Caught in the cross fire

States stood in line a couple of years ago to court Harley-Davidson Financial Services Inc.

on the rumor that the Carson City-based lending company planned to leave Nevada.

Texas,Montana, Colorado and South Dakota were among the states looking to attract financial industries, which are clean, pay above-average wages and benefit the community, says Donal Hummer, vice president for community and government affairs at Harley-Davidson.

Solidly established after 12 years of operations in Carson City, the company had no desire to move, says Hummer.

That changed in 2003 when the Independent Community Bankers of America lobbied for a bill Wal-Mart was thought to be the target which would have prohibited commercial corporations from owning the thrifts known more formally as "industrial loan companies." The bill passed the Assembly.

Faced with the prospect of finding itself an outlaw in Nevada,Harley-Davidson Financial Services made plans to roll to Texas.

The bill died in the Senate.

It was stalled by a joint lobbying effort: Harley-Davidson, Carson City Chamber of Commerce,Western Nevada Community College,Northern Nevada Development Association and the Economic Development Association ofWestern Nevada.

"It was such a bad bill we went to the director of the Department of Business and Industry and to the governor," recalls Larry Hickman, since retired as deputy commissioner of the state's Financial Institutions Division.

"The state can only go on record as neutral about a bill, but we were able to register the agency as being opposed to the bill.

That is highly, highly unusual."

"The information provided in the bill was erroneous,"Hickman says,"They made thrifts sound like an evil empire, totally unregulated.

That's not true."

To encourage Harley-Davidson to stay in Carson City, the state government offered tax abatements for personal property such as new equipment and computers, similar to the breaks offered by other states.

After that bill died in the Senate,Harley- Davidson built a three-story, 100,000-squarefoot call center on Arrowhead Drive to house about 500 employees.

The company last week formally dedicated the building.

But the bill came back in the current legislative session, and Hummer is preparing to do battle once again.

"I have 500 reasons to do it," he says."Plus, we just spent $25 million on a new building."

A similar bill was signed into law in California, says Denyette Depierro, legislative representative for the Independent Community Bankers of America,with about 6,000 members nationwide.

In short, the 2005 Nevada bill says a commercial corporation cannot operate a thrift.

The California bill was union-driven, Hickman recalls.

The unions took aim at Wal- Mart, the largest non-union employer in the state.

The unions were concerned that Wal-Mart might open a thrift, says Hummer, and thought Wal-Mart wanted to recover transaction charges it pays to charge card companies.

Once Wal-Mart got a thrift license, it could run its own credit card operation and recover those transaction fees.

Wal-Mart applied for a thrift charter in Utah last month, as reported in "American Banker" online, says Hickman.

Depierro says the Independent Community Bankers of America worries that commercial companies operating thrifts, being beholden to shareholders, don't have the same fiduciary responsibilities to account owners that banks do.And she notes that thrifts don't face the same regulatory oversight as banks.

But why is a motorcycle maker such as Harley-Davidson in the banking business in the first place? Motorcycle buyers who want financing often discover that their regular banks and insurance companies are leery of financing a hog.

Buyers can turn to Harley-Davidson Financial Services to both finance and insure the motorcycle, says Laurie Cole, a Harley- Davidson spokeswoman.