Credit union laws rewritten in Minnesota

Northwestern Financial Review, May 1-May 14, 2002 by Bengtson, Tom

As this edition goes to press, Minn. Gov. Jesse Ventura was preparing to sign the Minnesota Credit Union Protection Act. Both the banking industry and credit union industry are claiming victory. Credit unions like the bill because it brings the state charter much closer to conformity with the federal credit union charter, and banking groups like the bill because many of the provisions in the original version were eliminated before it was ultimately passed by the legislature.

Cindy Jepsen, vice president for legislative affairs for the Minnesota Credit Union Network, said: "We're very pleased with the bill." She commented that it removes many of the incentives that state chartered credit unions have had to convert to a federal charter.

Charter flipping is one of the main reasons the credit union industry cited for pursuing an overhaul of the law. The Minnesota Credit Union Network says 54 state chartered credit unions have converted to federal charters in the last several years. Noting that federally chartered credit unions do not pay Minnesota sales tax, the Network argued the state already is losing $1.6 million per year in sales tax because of these conversions. There are 114 state chartered credit unions in Minnesota who currently pay approximately $3.1 million in sales tax to the state every year.

The bill allows credit unions to welcome groups of up to 3,000 people into their field of membership, the same threshold as federal credit unions. The Minnesota law had been 1,500 people. The new law gives groups with memberships ranging from 500 to 3,000 people the opportunity to petition to the Minnesota Department of Commerce to be included in an existing credit union's field of membership. Credit unions like the change because it makes it possible for more groups to seek membership, and banking groups like the law because it requires those groups to obtain Commerce Department approval.

Credit unions originally had sought additional powers to offer trust, real estate and insurance services. Those provisions were dropped from the bill after lobbying from the Minnesota Bankers Association, the Independent Community Bankers of Minnesota and the Minnesota Savings League.

Jepsen said the Minnesota Credit Union Network proposed ambitious legislation at the opening of the legislative session understanding there would be compromises along the way. "We were pragmatic about this," she commented. "We will be back."

Jepsen said it is too early to comment on additional powers her trade group might seek for credit unions in the future. "We need to let the dust settle on this," she said.

Using radio advertisements and billboards, the credit union industry mounted a substantial public relations effort to support its legislative efforts. The Minnesota Bankers Association estimated the credit unions spent about $250,000 on the campaign. The Minnesota Credit Union Network's Web site offered people a chance to win camcorders, palm pilots and other prizes if they signed up for its Grassroots Club, which encouraged people to write letters and visit legislators on behalf of the legislation.

The new credit union law becomes effective August 1. ...The Rotary Club in Fergus Falls, Minn., is planning a "Salute to Mark Olson," for July 26. Olson, the Federal Reserve Board governor, was president of the Fergus Falls Rotary Club in the early 1980s. Olson's hometown will honor him with a lunch and dinner program at the Bigwood Events Center, which is attached to the Best Western Hotel in Fergus Falls.

Minnesota State Sen. Cal Larson, whose district includes Fergus Falls, is heading up the planning effort. He reports that Fed Chairman Alan Greenspan has been invited. Gary Stern, president of the Ninth Federal Reserve District Bank in Minneapolis, will introduce Olson at the event's luncheon, where Olson will deliver a speech. Olson will also take an opportunity to respond to comments made by other guests at the dinner.

The event is open to the public. Luncheon tickets are $15 and dinner tickets are $25. To order tickets and to obtain additional information, contact Sen. Larson at 218-736-7823. ...You still have a chance to submit nominations for our annual Rising Star recognition. Our second issues of June and July will feature outstanding young bankers. Candidates should be younger than 45 years old with at least 10 years of banking experience. Submit your nomination before the end of May by sending me an email at Tom@NFRcom.com or faxing me a letter at 612-929-8146.