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N.J. s public deposits plan becomes law
TRENTON, N.J. (8/23/11)--New Jersey Gov. Chris Christie Friday signed legislation that paves the way for public entities to seek the best possible return for taxpayer dollars by allowing the state's credit unions to serve as eligible public depositories. S-1807/A-1597 will enable counties, school boards, municipalities and other government entities to use credit unions as depositories. Previously credit unions were prohibited from serving as eligible public depositories by the Government Unit Deposit Protection Act, which mandates depositories have Federal Deposit Insurance Corp. (FDIC) insurance--even though credit unions' government-backed insurance with the same limits is through the National Credit Union Administration. New Jersey's credit unions can now compete with banks in the $15 billion public deposit market. With credit unions typically paying on average better rates and offering lower fees than banks, public entities will have a new option as they seek the best yield during tough economic times, said the New Jersey Credit Union League (NJCUL). "This market has historically been dominated by a small group of banks," said league President/CEO Paul Gentile. "Credit unions will bring competition to public deposits that will likely drive better returns and ultimately help taxpayers. Even if credit unions aren't ultimately chosen by the public entity, their presence in the market raises the competitive bar," he added. The bill arrived on the governor's desk with strong bi-partisan support. It passed the Assembly 67-8 in late June and the Senate in June 2010 by a 29-6 vote. Prime sponsors in the Senate were Senate President Stephen Sweeney and Senate Republican Conference Leader Robert Singer. In the Assembly, prime sponsors were Speaker Sheila Oliver and Deputy Speakers Upendra Chivukula and John Wisniewski. The legislation was supported by the credit union league, the New Jersey League of Municipalities, the New Jersey School Boards Association and the New Jersey Association of Counties. "We thank the sponsors spearheading this legislation and making the case that public entities should have the right to seek the highest available returns on taxpayer dollars," said Gentile. He noted the governor "also recognized the role credit unions can have in driving competition. This legislation fits into efforts of the governor and legislative leaders to find ways to hold property taxes in check." NJCUL Chairman Shawn Gilfedder, president/CEO of McGraw Hill FCU, East Windsor, said the league "was able to spearhead legislation that empowers New Jersey credit unions to add to their business line while also potentially helping taxpayers. In a time when regulators and lawmakers seem to be clamping down on financial service providers including credit unions, this is a proactive step in the right direction." A core mission of New Jersey credit unions is to help improve financial literacy in the state. An amendment in the legislation mandates that credit unions contribute funds to a nonprofit entity dedicated to promoting financial literacy in the state based on the level of public deposits the credit union takes in. "Financial literacy is sorely needed in New Jersey," said Gentile. "This legislation will help financial literacy efforts expand through credit unions' activity with municipal deposits. That's a win-win for consumers and public entities alike."


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