Banking

Illinois credit unions welcome lower deposit-insurance fees

State-chartered credit unions in Illinois are getting a much-needed shot in the financial arm in the form of credits applied to their 2021 exam fees.

The credits stem from legislation enacted in 2009 to resolve litigation from the Illinois Credit Union League. The lawsuit, filed in 2004, alleged that then-Governor Rod Blagojevich was trying to use fees paid into the state’s Credit Union Fund to address budget deficits.

Any fees collected by the Department of Financial and Professional Regulation above a 25% expense threshold are returned to credit unions. Those credits have totaled $23 million over the years.

State-chartered credit unions are set to receive a total of $840,000 in credits in 2021 at a time when many of them are still coping with fallout from the coronavirus crisis.

The credit is “welcome relief,” said Steven Bugg, president and CEO of Great Lakes Credit Union in Bannockburn, Ill. Bugg said the $1 billion-asset credit union plans to allocate some of its credit toward digital products and services.

“Throughout [the Covid crisis] it became even more apparent that we needed to offer more robust digital services to remain relevant,” Bugg said. He declined to disclose the size of Great Lakes’ credit.

State-chartered credit unions receive an offsetting credit to the total regulatory fees due to the Illinois Department of Financial and Professional Regulation, said Patrick Smith, senior vice president of regulatory affairs for the Illinois Credit Union League.

The Illinois Credit Union League is the primary trade association for 212 state- and federally chartered credit unions.

While the size of the credit will vary based on how much an institution paid in the previous fiscal year, the total amount will be distributed among the 181 state-chartered credit unions.

Each institution is set to receive a credit equal to 61% of what they would normally pay in regulatory fees, Smith said. For instance, a credit union that would normally owe $10,000 would only have to pay the Illinois Department of Financial and Professional Regulation about $3,900 after the credit is applied.

“The formula was designed to keep a minimum balance in the fund equal to about three months of operating expenses,” Smith said. “The credit union section would then have a buffer in the [Credit Union Fund] and not run short of funds before receiving additional quarterly revenues from future regulatory fees collected.”

The state’s fee credit is unique. A spokesman for the Credit Union National Association said there are no similar structures in other states.

Fee credits for 2020 overpayments will help credit unions return capital to their members, while taking the edge off of regulatory burden, said Michael Abraham, president and CEO of the $105 million-asset First Financial Credit Union in Skokie, Ill.

“With the impacts of Covid and the large stimulus deposits recently, every bit helps,” said Abraham, who also declined to disclose the size of his credit union’s credit.

“The timing of the credit this year is advantageous,” Abraham added. “I’m all for paying our fair share of the costs for sound regulation, and the fee credits serve as a reminder that credit unions and their members are not going to stand for a diversion of those funds to cover unnecessary burdens as the cost of compliance is high for regulated financial institutions already.”



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