COUNCIL BLUFFS, Iowa—A credit union that recently switched to a state charter is now seeking to return to a federal charter.
Cobalt Credit Union here is seeking to make the move from an Iowa state-chartered credit union to a federal credit union charter.
The $1-billion credit union will hold a vote on the proposed charter change on May 1, reported Keith Leggett, the former senior vice president and senior economist at the ABA.
In 2018, the credit union had converted from a federal credit union to a state-chartered credit union.
Cobalt CU stated several factors have influenced its decision to again be a federal credit union.
The credit union pointed out that federal credit unions do not pay state income taxes, but Iowa state chartered credit unions do, said Leggett. As CUToday.info has also reported, Cobalt Credit Union pointed to the Iowa legislature and the bills it has considered in recent years that would impose a higher taxes on Iowa state chartered credit unions.
As a federal credit union, Cobalt would be able to offer small-dollar loans through the Payday Alternative Loan program. Iowa law limits the fees that the credit union can charge on these small dollar loans, as a result the credit union loses money when it makes such loans.
More Competitive Rates
Cobalt further stated that by becoming a federal charter it can offer its membership more competitive rates and fees. The credit union noted that it costs the credit union $708,440 more annually to be an Iowa state chartered credit union compared to a federal credit union.
The credit union estimated that the proposed cost of converting from a state charter to a federal charter would be $48,760. When the credit union converted to a state charter in 2018, the cost was $38,678.03.
Cobalt Credit Union is pledging to its members that at the time of the conversion to a federal charter and for a period of five year thereafter, it will not convert to a mutual savings bank or savings association or a stock institution, Leggett said.