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Virginia Senate Panel Passes League Rewrite of SB 440

Tuesday, February 9, 2010

FOR IMMEDIATE RELEASE:
Feb. 4, 2010
CONTACT:
Lewis Wood
Director of Public Relations and Communication
800.768.3344, ext. 629
Karin Sherbin
Director of Governmental Affairs
800.768.3344, ext. 626
The Virginia Senate's Commerce and Labor Committee voted 15-to-0 in favor of substitute language for Senate Bill 482, transforming the bill from a merger and acquisition bill into a charter choice bill for state-chartered credit unions. The substitute bill was drafted by the Virginia League in response to the original bill offered by state bankers.
 
The new substitute bill now heads to the full Senate for consideration. Companion legislation in the House of Delegates -- HB 482 -- appears well on its way to passage with its second reading on the House floor Feb. 10.
Sen. Dick Saslaw (D-35) was the bill's patron in the Senate; he is also the chairman of the Senate Commerce and Labor Committee and Senate Majority Leader. He told the panel that the bill before them was a substitute that would give credit union members "ample opportunity" to comment on a conversion plan and for them to receive notice of the proposal to change their credit union to a mutual savings bank. He noted that after a credit union's board of directors approves conversion, then two-thirds of members voting are needed to support conversion. The State Corporation Commission also has to approve the conversion, retaining the right to deny the change if safety and soundness issues are present.
 
Unlike the House panel consideration, the Senate proposal sparked questions, mostly centered around the impact of a credit union to mutual savings bank conversion.
 
Sen. Saslaw noted that conversion to a mutual savings bank charter would allow the former credit union to bid on public deposits, "greatly enhance business lending opportunities," and turn credit unions into “taxpayers that contribute to the state's General Fund.” 
 
The League provided the language for the substitute bill in both the Senate and House committees. Originally, the Virginia Bankers Association had proposed a bill that would make it easier for stock-owned banks to take over credit unions, a proposal rejected by the League's Board of Directors in January.  
 
"I think this is a positive result for what was a desperately flawed bill. Credit unions were successful in transforming this legislation from merger and acquisition bill into a credit union charter choice bill," said League President Rick Pillow. "The original language in this bill would have been disastrous for credit union member-owners in Virginia, because it failed to protect member rights in cases of a conversion or acquisition to or by a for-profit bank. Now the bill offers state-chartered credit unions a clear path for conversion to a mutual savings bank charter, if that is the will of members, while providing the same member safeguards currently in place at the federal level for such conversions."
 
League President Rick Pillow made the following points about the substitute bill:
 
First, this wasn't our bill originally, but we think the substitute we brought to the table is a vast improvement over the language originally offered. The substitute bill provides a clear path for a state-chartered credit union to convert to a mutual savings bank – if that is the will of the membership.
 
As originally drafted, this legislation was nothing more than a merger and acquisition bill, allowing stockholder-owned, for-profit banks to merge with or acquire member-owned, not-for-profit credit unions. This bill is now a credit union conversion bill, offering state-chartered credit unions the same charter conversion opportunities afforded federally chartered credit unions.
 
Charter options are an unfortunate necessity due to an always uncertain economic and regulatory environment. The substitute bill allows choice while protecting member interests through full disclosure and notice, which was always our priority in negotiating with lawmakers and bankers.
 
Second, parity between the state and federal charters has long been a commitment of the Virginia League. We believe that credit unions and their member-owners should have charter options.
 
But, we believe that the interests of member-owners must be protected by adequate disclosure, clear member communication guidelines regarding the impact of a charter change, proper voting procedures, and the fullest protection of member equity available under the laws governing such conversions. It should be noted that under the new language of this legislation, state-chartered credit unions considering conversion to a mutual savings bank charter will adhere to the same guidelines federally chartered credit unions follow in converting to a mutual savings bank charter.
 
"I want to thank our credit unions for their grassroots work this past month in educating lawmakers about the potential impact of this bill," said Pillow. "I don't think there's any question that the visits, phone calls and e-mails from credit union supporters strengthened our hand at the negotiating table. I think lawmakers saw clearly that their credit union constituents could not abide the original language of this legislation."