Illinois League Joins Banks in Examination Fee Suit Against State

SPRINGFIELD, Ill. – In a rare show of unity with banks, the Illinois Credit Union League has teamed up with two banking trade groups to seek relief on examination fees diverted by Democratic Gov. Rod Blagojevich to solve a state budget crisis. In a suit filed in Sangamon County Circuit Court, the Illinois League seeks an immediate reduction in regulatory fees “to a level that reflects the actual budgetary cost of regulating and supervising state-chartered credit unions, thrifts and banks.” Joining the Illinois League in the suit are the Illinois League of Financial Institutions, which represents savings & loans, and the Community Bankers Association of Illinois. In the suit, the three associations seek to block any transfers of excess fees “from the financial institutions’ dedicated funds to pay for the general operation of state government.” Spokesmen for the trade groups warn that an additional state suit seeking a temporary injunction if the governor “starts immediately transferring new funds” might be filed. The Sangamon County suit filed Dec. 14 asserts that actions taken by the state to balance its budget are unconstitutional and under a budget bill passed this year, “the Administration intentionally escalated financial institution regulatory fees far in excess of the amount necessary to cover budgetary expenses of regulatory oversight.” The pleadings also state that the transfer of excess monies from the financial institutions’ dedicated funds to a General Revenue Fund “violated the existing statutory framework that limits the specific purposes for which expenditures from the dedicated funds may be made.” The suit against the state by the three trade groups has been in the planning stages for months as CUs, at least, sought to negotiate with the Division of Financial Institutions regarding higher examination fees imposed on state CUs. Some of the state’s largest had threatened to convert to a federal charter unless the state stopped the diversion of funds from the department. Noticeably absent from the Springfield suit was the Illinois Bankers Association, which sources said decided to go it alone with the state. “I really think there are some people on the Illinois Bankers Association board who are close to the Blagojevich administration and don’t want to be poking him in the eye with this kind of suit,” said one insider. In a press release, Daniel D. Plauda, president of ICUL, lauded the leadership of the groups in filing the suit and said the court action represents a “critical factor in preserving our respective dedicated funds and ensuring surplus funds are properly credited to the financial institutions that paid the regulatory fees in the first place,” said Plauda. He continued, “Credit unions, thrifts and banks do not object to reasonable fees to cover the cost of their regulatory supervision. However, they vigorously oppose the imposition of hidden taxes that unfairly burden Illinois consumers.” Over the past several months, said the release, ICUL, ILFI and CBAI have engaged in negotiations with the Illinois Department of Financial and Professional Regulation, parent of DFI, “to pursue remedial relief via legislative and/or regulatory solutions before resorting to judicial action. “However, after it recently appeared that an acceptable resolution could not be reached, the three associations concluded the suit was necessary in order to restore integrity to the process of regulatory oversight, and maintain safety and soundness of their respective industries.” In the 2004 fiscal year, noted CBAI, more than $6 million in excess financial institution regulatory fees were collectively generated and transferred to the General Revenue Fund by the state “as a result of the escalation in the rates assessed against credit unions, thrifts and banks.” “We unequivocally oppose the intentional creation of excess regulatory fees, which are then used to cover expenses of state government unrelated to the cost of regulatory oversight,” said Robert J. Wingert, CBAI president. -