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NAPERVILLE, Ill. – Sibling rivalry between credit unions and banks highlighted the recently ended 92nd session of the Illinois General Assembly. Credit union lobbyists describe the session as “active” and claimed more victories than losses. The long-term strategy of the Illinois Credit Union League, said executive vice president and chief operating officer Stephen Olson, is matching their federal counterparts. NCUA, he said, gives federally-chartered credit unions greater flexibility than Illinois-chartered CUs and keeping pace with federal changes is a key legislative priority. “We play that parity point to the hilt both ways,” Olson said. The 92nd session of the Legislature also took up the hot issue of predatory lending and resolved it with new regulations rather than legislation. The Illinois legislature is split; Republicans hold a 32-72 majority in the Senate while Democrats have a 62-56 dominance in the House of Representatives. Gov. George Ryan is a Republican. The regulatory route required only the approval of the legislature’s Joint Committee on Administrative Rules. The most contentious issue was H.B. 3008. The final version made several of what Olson called “technical changes” to the state’s credit union act. The bill passed both the Senate and House of Representatives without a “no” vote. Lost in the process, however, was a provision relating to the business lending authority of Illinois CUs. Keith Sias, the ICUL’s director of state governmental affairs said the stricken language was a way of codifying administrative rules and the loss of provision was inconsequential to credit unions. “It was a few words that were ambiguous but might have been construed to give us some new lending authority.” The state bankers’ association took credit for knocking that provision out of the bill. In the end, said Olson, the most important provision of the legislation as passed conforms provisions in state law regarding privacy issues to the federal Financial Services Modernization Act, called the Gramm-Leach-Bliley Act. “The state scheme was not as well developed as the federal law,” Olson said. Another bill, H.B. 2538, a financial industry omnibus bill, included provisions to allow release of information to prevent actual or potential fraud. H.B. 3008, which passed the State Senate 56-0 and the House of Representatives, 116-0, also provided that interest earned by the Credit Union Fund – the repository for fees credit unions pay for their regulation – would stay with the fund rather than move to the state’s general fund. The bill also clarified regulations that allow credit unions to invest in certain municipal bonds. The bill was sent to Gov. George Ryan June 14. The governor then has 60 days to act on the bill, which becomes law unless he vetoes it during that time. Katie Andrews, Gov. Ryan’s associate press secretary said the bill is still under consideration. S.B. 333, which was signed by the governor and became effective June 1, was chiefly a tussle between insurance agents and insurance companies over the ownership of “expirations,” the dates of policy expirations. Agents sought to keep the data from lenders, who increasingly have their own insurance operations. The bill assured that lenders, who also need to know that their mortgage holders have homeowners’ insurance in force, would have access to the information. Olson took particular pride in the death-by-referral-to-committee of S.B. 746, which would have denied credit unions the ability to accept deposits of public funds. “746 was a pot shot taken at us by our friends in the Illinois Bankers Association,” said Olson. “There are always some bankers that are frustrated with the success that particular credit unions enjoy in Illinois.” Olson said the bill was the IBA’s response to the expansion and conversion to a state charter of Citizens Equity Federal Credit Union in Peoria, Ill. The switch gave CEFCU, a credit union with 212,000 members and nearly $2 billion in assets, the ability to expand geographically. Last September, the IBA sent a letter to Illinois members of Congress, state legislatures and financial institutions in the state expressing “our industry’s concern about the impact (the change of charter) will have on community banks, as well as many small credit unions.” The IBA took the death of the bill with public equanimity. A statement on its Web site took solace that, despite the bill’s death, “the IBA’s initiative allowed us to highlight the competitive disadvantages between banks and credit unions.” Said Olson, cheerfully, “Sometimes, you’re as successful when killing a bad bill as when you’re passing a good bill.” Several other pieces of legislation, opposed by the Illinois League, died at the end of the session. S.B. 1234 would have increased the homestead exemption for debtors in bankruptcy from the current $7,500 per individual and $15,000 for two or more owners to as much as $50,000 and $100,000, respectively. The ICUL joined with others in the financial industry to oppose the bill even after those caps were whittled down. Olson said a key objection of financial institutions was that it would have made it more difficult to sell mortgages into the secondary market. S.B. 1234 and a similar bill in the House died in committee. The legislature grappled with several bills and resolutions on predatory lending, considering issues such as defining what constitutes a predatory loan, premium financing for credit insurance and prepayment penalties. The session ended with no legislative action. Instead, the Department of Financial Institutions and the Office of Banks and Real Estate adopted new rules effective May 17, imposing new requirements on “high risk” second-mortgage lenders. This is on top of rules passed affecting Chicago and surrounding Cook County. The ICUL supported the new state rules, which, it said, make state regulations substantially consistent with Regulation Z criteria. The legislature returns this month for a brief session and does not reconvene until January 2002. Olson said he expects that the ICUL in the next few months will put together a legislative program for the next session that includes a push for rules changes to increase loan limits and eliminate some prior regulatory approvals. “I think we’ll probably have another technical amendments bill for the Credit Union Act,” he added. Olson also is looking ahead to the changes that bankruptcy reform might bring, particularly as they affect pre-bankruptcy collections practices. – [email protected]

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