First Quarter 2007

Difficult legislative mood continues

The League and Illinois credit unions have come to expect a contentious atmosphere in the state’s legislative landscape — and the Spring 2007 session is no exception. More than 5,000 bills have been filed, and ICUL staff has been analyzing these bills (and related amendments) for their impact on Illinois credit unions and their business operations.

In addition, as a result of last Fall’s elections, there has also been a sizable shift in the power of the Democratic Party in the State, including a Governor in his second term, and the party’s continued control in the House, now with a 66-to-52 advantage. A new dynamic this session is the party’s “super majority” control of the State Senate (three-fifths: 37-to-22), which means it has enough votes to overturn the Governor’s vetoes and can pass bills in that chamber regardless of Republican support.

According to the Legislative Research Unit, a clean sweep of all statewide offices and both chambers has not occurred since 1941 (ICUL friend and staunch credit union supporter, Judy Baar Topinka, as State Treasurer was the lone Republican statewide officer prior to her attempted bid for Governor last fall). Meanwhile, much debate will continue over the State’s fiscal condition in the midst of the tense, on-going “tug-of-war” between the three leaders of the state’s executive and legislative branches.

In the face of all these issues, credit unions are focusing on introducing themselves to and educating 15 new legislators about the credit union difference. ICUL at the same time is working hard to further its package of legislative proposals during the session. Consistent with policy direction provided by the League Legislative Committee and the Board of Directors, the following measures have been prepared for introduction in the 95^th General Assembly:

H.B. 1526: Regulatory fee reduction bill (patterned after SB 2495, which passed the Senate last year on a 51-0 vote and received 66 co-sponsors in the House, before being held by Speaker Madigan in the House Rules Committee). This measure lowers regulatory fees for credit unions over $5 million in assets, by restoring the rate in effect before the 2004 Budget Bill was adopted that precipitated the pending regulatory fee litigation (note: through remedial legislation previously initiated and passed by the League, credit unions under $5 million were excluded from the fee increase enacted in 2004.) Additionally, it will protect the dedicated Credit Union Fund from further “sweeps” to the State’s General Revenue Fund. This measure unanimously passed the House Executive Committee on March 14;
H.B. 623: An amendment to the Illinois Credit Union Act (ICUA) Section 59, Investment of Funds, to clarify the authority of credit unions to invest in employee benefit plans and obligations. This measure unanimously passed the House on March 1 and has been assigned to the Senate Rules Committee;
H.B. 1288: Technical amendments to the ICUA, including:

An amendment to add new Section 4.1, Assumed Corporate Names, to authorize credit unions to utilize assumed names to better market to groups unrelated to the original sponsor that gave the credit union its corporate name;
An amendment to Section 8, Director’s Powers and Duties, to establish certification standards utilized by the National Association of State Chartered Credit Union Supervisors (NASCUS), for Illinois state-chartered credit union examiners;
An amendment to Section 20, Election or Appointment of Officials, to authorize credit unions to amend their bylaws to provide for election of directors based on one vote per member (note: also introduced as a stand-alone bill, H.B. 352; the measure unanimously passed the House on February 8);
An amendment to Section 22, Vacancies, to clarify that when a vacancy has been filled by the Board, the election of a successor director by the members would not occur until completion of the expired director term that was filled by the Board. Further, provides certainty by describing events that could trigger the declaration of a Board vacancy;
An amendment to Sections 30 and 46, Duties of Directors and Loans, to authorize each credit union board, at its option, to delegate to the chief management official (with authority to further delegate), the authority of setting loan and dividend rates; hiring employees other than the chief management official and fixing their compensation;
An amendment to Section 51, Other Loan Programs, to authorize credit unions to purchase the indebtedness of members of other credit unions; and
An amendment to Section 70, Use of Name, Sentence, to prohibit other persons or foreign credit unions from using the name of an existing Illinois credit union to market and/or solicit business.
The amendments under this measure (unless otherwise noted) unanimously passed the House Financial Institutions Committee on March 6 and;

S.B. 1673: An amendment to the Deposit of State Moneys Act authorizing the State Treasurer to accept a reduced rate of return on investments to assist credit unions in their efforts of providing financial literacy programs to members residing in investment areas. Investment areas are economically distressed areas as defined in the Community Development Banking and Financial Institutions Act of 1994 and identified by the U.S. Department of the Treasury. This measure has been assigned to the Senate Financial Institutions Committee.

To maintain their successful political grassroots activities and capture the attention of local legislators during another compressed session, credit unions are encouraged to mark their calendars for the League’s annual Legislative Day Event and reception. This year’s event is scheduled for March 27 and will feature a conference briefing at the Abraham Lincoln (formerly Renaissance) hotel, State Capitol visits and an evening reception. Please refer to the League’s Web site for registration information and other event details.

On the regulatory fee case front, the Illinois Division of Financial Institutions (DFI) issued its 2006 regulatory fee invoices to state-chartered credit unions on or about December 11, 2006 (notwithstanding the statutory payment deadline of March 1, 2006). In response and on behalf of those credit unions, the League filed a motion in the pending regulatory fee case to enjoin the agency from assessing the fee without giving the credit unions the fee credit to which they were statutorily entitled under the Illinois Credit Union Act (ICUA). The League’s banking co-plaintiffs joined in the motion, since the Division of Banks had similarly assessed regulatory fees to banks without including a fee credit.

In response to the motion filed by the League and its co-plaintiffs and following a hearing on December 18, 2006, Judge Leo Zappa ruled on December 22, 2006 the DFI need not recognize and apply the statutorily mandated excess fee credit mechanism in connection with its 2006 regulatory fee assessments. The Judge found preservation of the status quo would not be maintained consistent with the preliminary injunction the League successfully obtained in March 2005, if the disputed money (i.e., the credit) was returned prior to resolution of the case. As previously reported, the injunction restricts DFI from transferring any moneys from the Credit Union Fund, except for purposes prescribed in the ICUA. The Judge further found that the manner in which the disputed funds are expended is merely delayed until the case is decided on the merits.

Along with its co-plaintiffs, the League was disappointed in the Judge’s ruling, because it ignored the factual and statutory bases upon which new regulatory fee assessments are made. Nonetheless, the League was pleased he reaffirmed the viability of the injunction against DFI – that injunction continues to prohibit the State from sweeping the credit union dedicated fund or expending monies for purposes unrelated to credit union regulatory supervision. At this point, the League and its co-plaintiffs are vigorously prosecuting the case to its conclusion. In that regard, new discovery (interrogatories and requests to produce documents) were served on Governor Blagojevich, DFPR Secretary Dean Martinez, DFI Director Gina DeCiani and each of the other defendants on February 1, 2007.