After Six Years, Illinois CUs Win $6.2 Million as Fee-Sweep Suit Settled
"This has been a long journey," declared Illinois Credit Union League President/CEO Dan Plauda commenting on the wind up of a protracted legal battle pitting the league and bank trade groups against a Blagojevich attempt in 2003 to siphon examiner fees to pay for budget deficits.
The $6.2 million windfall announced this month also "couldn't come at a more appropriate time in light of current economic conditions," said Plauda.
The payment from the state follows passage of an April 6 law, signed by Gov. Patrick Quinn, clearing final roadblocks on the so-called "fee raid" or sweeps of CU and bank regulatory fees seized by the Blagojevich administration.
Under the terms of the agreement, CUs will also receive a reduction in their regulatory fees paid to the state going forward in the aggregate amount of approximately $650,000 per year, according to a statement from the Illinois league.
The league is still working on administrative details for how the money will be returned, but they should be ready within the next two weeks, forecast Stephen Olson, general counsel. The state doesn't have a protocol in place yet for the payment. About 1,000 entities will receive money, Olson said.
The largest credit unions could receive up to $260,000 each from the state, and $45,000 a year in future reduced fees based on asset size.
The 2004 lawsuit brought in a Springfield court by the Illinois league and the banking trade groups challenged escalated regulatory fees that financial institutions had been paying to cover examiner fees.
Blagojevich had raised the fees by 50% for CUs and 27% for banks, while also seeking to amend a state law to 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 didn't want to be used by the state to pay for things not related" to supervision, Olson maintained. Joining in the Springfield suit were the Illinois Bankers Association, the Community Bankers Association of Illinois and the Illinois League of Financial Institutions.
In March 2005, a Springfield judge granted the league and its co-plaintiffs an injunction to prohibit further sweeps while the case was being prosecuted. The injunction effectively restricted the transfers.
Because CUs and banks were still paying higher rates, money began to accumulate in the dedicated funds. However, 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 last March.
Olson said the settlement was contingent upon legislation because credit union regulatory fees are set by statute.
Once the payment process is complete, the injunction will be formally lifted, so "we're 95% there," said Olson, noting the goal is "to make sure credit unions get their money as quickly as possible."
Olson said the league is indebted to Gov. Quinn and leading lawmakers who helped move along the process this year. "Quinn is an active credit union member and is very much a consumer advocate," Olson said.
The regulatory fee case is unique, maintained Olson "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."