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Tom Bearden reports on the conflict between banks and credit unions.

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TOM BEARDEN: Rene Siegfried says she owes her freedom to the AT&T Family Credit Union in Asheboro, North Carolina. She was going through a divorce in 1992 and needed a loan to buy out her ex-husband's share of the equity in their house. She says the credit union was the only place that would even consider loaning her money. Without it, she would have lost control of her home.

RENE SIEGFRIED: My husband and I, at the time, were on very bad terms. This would have gave him control of the house again when it was just me and my children here. So--

TOM BEARDEN: So it bailed you out?

RENE SIEGFRIED: It bailed me out. It let him stay on his side of town and I could stay over here.

TOM BEARDEN: Providing people with financial services that might otherwise be denied is what credit unions were designed for. The 1934 Federal Credit Union Act made it possible for people who shared a common bond--like working for the same company--or who shared an occupation--like teaching--to pool their resources and provide small loans to each other. Congress considered this an important social service, and granted tax exemptions to credit unions. This allowed them to charge lower fees for services and lower interest rates on loans. But only companies with more than 500 employees could qualify. The credit union landscape changed dramatically in 1982. Economic times were tough. Factories around the country were closing, and so were credit unions. So the agency that regulates credit unions, the National Credit Union Administration, began allowing them to sign up people who worked for several different companies. In effect, the common bond requirement had been replaced. People who worked for many different companies--some too small to form their own credit union--could now join institutions like AT&T Family, regardless of the type of job they did. In the late 1980's, the AT&T Credit Union opened a branch office in Asheboro, and began recruiting new members in several local factories. One of them was the Klaussner furniture plant where Rene Siegfried works. She was just one of some 15 million people who were allowed to join credit unions as a result of the new multiple common bond definition. But Mike Miller saw those new accounts as a threat to the very existence of his business. He's the president of the First National Bank of Asheboro.

MIKE MILLER, President, First National Bank & Trust: When you cease serving a single employer as an occupational-based credit union, you cease being a credit union; you have lost your identity. AT&T Credit Union serving furniture companies, battery workers, casket makers, telephone workers, Coca-Cola bottlers, Duke Power, people like that, they literally have lost their identity as a credit union. They're no longer a credit union. They're a bank.

TOM BEARDEN: And because credit unions enjoy that exemption from some of the taxes that banks have to pay, Miller and other bankers saw them as unfair competition.

MIKE MILLER: I really don't believe that the furniture workers and the battery workers would appreciate it if an agency of their own government set up a competitor across the street, doing virtually the identical business, and gave them a complete tax exemption. In that case, the furniture worker would lose jobs; the battery worker, the shoe worker, would lose jobs. In the situation of community banks, yes, it is a survival issue.

TOM BEARDEN: So the bankers went to court. In February, after eight years of litigation, the Supreme Court ruled in their favor. The court said congress intended for occupation-based credit unions to serve a single company. Now it's the credit unions who say their survival is threatened. Marcus Schaefer is president and CEO of the AT&T Family Credit Union.

MARCUS SCHAEFER, CEO, AT&T Family Credit Union: It would have the effect of prohibiting us from extending affordable financial services to this community and others.

TOM BEARDEN: And in effect, attrition would eventually run you out of business?

MARCUS SCHAEFER: I think that's a fair representation--that little by little, things like direct deposit payroll from those employers, at some point if they have--less than half their employee base is able to get direct deposit to the credit union, they're going to ask why do we have this relationship.

TOM BEARDEN: The credit unions have gone to Congress for relief. The AT&T Credit Union staged a rally in Asheboro to seek public support and to petition the state's congressional delegation to undo the Supreme Court decision and allow the continued expansion of their industry. of their industry. The bankers are fighting back, arguing that the only fair thing to do is level the playing field by eliminating credit unions' tax-exempt status. But AT&T's Schaefer says the exemption is there for reason--to provide financial services to working people who otherwise wouldn't have access to credit at reasonable rates.

MARCUS SCHAEFER: If they can come to the credit union and cash their payroll check without having to pay a fee, if they can have a checking account, if they can borrow for a car at affordable rates, then they have an opportunity to build a financial future that they might not otherwise have."

TOM BEARDEN: Schaeffer says people of modest means can't afford to do business with banks.

MARCUS SCHAEFER: Unfortunately many of these workers don't have the minimum deposit that the banks require, which, if you're fortunate, that would be a hundred dollars. In many cases it's much, much more than that. In addition, almost all banks charge a minimum monthly fee for having these types of account relationships. And $7.50 would be considered low. Unfortunately a number of our members don't have that extra money; they don't have the initial deposit; and they cant afford to pay the monthly fee.

MIKE MILLER: I disagree very violently that there are people out there who cannot afford our services. We have extremely low-cost options at our bank.

TOM BEARDEN: For example?

MIKE MILLER: For example, the minimum balance to get no service charge checking here is either $300 in checking; or we have another product, if you have direct deposit of your paycheck, it's no service charge for checking at all. We also have another product that for a flat fee of $7.50 per month you get unlimited no-service charge checking, plus we buy your checks as well.

TOM BEARDEN: Miller says small community banks like his deserve public support because they also provide a valuable social service by serving people like Keith Crisco. The First National Bank provided the capital to start up his elastic factory by helping him get a Small Business Administration loan, which credit unions don't normally make. He thinks he got extraordinary help.

KEITH CRISCO, Small Business Owner: We approached several banks. This bank locally worked with us, assisted us in our financial planning, helped us go after our initial loan with an SBA guaranteed loan, and was just critical to our startup.

TOM BEARDEN: Ultimately Congress will decide the issue. On April 1st, the House overwhelmingly approved a bill that overturns the Supreme Court decision. A bitter grassroots lobbying battle was waged, but the credit unions and their 70,000 members clearly prevailed in the House, where no member spoke against the bill.

REP. BERNARD SANDERS, (I) Vermont: At a time of increasing bank fees, increasing ATM fees, increasing credit card fees, increasing minimum balance requirements, and the loss of many locally owned banks to large, multi-billion dollar corporate institutions, credit unions today are more important than they have ever been. HR-1151 will go a long way toward ensuring the long-term viability of credit unions, of allowing credit unions to expand, rather than to contract and wither away, which is clearly the goal of many large banks.

TOM BEARDEN: The issue now moves to the Senate, where the chairman of the banking committee is drifting a similar bill. A committee vote is expected by the end of the month.

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