IOLTA bill a 'big win' for CU movement, CUs note
WASHINGTON (12/18/14)--The passage of the Credit Union Share Insurance Fund Parity Act has been met with optimism by credit unions that believe the law will open up new relationship possibilities.
The bill, passed by the Senate last week, would allow the National Credit Union Administration to extend share insurance coverage to trust accounts such as Interest on Lawyer Trust Accounts (IOLTAs) opened and managed by credit union members. It now awaits President Barack Obama's signature, and the Credit Union National Association has sent a letter urging him to sign it into law.
According to an article from the California and Nevada Credit Union Leagues, passage of the bill "is big news for federally insured credit unions in California and Nevada that serve attorney firms and other businesses, and could open the door to deepening current relationships and attracting new prospects."
Robert Reck, first vice president and business services department manager, North Island CU, San Diego, with $1.1 billion in assets, said there are "seven or eight" attorney firms his credit union will reach out to right away if the bill is signed by Obama.
Some firms chose not to establish a business relationship with North Island because the credit union couldn't offer IOLTAs, Reck said, due to the "accounting headache" created by the legal requirement of paying interest to the State of California on these accounts. By offering IOLTAs, which attorneys are required to use, new relationships can be formed.
"We offer a complete line of business products, but IOLTAs have been the only exception," Reck said. "I always hated saying, 'You need to go somewhere else for that.' I'll never have to say that again if this bill becomes law. We'd be able to offer a complete business relationship."
Greg Badovinac, assistant vice president of compliance and government relations, Western FCU, Hawthorne, Calif., said the passage of the bills makes it a "good day for credit unions."
The legislation allows the $1.9 billion-asset credit union to "serve members, including business owners, who desire to keep all their business checking accounts in one financial institution," Badovinac said, adding that Western FCU plans to offer those accounts to members as soon as they are permitted to do so by the NCUA.