Legislature To Update CU Law
LANSING — The Michigan Credit Union League (MCUL) wants to see the credit union industry in Michigan achieve financial modernization.
The organization contends legislative and regulatory changes are needed to enable state-chartered credit unions to keep pace with the evolving needs of members.
The Michigan Credit Union Act (MCUA), last updated in 1986, governs the activities of 274 Michigan credit unions that are state chartered. The remaining 165 are federally chartered.
More than two years ago, the MCUL Government Affairs Committee and Regulatory Subcommittee identified specific areas of the law where they felt modernization was needed and formed a working group to revise and update the act.
The Office of Financial and Insurance Services (OFIS) has been engaged the past year in ongoing discussions with the MCUL concerning a rewrite of the law.
The MCUL has now finalized the language of a bill it expects to be formally introduced to the legislature tomorrow. Sen. Shirley Johnson, R-Oakland, and Rep. Clark Bisbee, R-Jackson, are sponsoring the bill.
“Every industry, over a period of time, has to look at their governing act,” said Dave Adams, MCUL president and CEO. “The provisions that we’ve come up with, working in cooperation with OFIS, have to do with regulatory relief provisions.
Adams said OFIS shares the objective of working with the industry to make sure that the state law and associated regulations are as current as possible and as relevant to the current operating environment as possible.
“There’s a balancing act there to make sure we have the right mix of laws and regulations to protect consumer interests but also to protect credit unions as small businesses themselves.”
The MCUL wants the state to make it as easy and as flexible as possible for credit unions to enable access.
One of the most significant provisions of the bill would create greater flexibility for credit unions to expand their fields of membership. The provision would allow more consumers in more communities — and more small employers — to have access to credit unions, he said.
The bill calls for elimination of some of the documentation and paperwork that serves no safety or soundness purpose. That, too, would make it easier for credit unions of all sizes to expand, Adams said.
Another provision of the bill would give credit unions authority to offer trust services through a subsidiary organization or a Credit Union Service Organization. That would generate more competition in the marketplace and offer people “a consumer friendly, nonprofit alternative,” he said.
Another pro-consumer facet of the bill is to enable credit unions to compete with payday lenders and check-cashing outlets.
“We think there are people that are sometimes taken advantage of by these types of lenders and check cashing outlets,” Adams remarked.
Other provisions involve deregulating the industry and giving credit union boards and management greater flexibility to operate their organizations in more effective ways.
Credit unions are different from banks and thrifts in that they have always, by law, been limited as to who they can serve. As it is now, they have to be organized according to an occupational or association group, or what is called a “well-defined community.”
They’re also limited as to the types of financial services they can offer, and, by design, have to focus almost exclusively on consumer financial services.
Adams pointed out that all other sectors of the financial services industry — banks, thrifts, insurance and securities — have gone through the process of deregulation and have sought regulatory relief over the last several years.
That has enabled them to expand and meet the needs of the marketplace, he said, and now it’s the credit unions’ turn to go through that modernization process.
He says the proposed bill is a very pro-consumer bill, and his group isn’t aware of any objections to it. Although in other states, he noted, the banking industry has tried to oppose credit unions’ efforts to relax field-of-membership regulations.
Statewide, credit union membership is 4.4 million, or nearly 45 percent of the population. There are 42 credit unions in the Grand Rapids area with 373,300 members. Collectively, they represent some $1.4 billion in deposits.
Many federal and state chartered credit unions already have fairly broad fields of membership, including whole counties and multiple counties. But the current regulatory framework especially limits smaller credit unions from expanding their fields of membership, he said.
Of the 440 credit unions in Michigan, half of them are smaller than $20 million in assets.
“What this change in the law is going to do is to make it easier for all these credit unions to consider expanding their fields of membership. It won’t be immediate and it won’t be far reaching because many credit unions will still choose to have limited or closed fields of membership,” he said.
“But what the change in the law does is it enables credit union boards of directors to make that determination themselves, as opposed to this being restricted by law. We don’t believe it’s good public policy to have an antiquated law that restricts credit unions’ ability to provide for greater access.”
Adams said the hope is to have the bill go to the floor of the Senate before summer.
“We’re ready to work with the Legislature for the whole year to get this passed, but we’re hopeful we’ll get it passed sooner than that.”He said Gov. Jennifer Granholm’s administration hasn’t formally endorsed the legislation but the administration does support OFIS.