Credit unions, banks clash over public deposits returns to Capitol

a lot of money - a million US dollars in cash

The annual “food fight” between credit unions and banks over the fate of deposits from government entities is back.

A move to allow credit unions — nonprofit entities that don’t pay many of the taxes that banks pay — to hold deposits from state and local governments has failed to pass in recent years but has kicked up plenty of dust as the two different groups of financial service providers clashed in committees.

However, the battle was more subdued Thursday, as the House Insurance & Banking Subcommittee approved the measure (HB 611) by a 15-2 vote. The bill would allow credit unions to accept deposits from state and local governments.

“I would like to put this issue to bed this year,” said Rep. Tom Fabricio, a Miami Lakes Republican. “This is like brothers fighting, really, because the differences are minuscule.”

But the two sides have fought like Cain and Abel in the past.

Credit unions were formed in the early 1900s as community-based entities that pool resources from similar members to make loans. They now want to provide competition to banks for public deposits, something they are currently barred from having.

Cecilia Homison, CEO of Tallahassee-based First Commerce Credit Union, listed several charitable donations and causes her group has backed, including serving 300 meals in Marianna to residents affected by the terrible storm that swept through the Big Bend region Tuesday, highlighting the community-based nature of credit unions versus banks.

“Our positive impact is indisputable,” Homison said. “We prioritize members and communities over profit.”

Banks, though, argue credit unions have gotten much larger, offering more services and allowing them to offer cheaper rates to governments because of their tax-exempt status. Anthony DiMarco, a lobbyist for the Florida Bankers Association, warned credit unions could buy up small community banks.

“If this bill were to pass and become law … you may see further bank consolidation of community banks,” DiMarco said.

Prodded by Rep. Marie Woodson, a Hollywood Democrat, about the possibility of a compromise, DiMarco indicated it could be challenging to find one.

“I don’t think our middle ground is their middle ground,” DiMarco said. “If you’re going to act like a bank and try to take on new powers, then you should be taxed and regulated like a bank.”

Most of the committee sided with the credit unions, arguing competition was needed, especially in rural areas that might only have two financial service operators in the first place — one credit union and one bank.

“I do believe in choice,” Fabricio said. “(Community banks) will not go out of business, they will continue … but the banks will have to fight for the business.”

Yet two members remained unconvinced — Reps. Allison Tant, a Tallahassee Democrat, and Cyndi Stevenson, a St. Johns County Republican.

“Fundamentally, there is a gulf of fairness,” Stevenson said. “The banks are paying taxes that are helping fund the schools and the jobs too.”

The bill has two more committee hearings in the House before making it to the floor. The Senate version (SB 1018) hasn’t been heard in that chamber.