SACRAMENTO, Calif. – A bill that would allow state-licensed credit unions here to provide trust services without having to form a credit union service organization received overwhelming support from the California Assembly Banking and Finance Committee with a 51-6 vote. The Assembly passed AB 684, authored by Assemblywoman Christine Kehoe, D-San Diego, would allow a state-licensed credit union with its main office in California to offer in-house trust services if its bylaws permit it to do so and would amend the current Financial Code to add credit unions to the list of financials that can offer such services. Presently, corporations, industrial banks, commercial banks and foreign or state banks that maintain a branch office in the state are permitted to engage in trust services. The legislation now goes to the Senate Committee on Finance, Investment and International Trade scheduled to commence in early July. Larry Sharp, president/CEO of Arrowhead Central Credit Union said, “legislators are really tired of the fight that banks are putting up to prevent credit unions from offering trust services.” Arrowhead’s CUSO, Arrowhead Trust, Inc. is the only CUSO in the state that offers trust services. “It was that kind of vote,” Sharp told Credit Union Times while he attended a World Council of Credit Unions conference in Dublin, Ireland. “Really, this legislation will allow credit unions to offer trust services, keep the costs down and make it less costly to members. It will restore these services to areas that banks have deserted through their centralization and the raising of value limits.” Indeed, several Assembly members spoke in favor of AB 684 pointing out that credit unions are serving communities neglected by banks. Both Assemblymembers Carol Liu (D-Pasadena) and Ed Chavez (D-Industry) agreed that consumers who have established long-term relationships with their credit unions should be allowed to receive trust services there. Assemblyman Phil Wyman, (R-Victorville) added there was no reason to prevent credit unions from providing trust services as long as they remain safe and sound. In April, Sharp testified before the Assembly, citing a large number of banks have raised the minimum initial value for a trust account to $1 million or more and that many of the living trusts consumers want to establish and the inheritances that California residents are receiving from their parents and grandparents are far less that $1 million. Sharp also said that banks and trust companies are consolidating their operations in the state’s major metropolitan areas in the Bay Area, Los Angeles/Orange County and San Diego. The Department of Financial Institutions (DFI), the agency that regulates all state-chartered banks, savings and loans and credit unions, would require proof from credit unions that they have hired qualified professionals to oversee trust management. DFI would also conduct audits of trust departments. Meanwhile, the California Credit Union League is expecting bankers to “pull out more arsenal” when AB 684 appears before the Senate Assembly, said Monica Cisneros, the league’s legislative and regulatory analyst. “We’re not asking for any special treatment here,” Cisneros explained. “We’ve worked closely with DFI and are addressing their concerns but the banks have tried to derail the bill every step of the way.” At the league’s annual meeting last year, 200 credit unions were surveyed to find out whether they would offer trust services. Almost half, 48%, said they would. Only five credit union service organizations offered trust services at the end of 2000, according to NCUA data. -

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