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The Michigan Senate last week gave its own testament to the credit union movement by unanimously approving a landmark credit union reform bill on International CU Day.

The bill, which now moves over to the House, would allow individual credit union boards to set their own fields of membership for the first time, with the state supervisor authorized to reject FOMs only on the basis of safety and soundness concerns.

The bill also has a unique wildcard provision authorizing the state regulator to allow state-chartered credit unions to engage in the same activities as federal credit unions or other financial service providers if the regulator determines the state chartered credit unions would otherwise be at a competitive disadvantage. Similar language was included in a rewrite of the state's banking statute in 1999.

The bill would also authorize Michigan's 270 state-chartered credit unions to provide limited services, including check cashing, money transfers, currency conversion and travelers checks to non-members within their FOM. It would also allow CUs to make short-term payday loans up to $1,000.

"What this really indicates," said MCUL President David Adams of last week's 38-0 Senate vote, "is this legislation had broad bipartisan support and was a real no-brainer from the get-go. The final vote, though, represents its value to the public."

The bill also established new guidelines for credit union governance, including lowering the required number of board meetings to nine a year from the current 12. It also extends the examination cycle to once every 18 months from the current once a year.

The measure would also increase the permissible investments in CUSOs to a maximum of 12% of assets from the current 5%, and would also allow boards to delegate authority on setting loan and dividend rates, and permissible investments, to the CEO.

Opposition to the bill as it moves over to the House has been carefully muted during negotiations between the key parties: legislative leaders, the Michigan league, the Michigan Association of CUs, and the Michigan Bankers Association, which signed a letter stating it agrees to the final language passed by the Senate.

Adams said he believes the open debate with the bankers and the constant reference to the credit union tax exemption will help in both getting the bill passed by the House and in future conflicts. "The key issue was we were able to handle the tax-exempt status in a proactive way," he said. "We had a good, healthy, open debate. This makes us less vulnerable to future attacks in Michigan."

In agreeing to final language, CUs made several compromises, including eliminating a provision to allow CUs to directly offer trust services; put back some language defining the common bond for FOM purposes; and limited services to non-members to those either "unbanked" or residing in underserved areas.

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