A bill signed into law by Iowa Governor Kim Reynolds earlier this month presents a win for the state’s banks, according to the Iowa Bankers Association.
The appropriations bill HF 2502 includes provisions that will ban credit unions from using the name of any “public university in the state,” with public university defined as the State University of Iowa, Iowa State University of Science and Technology, and the University of Northern Iowa. The law goes into effect on April 30, 2019.
The provision will impact several credit unions, most notably the University of Iowa Community Credit Union, the second-largest financial institution in the state. The credit union’s board met and voted on June 9 to change its name by the deadline according to an FAQ page on its website. UICCU estimated the cost of the name change will be $2.5 million, abou 0.9 percent of its projected annual revenue.
“Just as a good business practice, we think it makes sense that they change to a name that doesn’t infer or imply that they’re somehow related to the university,” Sen. Charles Schneider, chairman of the Senate appropriations committee, told the Des Moines Register.
The North Liberty-based credit union, which is not affiliated with the University of Iowa, has $4.8 billion in assets, 16 branches, 430 employees and 177,000 members. It was founded in 1938 as the State University of Iowa Hospital Employees Credit Union with a membership field of employees of the UI Hospital, and expanded its membership field to all serve all staff, students, and alumni” in 1966.
“We believe we made some real progress we intend to build upon,” said John Sorenson, IBA president and CEO. Sorenson characterized the law as a win for transparency, reducing the confusion of customers who might think they were supporting the University of Iowa by joining UICCU.
An additional plus for banks in the bill was a change to an existing state tax, the Moneys and Credits Tax, that is imposed on state credit unions at a rate that equals 0.5 percent of “legal and special reserves.” Under current law, Moneys and Credits tax revenue is split evenly between state and local governments and is administered by local governments.
The problem has been that many credit unions aren’t paying this tax, the IBA said, and local governments don’t know how to administer it. HF 2502 fixes this by transferring administration to the state to insure the tax is being assessed and paid.