MADISON, Wis. – Credit unions in several states nationwide are increasingly accepting municipal deposits from local governments. More states are trying to get laws passed to obtain that capability.
Many municipalities are not aware they can use credit unions as depositories. Education is a key focus of credit unions that do accept these deposits.
A city's decision is based on the amount of expenditures coming up for a city's work that needs to be done or as determined on what the bid revealed about the interest rate that the credit union and other financial institutions would provide the city for its investment, he explained.
Some municipalities slice their Request for Proposal from a municipality (RFP) into pieces and accept bids that way, while others want the RFP to cover all their financial needs such as credit cards, checking accounts, and so on.
United CU, a $17 million asset credit union in Mexico, Mo., has had one active municipal deposit account since 1998 with a small of 1,300 residents.
"It's more of an education process," United CEO Brent Sandler told CUNA News Now. "Some businesses don't understand that option is there. There is a whole misconception of who we are, what we can do and who we can serve.
"Credit unions need to be more aggressive and educate businesses and reach out to them. And that can open many doors, not just municipal deposits," he concluded.
Momentum has been building nationwide for cities to pass Responsible Banking Ordinances, which would provide credit unions more opportunities to accept municipal deposits.
Portland, Oregon adopted a Responsible Banking Resolution in May which resulted in the city depositing $250,000 in each of 10 Oregon credit unions and banks. Two credit unions received deposits.
Those with Responsible Banking Ordinances include Brockton, Mass.; NYC; Los Angeles; Kansas City (Mo); and Portland (Ore).
Similar ordinances are being considered in Austin, Texas; Boston; Chicago; Minneapolis; San Jose, Calif.; and Seattle.
States governments are involved as well. Washington enacted a law in March to allow public entities for the first time to deposit funds in any Washington credit union up to federally insured limits.
Other states with public funds or municipal deposits bills pending or awaiting implementation include Alabama, Ohio, New Jersey, Minnesota and New York.
The New Jersey legislation was signed into law last August. The public comment period on the proposed implementation rule ended on June 1. The next step is for the Department of Banking to publish its final rule. Once that happens, credit unions will be able to apply to become eligible depositories. There is no set date for publication though it is anticipate it could be before summer’s end.
A “Responsible Banking” bill was introduced in the New Jersey Legislature this month.