OLYMPIA, Wash. – In a little-publicized series of hearings two weeks ago, state regulators, concerned about the growing number of troubled institutions, asked the legislature for new powers over credit unions and banks.
Separate bills in the House and Senate would give the Department of Financial Institutions new authority to bring supervisory actions against officers and directors, would allow the DFI for the first time to examine a credit union’s partially owned CUSO, any subsidiary of a credit union’s CUSO, its private deposit insurer and would make it a misdemeanor for individuals to bad-mouth the safety and soundness of a credit union in public.
The bills, endorsed during January hearings by Linda Jekel, the director of the DFI’s CU Division, have raised the ire of a citizens group called People for Democratic Financial Institutions, which helped overturn the conversion to a bank by Columbia CU in 2003, when the group was known as Save Columbia CU. In a letter to members, Ron Bensley, a member of the group, said he is concerned the bad-mouth clause would create "an ominous ‘chilling effect’ on interested citizens, including members/owners of credit unions, who raise legitimate concerns about the manner in which the credit union is being operated."
Among the members of the new group are Lloyd Marbet and Cathy Chudy, local activists who helped form Save Columbia CU and later were expelled from the credit union after a protracted legal fight that followed the failed conversion to a bank.
The proposals come as Washington state has closed three banks, the latest on Friday – for a total of five in the 12 months – more than it closed in the previous two decades combined.
Director Jekel told the House Financial Institutions and Insurance Committee during a hearing last month that Washington’s 70 state chartered credit unions are under increasing pressure because of the recession. "As the economy changes," said the state credit union regulator, "it is time to modernize the Department's regulatory toolbox."
