First Quarter 2006

Shortened session to compress State legislative efforts

The League will be contending with a compressed state legislative session and election year politics while attempting to advance its state legislative and regulatory agenda and its litigation against the State.

The recently released schedule for the Spring session of the Illinois General Assembly has the legislature slated to adjourn on April 7, 2006 – nearly two months earlier than normal. Since 2006 marks the second year of the 94th General Assembly, lawmakers will be focused primarily on the budget and "emergency" legislation. In fact, legislative leaders have indicated that individual lawmakers may be limited to action on as few as three bills per member during this shortened Spring session. This type of environment makes it that much more difficult for trade associations such as the League to implement its legislative plans, as well as defeat any issues detrimental to its membership. During the Spring session, the League will be initiating the following issues on the legislative front:

A bill to roll-back the 27.5 percent regulatory fee escalation instituted by the Governor in 2004 and to protect the dedicated Credit Union Fund from further transfers to the state's General Revenue Fund (this bill contains other clean-up provisions to the Illinois Credit Union Act as well);
A financial industry coalition bill (similar to HB 233 introduced in Spring 2005) that would also rollback the fee escalation and protect the Credit Union Fund and other financial institution dedicated funds; and
A bill to amend the Uniform Commercial Code (UCC) to clarify the status of a consumer loan purchase-money security interest. These bills are expected to be filed this month.

On the regulatory front, the League is conducting meetings with DFI to confirm logistical and operational details in light of DFI Director Michele Latz’s resignation, effective January 20. Further, the League is also proposing that DFI initiate rulemaking amending Section 190.70 of the DFI Rules pertaining to loan loss accounting. The proposed amendment would allow credit unions greater flexibility in loan loss accounting procedures by using alternative methods in calculating their historical loss rate. League staff will be working with DFI to finalize the language of this proposed rule change during the first quarter of 2006.

Proposed by the League’s Legislative Committee, the above legislative and regulatory package for the Spring 2006 session of the Illinois General Assembly was approved by the League Board of Directors at its November meeting.

To maintain their successful political grassroots activities and capture the attention of local legislators during the shortened session, credit unions are encouraged to mark their calendars for the League’s annual Legislative Day Event and reception. Due to the early adjournment date as mentioned above, the League has scheduled this annual event for March 28, 2006. It will feature a conference briefing at the Abraham Lincoln (formerly Renaissance) Hotel, State Capitol visits, and an evening reception at the new Abraham Lincoln Presidential Museum. Registration information for this event is available via the League's Web site and has been mailed to all credit unions.

On the litigation front, a significant development in the League’s joint lawsuit against the State occurred during December. As reported in the Judicial Action Alert dated October 14, 2005, the State in late May filed a Motion to Dismiss the Amended Complaint filed by the League and other co-plaintiffs. You will recall the Amended Complaint seeks to roll back the regulatory fee escalation contained in the State's fiscal year 2004 and 2005 budget implementation bills, to a level that covers, but does not exceed, the actual budgetary costs of regulatory oversight.

The suit also seeks to prohibit the State from raiding the Credit Union Fund and bank funds, through transfers to the General Revenue Fund, to pay unrelated general operating expenses of the State. The essential argument presented in the suit is that regulatory fees must be used only for the purpose for which they are collected.

A hearing on the Motion to Dismiss was held before Judge Leo Zappa, the presiding judge in the case, on Monday, November 21, 2005, and on Friday, December 2, 2005, Judge Zappa ruled in our favor by denying the State's Motion to Dismiss! Governor Blagojevich, OMB Director John Filan and the other defendants were ordered by the Court to answer our Complaint within 28 days.

We have received the State's Answer to our Complaint and know where factual disputes exist in the case. That, in turn, will help guide the League and its co-plaintiffs as we pursue discovery and our ultimate goal of resolving the case at the trial court level through a summary judgment motion.

As noted in the legislative agenda above, the League is undertaking a "dual track" strategy in an attempt to resolve the litigation issues through legislation. The League board approved this approach in November, and League staff has met with co-plaintiffs in the case to discuss the feasibility of pursuing such a strategy on a financial institution coalition basis, which they approved as well.

For more information regarding the fee litigation case or the League’s 2006 legislative/regulatory agenda, contact Steve Olson, Executive Vice President, General Counsel & COO at (630) 983-3405, or Keith Sias, Director of State Governmental Affairs, in the Springfield Legislative Office, at (217) 744-1801.