DATE: Friday, October 10, 1997              TAG: 9710100629

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY TOM SHEAN, STAFF WRITER 

DATELINE: NEWPORT NEWS                      LENGTH:   98 lines

CREDIT UNIONS: CASE HEATS UP BATTLE U.S. SUPREME COURT CASE HEATS UP BATTLE FOR BANKING CUSTOMERS.

At some credit unions, marketing consists of a newsletter and a flier for the next promotion of auto loans.

At 1st Advantage Federal Credit Union, the marketing toolbox includes bumper stickers declaring that ``Friends Don't Let Friends Use Banks'' and packages of toothpaste and brushes labeled ``Brush Banks Away!''

For Paul J. Lucas, this week's U.S. Supreme Court case pitting credit unions against banks has become an opportunity to tout the services at 1st Advantage.

``I think it's fantastic,'' said Lucas, vice president of marketing and business development. Without the court case, ``there was no way we could have generated this sort of awareness.''

For years, banks and expansion-minded credit unions have fought over the federal law defining who was eligible to join a credit union. On Monday, their dispute moved to the Supreme Court.

Bankers and credit-union officers expect the court to make its decision known by year's end.

Immediately after stating its case to the Supreme Court, the American Bankers Association predicted the outcome.

``Two separate federal courts of appeals have agreed with us, and we have every confidence in our case,'' said Michael S. Helfer, who is arguing the case on behalf of the bankers' association.

The contestants, however, aren't standing around waiting for the decision. The stakes for both sides are high, especially in areas like Hampton Roads that have large concentrations of credit-union members.

Several credit unions in Hampton Roads already are waging letter-writing campaigns and lobbying members of Congress for legislative help.

Banking organizations, meanwhile, are seeking ways at the state and federal levels to curb the expansion of larger, more aggressive credit unions.

1st Advantage, which changed its name last year from Fort Eustis Federal Credit Union, embodies the type of credit union that sparks anger among bankers.

Its 75,000 members come from 162 companies and organizations ranging from Colonial Williamsburg and Lawyers Title Insurance Corp. in Richmond to a service station down the street from 1st Advantage's headquarters on Jefferson Avenue in Newport News.

With $220 million in assets, 1st Advantage is larger than some community banks in Hampton Roads. That represents serious competition in the eyes of many bankers.

``We see it particularly in certificates of deposit and consumer-loan programs,'' said Steve Kocen, head of marketing for the CENIT Bank and Princess Anne Bank subsidiaries of CENIT Bancorp Inc. in Norfolk. ``Credit unions serve a purpose, but some are getting away from their original mission.''

What irritates Kocen and other bankers is the combination of their tax-exempt status and efforts by some credit unions to attract a broad spectrum of members.

The bankers' feud with credit unions dates back to 1982, when regulators allowed federally chartered credit unions to take unrelated groups into their fields of membership. Under the 1934 law that defined the role of credit unions, eligibility had been limited to individuals who shared a common bond, such as working at the same company or belonging to the same church.

With the 1982 ruling, more aggressive credit unions could add members from hundreds of companies and organizations without regard to a common bond. The regulatory change, these credit unions said, was justified because it enabled them to provide services to employees at companies too small to support their own credit unions.

Banks, however, argued that credit unions with diverse fields of membership were competing unfairly. Because they pay no taxes, credit unions can offer higher interest rates for their deposits and charge lower rates for their loans, bankers complained.

When a group of North Carolina banks and the American Bankers Association won their case against a large North Carolina credit union in a federal appeals court last year, the Winston-Salem, N.C., credit union and the National Credit Union Administration sought a hearing from the Supreme Court.

Credit unions also began lobbying for congressional help. A bill pending in the House of Representatives would ease the limits on their ability to take in groups of unaffiliated members. So far, credit unions have picked up 122 co-sponsors for their measure.

Whatever the outcome in the Supreme Court, the proposed Credit Union Membership Access Act will be essential for credit unions, Daniel A. Mica, president and chief executive of the Credit Union National Association, told credit-union officials Monday.

``If the banks win, we will need to pass (this bill) to ensure survival of a viable credit union movement for tens of millions of consumers,'' Mica said. ``If we win, the banks will continue to use their influence in Congress and try to cripple credit unions any way they can.''

Court restrictions on membership expansion have delayed parts of 1st Advantage's strategic plan for 1998, Lucas said. However, the credit union is working on another marketing tool - a comparison of its services and costs with those at banks.

The high-profile battle in the Supreme Court will make this marketing effort more timely than it otherwise would be.

``The public awareness has opened the door to being compared,'' he said. ILLUSTRATION: Color photo by Mark Mitchell/Virginian-Pilot

For Paul Lucas... KEYWORDS: CREDIT UNION

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