Turning aside appeals from the banking lobby, New Jersey Gov. Chris Christie has signed the municipal deposit bill empowering credit unions to start accepting government funds.
The legislation, to go into effect later this year, would allow CUs for the first time to accept public funds of counties, school boards, municipalities and other local government entities.
The New Jersey Credit Union League hailed the bill’s enactment as a victory both for the industry following a long-fought slugfest with the New Jersey Bankers Association and for consumers, the league said, “in bringing the best possible return” on public dollars.
As early as last week, the league had mounted a vigorous postcard campaign directed at the Republican governor’s office to ensure he signed the bill, which has been on his desk for more than a month after continuing to draw banker opposition. Among those voicing concern at one time was Christie’s own Department of Banking & Insurance.
Until the bill’s passage, CUs were prohibited from serving as eligible public depositories by the Governmental Unit Deposit Protection Act that mandates depositories have FDIC insurance, despite similar NCUA authority.
“New Jersey's credit unions can now compete with banks in the $15 billion public deposit market,” said Paul Gentile, president/CEO of the league. “Credit unions on average pay better rates and offer lower fees than banks, so public entities will now have a new option to consider as they seek out the best yield in these tough economic times.
This market, he said, “has historically been dominated by a small group of banks.” CUs, he said, “will bring competition to public deposits that will likely drive better returns and even if credit unions aren't ultimately chosen by the public entity, their presence in the market raises the competitive bar."
The league noted that the bill came to the governor's desk “with strong bipartisan support having passed in the Assembly 67-8 in late June” after winning state Senate approval in June 2010 by a vote of 29-6.
The legislation, said the league, also had the backing of the New Jersey League of Municipalities, the New Jersey School Boards Association and the New Jersey Association of Counties.