone -- will sue over your retirement plan's performance or any advice that company personnel might give you regarding your investments.
The survey of more than 200 companies shows that employers' top priority for next year will be "ensuring employees appreciate the 401(k) plan," followed by "seeking to reduce the risk of liability and exposure to lawsuits."
This nervousness isn't helping anybody, Hewitt experts said.
"Employers are exercising more caution than ever," consultant Lori Lucas said in a statement. When "extreme caution" causes employers to hesitate to help workers with retirement and investing decisions, "it's an issue," she said.
Keith Anderson, founder and leader of Anderson's Ark & Associates, an organization that has allegedly assisted hundreds of its members in evading income taxes and laundering money, was extradited from Costa Rica last week and is in U.S. custody, the Justice Department said. Anderson's Ark maintains a business center, a conference center, and several villas and guest facilities in Costa Rica. Anderson had been in custody there since his arrest in February.
Anderson's Ark, under Anderson's direction, is accused of obtaining about $28 million in illegal tax refunds for more than 1,500 clients from 1998 to 2001. The government also charges that the organization handled more than $50 million of clients' money and that it prepared tax returns that claimed large deductions for fraudulent "net operating losses" and "consulting expenses." The complaint alleges that the funds were not spent as claimed but instead were wired to Costa Rica so clients could later withdraw them with debit cards.