Lawmakers need to act to stop credit unions staging raids on traditional bank business.

The call came from the president elect of the American Bankers' Association, Bill McConnell.

Mr. McConnell told a meeting of the New Jersey Bankers' Association in Bermuda that credit unions exploited "myths'' to maintain tax and regulation privileges denied to mainstream banks.

He said: "They all want the rights of banks but none of them want the responsibilities.'' Mr. McConnell said the booming credit union sector received millions of dollars in tax breaks on the Federal level alone. And he said a group of credit union executives visiting Washington escaped $20,000 in hotel taxes because they could not be taxed while on official business -- unlike bankers.

But, said Mr. McConnell, the image presented by credit union chiefs of their organisations as "mom and pop'' operations serving the blue-collar, low income sector was out of date.

He added that in Illinois, credit unions had $1.5 billion in assets and were bigger than 98 percent of the state's banks -- and their growth rate outstripped banks.

Mr. McConnell said: "It's a myth that credit unions are here to serve just the little guy -- the blue collar worker who would have limited access to financial services if it wasn't for them.

"The typical member of a credit union is better off, better educated and more likely to own their own home than the population at large.'' He added that credit unions were now "aggressive competitors'' for the banking sector and offered rates no banks can meet.

Mr. McConnell also slammed claims that credit unions served their communities better than the banks.

He said that "banks serve the entire community. Credit unions serve only the areas they want to serve -- they have no obligation to serve low to middle income areas.'' He added that a landmark Supreme Court decision on so-called multiple common bonds for credit unions -- which would allow them to expand further -- was expected soon and that the banks "although it may take a long time, have a good chance of winning this.'' Mr. McConnell was backed by Al Griffith, president of the New Jersey Bankers' Association.

He said the problems stemmed from a decade or more ago when smaller credit unions got into difficulties. He added the problem was worsened by credit union regulators "being an advocate for the industry, not a regulator.'' But he insisted the banking industry did not wish to challenge "the small mom and pop unions. ..they should probably continue to operate as is.'' And he added the banks' arguments were aided by sharp divisions between the traditional small credit unions and their big relatives because the small unions resented risking losing their tax-free status to "satisfy the thirsty desires of a small number of credit unions.''