Alabama legislative issues handout

Credit Union Legislative Issues CREDIT UNIONS ARE A CRITICAL PART OF ALABAMA’S ECONOMY SERVING THE NEEDS OF CONSUMERS, COMMUNITIES, AND SMALL BUSINESSES • •

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Credit unions are not for profit financial institutions, completely owned and governed by their members.

Because they do not issue stock to outside investors, and are governed by volunteer boards, their sole concern is to serve the members by providing the best financial products and services at the lowest cost. All money earned that is not used for operations or set aside for reserves, is returned back to the member in the form of lower interest rates, fewer and lower fees, and higher returns on savings.

This difference results in a real difference for Alabamians. On average, when compared to bank averages in 2012 credit unions in Alabama offer: o Over 1.5% lower interest rates on 60 month new car loans o Over 2% lower interest rates on 48 month used car loans; o .22% higher rates on savings accounts; o Almost .2% higher rates on Retirement Accounts; and o Lower NSF fees and late fees Last year, this return to members created over $131 million in benefits to Alabamians that would not exist without credit unions.

Without credit unions acting as a damper on bank rates and fees, most banks would be inclined to offer lower returns and higher fees.

CREDIT UNIONS REMAINED SAFE DURING THE FINANCIAL CRISIS, CONTINUING TO SERVE WHILE OTHERS PULLED BACK • • • • •

From January 2008 to September 2010, the height of the economic crisis, credit unions across the country continued their mission of reaching out, serving members and small businesses, and making loans.

While other lenders reduced real estate loans by 10%, credit unions increased real estate lending by 14.4%; While other lenders contracted their lending to small businesses by 18%, credit unions increased their member business lending by almost 40%; While not immune to financial conditions, credit union losses remained low, much lower than other lenders, even as they increased their overall lending.

This safe and sound lending was critical in keeping our state and local economies moving during trying economic conditions.

CREDIT UNIONS CAN CONTINUE TO BE PART OF THE ECONOMIC SOLUTION BUT NEED THE FREEDOM TO DO SO • • •

Credit unions in Alabama are part of our communities. Almost all credit unions operating in Alabama are headquartered right here in the state. We know and work to meet the needs of our members here in Alabama.

Credit unions across Alabama are ready, willing, and able to be part of the solution to economic issues affecting Alabama’s consumers, small businesses, and our communities.

To continue to effectively serve the needs of Alabamians, credit unions need the freedom and environment that enables us to do what we do best.

Maintain the Credit Union Tax Exemption • • •

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Credit unions are not-for-profit financial institutions owned by our members, and exist only to serve our members.

While we are exempt from corporate income tax, we do pay other taxes including property, employment, and excise tax.

The credit union exemption from corporate income tax is not based on the size of the institution, or the products and services offered, but on the credit union structure. All credit unions, regardless of size or complexity are owned entirely by their members, with each having an equal vote regardless of deposits. All credit unions operate without issuing capital stock, so their only loyalty is to the service of members and all are structured so that excess revenue is returned to the members.

Without the corporate income tax exemption, there would be no reason to remain chartered as a credit union, and the only options would be to close or convert to a bank charter, depriving nearly 1.8 million Alabamians of the benefits of credit union membership.

Support the ability of Credit Unions to Serve as Qualified Public Depositories •

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The proposed legislation would allow not-for-profit credit unions to accept public deposits; allow credit unions to bring competition to the public deposits market; and provide a unique opportunity for local entities to take advantage of community-based financial institutions, whose member-owners are they very people these government entities serve.

The proposed legislation would finally allow municipalities and public offices to have depository choice when it comes to their funds and financial service needs.

The proposed legislation would allow credit unions to bring competition to public deposits, which would help drive better returns and optimal economic benefits to taxpayers.

The proposed legislation would give public offices the option to deposit their funds into local credit unions and keep these locally-raised funds within their communities.

It would NOT cause any funds to be taken away from for-profit banks or reduce lending. The proposed legislation would only give municipalities the option to take their funds elsewhere if their specific needs are not being met or if they would like to seek the opportunity for better returns on their deposits.

Credit unions are insured by the federal government to the same level as FDIC insured institutions, and as locally owned and operated financial institutions, have close ties with local governments and their agencies. Credit unions should be allowed to serve government agencies as another option for their deposits of public funds.

Help Update Alabama’s Credit Union Act • •

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Proposed legislation would add much needed language to the Alabama Credit Union Act to help credit unions and their regulator operate more efficiently and effectively.

Some of the changes allow a credit union to expel members for abuse to employees or financial harm to the institution, creates penalties for the fraudulent use of the term “credit union,” adds protection to accounts set up by minors, and protects a completely volunteer board of directors for actions performed in duty of the credit union.

The Alabama Credit Union Act has not been significantly updated since the late 1980’s. The time to update the Act is long overdue.

Reduce the Regulatory Burden • • •

Every time Congress or the Legislature passes a new requirement, the result is additional regulations that further restrict our ability to serve our members.

While some may be well-intentioned, the Legislature must first look at the burden it will create on small businesses like credit unions and compare it to the benefit of the proposed requirement.

The Legislature should seek and support measures that reduce the operational burden of financial institutions.

Reduce the Right of Redemption Period • • •

In past legislative sessions, bills have been introduced to reduce the redemption period a homeowner can exercise in the case of foreclosure. Currently a homeowner has one year to exercise this right and this time period must be reduced.

Lenders find it difficult to re-sell foreclosed property due to the long amount of time a homeowner has to redeem foreclosed property. Less than one-tenth of 1% of foreclosed properties is ever redeemed and any reduction in the redemption period would positively affect all financial institutions in Alabama.

In addition to the benefit to the financial institutions, communities will benefit as well. There will be less unoccupied residences in neighborhoods and blight will be reduced.

For More Information on these, or any legislative issues affecting Alabama’s Credit Unions and our members, please contact: Jared Ross, Vice President, Governmental Affairs Jared.Ross@lscu.coop (850) 558-1012

Jason Cochran, Director of Governmental Affairs Jason.Cochran@lscu.coop (205)249-4478