STURTEVANT - Auto dealers can offer financing to customers, but financial institutions may not sell cars to their customers.

That is the outcome, at this point, of a recent state decision that may put Educators Credit Union out of the used-car business and partially idle a $7 million property at 1300 90th St.

The bitter battle over the right to sell used autos is being waged along Highway 20, and the auto dealers are in the driver's seat.

The state Office of Credit Unions has ordered ECU to stop selling used vehicles, although Monday it stayed that order, pending appeal. The order does not apply to repossessed vehicles or those coming off lease from credit union members.

"It doesn't seem very fair," ECU President Gene Szymczak said Tuesday. He said he was not aware if a particular auto dealer sparked the complaint that led to the ruling against ECU, the state's fourth-largest credit union, with 84,000 members and $900 million in assets.

But Wisconsin Automobile and Truck Dealers Association President Gary Williams said Tuesday, "Our disappointment is that it's not being enforced now, because (the practice) is clearly outside of the law."

The fight started with the association's Nov. 20 complaint to the Office of Credit Unions.

"ECU is openly engaging in motor vehicle retail activity," Williams wrote. "This activity should not be allowed because engaging in a retail business is not consistent with the banking or credit union charters or an allowable activity under the Wisconsin statutes."

"Retail business is not related to the routine daily business operations of credit union," he stated. Rather, credit unions exist to help people with financial matters.

"Allowing any financial institutions to compete in the retail market creates unfair competition, because in many cases individuals must acquire loans to buy those products," Williams said.

"And credit unions should not be the exception; they provide resources so that people can buy cars, furniture, houses, appliance and pay for weddings and tuition, but they should not and are not allowed to provide those products and services directly."

Office of Credit Unions Director Suzanne Cowan agreed, both in a preliminary ruling on Dec. 10 and a lengthier response on March 11.

Citing Statute 186, Cowan wrote that credit union activities must, for one, be related to the "routine daily operations of credit unions."

"Incidental sales of vehicles have been permitted as a function of leasing programs, but there is no provision for retail sales involving the wholesale purchase of vehicles for resale," she stated. "The retail sale of vehicles is not a routine daily activity of a credit union."

Implied consent

Lawyers for ECU argued in a Jan. 31 letter that the state had given abundant consent - both expressed and implied - for auto sales.

"We believe that regulatory approval has already been given to Educators Credit Union … to sell used vehicles to its members," attorneys Eugenia Carter and John Tuffnell wrote.

In 2002, they wrote that ECU, "with the express permission and approval of the (state) Department of Transportation, applied for and received a dealer's license to sell used vehicles." Since then, ECU's used-vehicle sales have ranged from 400 in 2004 to 714 in 2007.

Meanwhile, ECU has made quarterly reports to the Office of Credit Unions of its sales, leases and number of cars in inventory.

ECU also fully disclosed its plans to the Office of Credit Unions before investing $7 million in its five-acre property here, the lawyers wrote. That facility - which also houses ECU's call center - "is state-of-the-art and was designed, in part, to accommodate the automobile services ECU had continuously provided to its members for the previous 10 years prior to construction of the new facility," according to ECU.

ECU contended the auto association's complaint is "profit-driven. If (it) can drive Educators and other credit unions out of the market through regulatory trickery, it believes its used-car dealer members will capture the business."

"The resulting harm to Educators far outweighs the profit … used-car dealers will squeeze out of Wisconsin's teachers and other Wisconsin consumers."

But Cowan rejected those arguments. "While I can understand your frustration with the fact that automobile dealers have formed their own finance departments, it does not stand that you can in turn form a retail auto sales corporation to compete with them.

"I can understand that there has been 'mission creep' in the development of the retail side of your (credit union) business; however, retail sales and commerce are not permitted under Chapter 186.

"If this retail activity is allowed to continue unchecked, what will prevent the next (credit union) from providing sales of big-screen TVs or groceries?"

Williams said, "I don't see us as being at war; we need credit unions, we rely on credit unions. We just want credit unions performing their appropriate functions. In this case, we think they way overstepped."