NAPERVILLE, Ill. (4/24/12)--Illinois state-chartered credit unions are receiving a partial credit on their April 2012 first-quarter regulatory fee invoice. This partial credit is due in part to these credit unions receiving $11 million in the aggregate as a result of legal action undertaken by the Illinois Credit Union League (ICUL) eight years ago, ICUL said.
Between an initial cash settlement of $6.2 million, the regulatory fee holidays or credits realized in four of the past 12 quarters totaling $2.7 million, and a rate reduction of $2.1 million in regulatory fees paid to the state's Department of Financial Institutions (DFI) since the settlement was reached, Illinois state-chartered credit unions to date have realized a cumulative benefit of roughly $11 million.
The latest regulatory fee credit is the result of the remaining financial year 2011 amount due to Illinois state-charters after they enjoyed a total holiday on their fourth-quarter regulatory fee that would otherwise have been paid this past January to the Illinois DFI. The credit exceeded the total fourth-quarter billing to credit unions for regulatory fees, which meant state-chartered credit unions were entitled to, and received, a carry-forward credit applied toward first quarter fees, for a grand total of $1.25 million in the aggregate.
These credits continue to occur because of legislation initiated by ICUL to implement the court-approved settlement of the regulatory fee case it filed against then Gov. Rod Blagojevich in 2004, which was signed into law by Gov. Patrick Quinn effective April 6, 2009 (as Public Act 95-1047). Under the terms of the settlement, Illinois state-chartered credit unions received a cash payment from the state in June 2009--the aggregate amount paid to credit unions was about $6.2 million.
The payment represented a credit for the overpayment in regulatory fees made under the Blagojevich Administration's fee escalation and transfer ("sweep") budgetary arrangement adopted by the state in its fiscal years 2004 through 2006.
The 2009 legislation implementing the settlement also accomplished two other goals, according to Stephen Olson, ICUL executive vice president and general counsel. First, it codified a rate reduction in regulatory fees on a going forward basis commencing January 1, 2009. On a going- forward basis, the rate reduction has resulted in $700,000-plus per year during the past three years, or $2.1 million back to Illinois state-chartered credit unions since the legislation became law.
Second, the 2009 legislation reduced the Credit Union Fund margin that triggers a credit back to Illinois state-chartered credit unions. Olson noted the Credit Union Fund is the dedicated fund into which regulatory fees are deposited to offset the ordinary administrative and operational expenses of the DFI Credit Union Section in supervising state-chartered credit unions. It is structured as an operating account, not a savings account.
To ensure adherence to that objective, the legislation reduced the margin level to 25% from 50%.
When the balance in the Credit Union Fund at the end of a state fiscal year exceeds 25% of the expenses incurred by the state in administering the Illinois Credit Union Act and related laws, the excess must be credited to the credit unions that paid the fees in the first instance, Olson explained.
As a result of the legislation, Illinois state-chartered credit unions received an aggregate financial year 2010 margin credit of $1.45 million, which equaled a full fourth-quarter fee holiday for 2010, as well as a partial holiday on their 2011 first quarter fees paid to the regulatory agency in April 2011. That was in addition to the aforementioned financial year 2011 fee holiday and partial credit for fourth-quarter 2011 and first quarter 2012, respectively.
"We are particularly pleased that the prosecution and favorable settlement of the regulatory fee case continues to provide direct financial remuneration to our 285 Illinois state-chartered credit unions," Olson said.
"The latest credit shows that the settlement terms we negotiated with the State in 2008 remain beneficial for our credit unions," said Dan Plauda, ICUL president/CEO. "Certainly, it comes at a good time given the continuing difficult economic and regulatory environment."