VENTURA COUNTY CREDIT UNION TO TAKE ON BANKERS' SUIT.

Byline: Deborah Adamson Daily News Staff Writer

Ventura County's largest credit union said Friday that it joined a legal battle to fight for its right to do business under its community charter.

Point Mugu Federal Credit Union formally filed to become a co-defendant in a case brought by bankers against the federal regulator of credit unions, the National Credit Union Administration.

The case revolves around the NCUA's approval of community charters for credit unions. Bankers contend the federal regulator gave credit unions too much leeway in their community charters, hurting banks.

Under the Federal Credit Union Act of 1934, credit unions under a community charter may admit members within a well-defined area or neighborhood. Under an occupational charter, credit union members are admitted if their employer is part of the institution.

In the October 1997 lawsuit, bankers say NCUA gave too much free rein in approving certain community charters, citing Point Mugu as an example. To join Point Mugu, one must work, live or worship in Ventura County.

``We believe that under the law, Ventura County is way too large and way too diverse to be considered a well-defined community,'' said Michael Crotty, deputy general counsel for litigation at the American Bankers Association in Washington. ``Give me a break.

``There needs to be sensible limits on how big and diverse credit unions can be,'' he added. ``If not, they need to be treated like banks.''

Unlike banks, credit unions do not pay federal incomes taxes and many don't pay state income taxes. With lower costs, and as nonprofit institutions, they can pass along savings to their members, often offering lower fees and loan rates and paying higher interest on deposits.

As such, banks, particularly smaller community banks, have long contended that credit unions hurt their business.

Ron McDaniel, president of Point Mugu, is angered at the bankers' contention that the NCUA's approval of its charter was ``arbitrary'' and ``capricious.''

The credit union decided to become a co-defendant in the lawsuit because only a defendant can appeal to a higher court if the NCUA loses the case and decides not to pursue it further, said Tom Neuhaus, the attorney for Point Mugu.

The case carries important implications for Point Mugu's future, McDaniel said.

If the banks win, ``it would stop our growth for sure,'' he said. ``We'll look for other options - including the liquidation of the credit union - although a merger is more likely.''

But Steven Widerman a trial attorney for the NCUA, is confident of prevailing, if history is any guide.

``Our track record . . . has been victory in every case,'' he said, referring to similar lawsuits filed by bankers against the credit union industry.

That's been the case with ``occupational charter'' lawsuits, until recently.

Bankers have launched legal battles against the practice of credit unions in admitting dissimilar companies into its family. They claim that it violates the ``common bond'' requirement of the 1934 act.