DENVER — Public bodies such as municipal governments or the local community college are prohibited under Colorado law from conducting financial business with credit unions, a prohibition that credit unions and their funders say narrows the choices for public groups.
To remedy this, the Mountain West Credit Union Association is supporting Bill 22-1277, known as “Authorizing Credit Unions to Hold Public Money” and sponsored by Rep. Kyle Mullica (D-Adams ), Rep. Patrick Neville (R-Douglas) and Sen. Julie Gonzales (D-Denver), a measure that is expected to be presented to the House Business and Labor Affairs Committee on Thursday.
Under current Colorado credit union law, credit unions are actually allowed to do business with public entities. However, these same entities cannot work with credit unions because a law passed in 1939 requires them to exclusively use institutions backed by the Federal Deposit Insurance Corp.
When the law was passed, there was no similar insurance body for credit unions. There is now, which has created a “disconnect in law,” Mountain West Credit Union Association director of political finance and policy, Daniel Diorio, told BizWest.
On a practical level, local credit unions in the Boulder County area were recently barred from working with public groups on Marshall Fire recovery efforts, he said.
Additionally, HB22-1277 would provide governments and similar groups with financial options that are not currently available.
“That’s the core of our bill: choice,” Diorio said. “There’s nothing in the bill that says you have to use a credit union.”
Without changing the law, state officials are keeping their local counterparts “stuck in 1939,” he said.
While Diorio said the bill has won support from a number of municipal groups in the state, the Colorado Bankers Association disagrees.
“The bill is a good example of a credit union trying to be a bank and not wanting to play by the same rules as a bank,” CBA President Jenifer Waller told BizWest in an email. -mail.
Because credit unions do not pay income tax, governments would see less revenue from profits made by these institutions through their work with public groups, she said.
The Mountain West Credit Union Association counters by saying that while credit unions do not pay income tax, they also do not distribute profits to a small number of shareholders. Rather, profits are distributed among union members, whose public groups would be included if HB22-1277 were passed.