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News Now

CU System
Banks CUs honor Calif. IOUs but banks add a deadline
LOS ANGELES (7/7/09)--California banks and credit unions say they will honor state-issued "registered warrants" or IOUs --a promise to pay once the state's budget is passed. However, banks are putting deadlines on how long they'll accept the IOUs, while credit unions generally aren't setting a time limit. Bank of America (BofA), which announced it would accept the IOUs last week set a cutoff date of July 10--Friday. Other banks are following suit, with Chase, Wells Fargo & Co., and Union Bank saying they'll cash the IOUs from their customers only through Friday. Some banks, including City National, haven't set a deadline yet but didn't say they wouldn't. Credit unions, on the other hand, have agreed to accept the IOUs from members without setting a deadline, the California Credit Union League told the Los Angeles Times (July 3). News reports and bloggers' comments indicate that the banks' decision is generating some negative press. "The banks' hardball strategy will create hardships for their customers if no budget deal is struck soon and the state continues to issue IOUs instead of checks," said the Times. BofA cited two reasons for its decision, which it says is firm: the operational and financial challenge of accepting the IOUs, and its experience from the last time the state issued registered warrants in 1992. Then, the longer the warrants were accepted, the longer it took the legislature to resolve the matter, BofA said.


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