DENVER–A bill introduced in the Colorado House threatens to “widen an existing rift between banks and credit unions in this state,” according to a new report.
The legislation would provide credit unions access to one more line of business now held solely by banks: the finances of local governments, reported the Denver Business Journal.
According to the Journal, House Bill 1277 would permit public entities to make deposits with credit unions that are federally insured by the National Credit Union Administration, replacing a law that requires such deposits only in institutions protected by the Federal Deposit Insurance Corporation. It would apply to the state, counties, cities and special districts throughout Colorado.
“Credit unions and some local governments began pushing for the change after examining the use of credit unions for small programs or larger deposits in recent years and learning with surprise that such a move was illegal,” the Denver Business Journal said.
While HB 1277 doesn’t put a limit on how much of a local government’s funds can be invested with a credit union, Helen Gibson, vice president of strategic outreach for Denver Community Credit Union, told the Business Journal credit unions would look to gain smaller amounts of money rather than the entire holdings of a city like Denver.
“It just allows us to serve more people and organizations,” Gibson told the publication. “By opening up this door, you’re allowing these smaller communities to keep their money local, which is better for the community.”
Bankers Disagree
But, Jennifer Waller, president/CEO of the Colorado Bankers Association, told the Denver Business Journal the association disagrees with the premise that banks are not local institutions.
“In 2019, she notes, Colorado banks originated and purchased 166,416 small-business loans totaling $5.6 billion and 3,828 small-farm loans totaling $252.4 million,” according to the report.
Waller told the Business Journal she also believes the law is set up the way it is now because banks and credit unions operate on “unlevel playing fields when it comes to taxes, where banks pay income taxes and credit unions do not. Plus, she said, banks that hold public funds must abide by the Direct Protection Act, submitting to audits by the Division of Banking and pledging assets to protect up to 160% of the uninsured deposit beyond the first $250,000 protected by the FDIC.”
‘Biggest Fear’
Waller told the Business Journal, however, her “biggest fear is that passage of HB 1277 will lead to a major shift of deposits away from banks toward credit unions and imperil those loans that banks make to small businesses and farms. Credit unions made just 2% of federal Paycheck Protection Program loans in 2020 and 2021, and 82% of all banks held agricultural loans in the third quarter 2021 versus 8% of credit unions.”
“We’re not anti-credit union. We really feel credit unions serve their role. Banks serve our role,” Waller told the publication. “We just feel we need to stay in our lane. And this is one more example of a credit union trying to serve a bank’s role with abiding by the protections on deposits.”
“This argument doesn’t sit well with credit unions, city leaders or the bill’s sponsors, each of whom say it’s absurd to think that there is going to a mass transfer of any significant portion of the $7.58 billion in deposits that Colorado banks hold,” according to the Business Journal.
“Gibson’s credit union — which was formed in 1934 by Denver city employees, holds almost $500 million in assets and employs about 100 workers — was talking a few years ago with the city of Denver about a pilot program where the city would give it money to offer in small loans to members,” the report continued. “When it found that the state barred such a partnership, however, the credit union questioned whether the law was an unnecessary obstacle, particularly to locally-owned credit unions in smaller towns working to hold local money.”
One Rep’s Perspective
Rep. Kyle Mullica (D-Federal Heights) told the Business Journal he approached the bill with his perspective as a former Northglenn City Council member, believing that local governments should be allowed to make potential money holders compete on interest rates and other metrics. He doesn’t believe that banks will suddenly lose billions of dollars of public money if the bill becomes law, especially if they try to work with governments to hold onto it, the publication added.
Don’t Forget to Check the Spam Folder!
Don’t forget to check your Spam/Junk email folder if you didn’t receive your free, popular and daily CUToday.info news headlines on Monday.
And if you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time.
CUToday.info has received very positive response from readers following the move to an improved provider of the daily headlines, but many also noted they did need to go to their Spam/Junk folder and mark it as safe.
The new email solution has not only improved every reader’s delivery experience, but it also features a fresh, new format that is easy to read, especially on mobile devices.
Please note and/or make your IT department or email administrator aware the emails will be coming from the domains CUTodayinfo.com and CUTodayinfoReply.com.