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Fee-sweep suit settled Illinois CUs get 6.2 million
SPRINGFIELD, Ill. (4/13/09)--Illinois credit unions will receive a collective $6.2 million in cash and reduced regulatory fees after Illinois Gov. Patrick Quinn signed a bill April 6 that settled a lawsuit the Illinois Credit Union League and other financial industry groups had filed against the former Illinois governor and his administration. The lawsuit involved escalated regulatory fees that credit unions, banks and thrifts in Illinois paid to cover supervisory fees, according to Steve Olson, general counsel for the league. In 2003, former state Gov. Rod Blagojevich raised the fees by 50% for credit unions and 27% for banks in an effort to generate state revenue. He also amended a state law so that it would permit the money generated from the fees to be placed into the state’s revenue funds and used for expenses other than supervision. Credit unions and other state-chartered financial institutions were outraged, Olson said. The regulatory fee arrangement that credit unions and banks had with the state was that they would pay fees to cover supervision--nothing more and nothing less. “Credit unions didn’t want to be used by the state to pay for things not related to credit unions,” Olson told News Now. The Illinois state government also began “sweeping” the money collected from the fees and transferring it into the general revenue fund. The league worked to get credit unions’ escalated fee dropped to 27%, which was what banks were paying, but the institutions were still unhappy. After almost a year of trying to negotiate a compromise, the Illinois league, the Illinois Bankers Association, Community Bankers Association of Illinois and Illinois League of Financial Institutions filed suit against Blagojevich and his administration in December 2004. The plaintiffs argued that the escalated costs breached a pre-existing arrangement the institutions had for supervision fees. In March 2005, the league and its co-plaintiffs were granted an injunction against the state to prohibit further sweeps while the case was being prosecuted. The injunction restricted transfers from the dedicated funds to ordinary and contingent expenses of regulatory supervision. Because credit unions and banks were still paying higher rates, money began to accumulate in the dedicated funds. But the state couldn’t get at the funds due to the injunction--so the state pursued a settlement with the league and co-plaintiffs. A resolution was reached in March 2008. However, the settlement was contingent on legislation because credit union regulatory fees are set by statute. S.B. 2513 was introduced and eventually enacted April 6. The bill, sponsored by Sen. Terry Link and Rep. Joseph Lyons, implements the reduction of regulatory fees going forward. The group is still working on administrative details for how the money will be paid back. The state doesn’t have a protocol in place yet for the payment. About 1,000 entities will receive money, Olson said. Once the payment process is complete, the injunction will be resolved. “We’re 95% there,” Olson said. The process could be done in the next three weeks, he said. “We want to make sure credit unions get their money as quickly as possible,” he said. The largest credit unions could receive up to $260,000 each in a check from the state, and $45,000 a year in reduced fees going forward. The fees are based on asset size. Credit unions are excited about the reduced rate. “It’s not going [determine] the success or fail of the credit union, but it helps,” Olson said. “It’s a fair and reasonable compromise.” Illinois’ current governor, Quinn, understands credit unions, Olson said. Quinn is an active credit union member and has spoken at many Illinois league events. “He is very much a consumer advocate,” Olson said. For that reason, Olson said the league expects the reduced fees to remain in place. The regulatory fees case is unique because it enabled credit unions, banks and thrifts to work together instead of working against each other. “We were able to come together to work in a unified way and that helped us,” Olson said. The cooperation sent a message to the state, Olson said. He noted that the bill enacting the reduced fees passed unanimously. “This has been a long journey,” concluded Illinois league President/CEO Dan Plauda. “The credits paid to credit unions couldn’t come at a better time in light of current economic conditions.”


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