Illinois DFI Remains Independent; CUs Target Rise in Regulatory Fees

SPRINGFIELD, Ill. – Illinois credit unions believe they dodged a bullet last month, when Gov. Rod Blagojevich bypassed the Department of Financial Institutions in his consolidation of state government agencies. But now they are waiting to see if the price of their independence is a rise in regulatory fees. These were the big issues discussed earlier this month during the Illinois Credit Union League’s Legislative Day and the first meeting in several years of the Governor’s Board of Credit Union Advisors. Paul Simons, a member of the advisory board, expressed the group’s relief that the new administration did not merge the state’s Department of Financial Institutions, which regulates credit unions, with the Office of Banks and Real Estate. “Credit unions are so small in comparison to banks that we would have been an afterthought,” Simons said. “The (current) regulator understands and is concerned about our issues, but we’d be such a small piece if we were thrown in with the banks and real estate,” Simmons said. Commission member Peggy Cummins, CEO of Three Rivers Community Credit Union of Mt. Carmel, read a proclamation on behalf of the board commending Gov. Blagojevich on his decision to maintain DFI as a standalone agency. The board met with Edgar Lopez, acting DFI director and Patrick Smith, acting supervisor of the credit union division. Both permanent positions remain unfilled since Sarah Vega, who served as DFI director under former Gov. George Ryan, was fired in January from what had appeared to be the politically safe job of credit union supervisor. Neither Lopez nor Smith offered any indication whether or not they would get the jobs permanently. Of Lopez, board member Chuck Rutan, CEO of the University of Illinois Employees Credit Union in Champaign, said: “We’re all hoping he gets appointed, but we’ve heard speculation either way.” Lopez and Smith discussed their concerns about the state’s smaller credit unions. Smith noted what he called a “disturbing trend” of accelerated merger activity. He said DFI is seeing an average of between five and six merger applications a month. Smith said he has 12 merger applications in the pipeline. While he would not block a financially sound merger, he believes that if the credit unions would come to the division early on, some could remain independent. “If they’re avoidable due to loss of a manager or the board has become indifferent,” he said, he’d like to assist. “Whenever we can make a difference, we’ll try to help as best we can.” While credit union executives were relieved that their regulatory agency remained intact, the main topic of conversation before meeting with the regulators was the latest budget proposal from governor. Holding to his campaign pledge not to raise taxes, Gov. Blagojevich instead offered a plan to increase a variety of regulatory fees – including credit union fees – to help close a $5 billion budget deficit. Part of that increase would be transferred to the state’s general fund. Rutan estimated that the proposed increase in fees – of nearly 50% – will cost his $126.1 million asset state-chartered credit union about $20,000 a year, with fees rising from $30,000 a year to $55,000. “They’re now 25 percent higher than they would be if we were a federal credit union,” he said. “If this goes through, they will be double.” According to Simons, “That’s going to be a pretty big issue with us. (I’m concerned) that it will cause state-chartered credit unions to convert to federal charters.” That point is also being made by the ICUL, which has alerted its members to the budget plan and is urging members to contact their legislators. In its alert, the league is suggesting that members point out to legislators that, “Such conversions could result in the state actually receiving less rather than more income from credit unions.” -