Credit unions in Florida are making another attempt to get into public banking.
Florida law bars credit unions from accepting public funds, so state agencies, municipalities, school boards, universities and police and fire departments typically do business with commercial banks.
Proposed legislation would let credit unions become qualified public depositories, meaning that they could receive public funds for deposit. An amendment has been proposed that would only allow credit unions to accept public funds if there are no qualified public depositories within five miles of the depositing institution.
A similar bill, which did not include the proposed amendment, failed to pass in 2017.
The amendment has not assuaged bankers, who have long opposed such legislation.
“Talk about the camel’s nose under the tent!" Alex Sanchez, president and CEO of the Florida Bankers Association, wrote in a recent email to members. "As you can imagine, we are opposed to this charade."
Florida's bankers are in favor of competition as long as the playing field is equal, said Anthony DiMarco, the association's executive vice president of government affairs. He said bankers' primary beef is that credit unions do not pay corporate income tax, sales tax or Florida's so-called intangible tax on loans.
“So they get a 20% to 30% advantage,” he said of credit union profitability. "But when competing with a tax-paying bank for a public deposit, there’s a big pricing advantage for the credit union, too."
Credit unions view the issue differently.
Jared Ross, senior vice president of governmental affairs at the League of Southeastern Credit Unions & Affiliates, said credit unions should have an equal opportunity to compete for public funds. Nothing in the bill would force public entities to move their money. Rather, it would provide more options.
Several credit unions in the state have been approached by public entities asking if they could deposit funds, only to be turned away, Ross said.
For Ross, the tax-exempt status of credit unions has nothing to do with this issue. He said the focus should be on trying to get the best return for public depositors.
Half of all states explicitly allow credit unions to accept public deposits, including California, Pennsylvania and Texas. At least seven other states let credit unions accept public deposits because their laws do not expressly prohibit it. Legislation similar to the Florida bill
Changing the law would largely hurt community banks, DiMarco said, adding that it is unlikely that large cities like Miami would abandon the large banks that manage their accounts.
Ross said Florida bankers need to understand that, in some cases, credit unions are the only option for municipalities that want to bank locally.
“This is about a local government that would like to keep their money in their locality," Ross said. "So maybe [Sanchez] should understand what the issue is before he goes off the deep end."
DiMarco said the five-mile distinction seems arbitrary, though it may be based on a belief that such a distance could create opportunities for credit unions. He noted that most banking is done electronically.
Richard Gose, chief political officer for the Credit Union National Association, said in an email that his group believes credit unions are often better options for public entities because of their nonprofit, cooperative nature.
“Teachers, firefighters and other public servants benefit the most from public deposits, and we encourage states to consider legislation that would forge a path forward for credit unions to operate as public fund depositories,” Gose said.
Both sides said the legislation has a tough road ahead of it and that the odds of passage are hard to call. The bill currently sits with the insurance and banking subcommittee in the House and in the Senate's banking and insurance subcommittee. The next step would be subcommittee hearings.
While it is easier to maintain the status quo, Ross said the political composition of Florida's legislative committees will make it difficult for the bill to advance.
“I’m not confident we’re going to be able to get it done this year either, but we’re going to keep running out every ground ball and every pop fly,” he said.
DiMarco said he is never confident until the session ends.
“I’m always anxious about it,” he said.
