BILL ANALYSIS                                                                                                                                                                                                    �






                  SENATE BANKING & FINANCIAL INSTITUTIONS COMMITTEE
                              Senator Lou Correa, Chair
                              2013-2014 Regular Session

          AB 1282 (Bonta)                         Hearing Date:  June 5,  
          2013  

          As Amended: April 15, 2013
          Fiscal:             Yes
          Urgency:       No
          

           SUMMARY    Would modify the formula used to calculate assessments  
          paid annually by state-chartered credit unions to the Department  
          of Financial Institutions (DFI).
          
           DESCRIPTION
           
            1.  Would provide that the amount of the annual assessment on a  
              state-chartered credit union is the greater of $2,000 or an  
              amount derived by via a complicated step formula.  This step  
              formula modifies the step formula in existing law by:  a)  
              adding more asset tiers, and b) applying lower weights to  
              higher dollar value asset tiers.  

           EXISTING LAW
           
           2.  Authorizes the DFI commissioner to annually levy on and  
              collect from each state-chartered credit union an  
              assessment, calculated on the basis of total assets, which  
              in the commissioner's opinion is sufficient to meet the  
              expenses of the department in administering the Credit Union  
              Law and provide a reasonable reserve for contingencies  
              (Financial Code Section 14350).

           3.  Provides that the amount of the annual assessment on a  
              state-chartered credit union is the greater of $1,500 or an  
              amount derived via a complicated step formula.  This step  
              formula requires credit unions to pay an amount that is  
              based on their total assets under management (Section  
              14351).  

           COMMENTS

          1.  Purpose:   This bill is sponsored by the California Credit  
              Union League (CCUL), to create more parity between the  




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              assessments paid by state-chartered credit unions of a  
              certain size to DFI and the assessments paid by  
              federally-chartered credit unions of a similar size to the  
              National Credit Union Association (NCUA).  Under existing  
              assessment formulas, California's large credit unions pay  
              considerably more to DFI than they would be required to pay  
              to NCUA, if they were federally-chartered.  According to  
              CCUL, this inequity is causing some of California's largest  
              credit unions to consider federal charters - something this  
              bill seeks to reverse.  

           2.  Background:   DFI is a special fund agency, funded by  
              assessments imposed on its licensees.  At the present time,  
              DFI's credit union division requires approximately $7.2  
              million annually to cover its cost of operations.  

          The current formula used by DFI to calculate assessments places  
              a relatively heavy burden on credit unions with large  
              amounts of assets - a burden much higher than the burden  
              placed by the NCUA on federally-chartered credit unions of  
              similar sizes.  For example, Golden One, California's  
              largest state-chartered credit union, currently pays an  
              annual assessment of approximately $710,000.  If it were to  
              switch to a federal charter, it assessment would drop to  
              approximately $480,000.   

          This bill's sponsor is committed to keeping the state charter an  
              attractive option for credit unions of all sizes.  As of  
              December 31, 2012, California is home to 246  
              federally-chartered credit unions and 151 state-chartered  
              credit unions, suggesting that the federal charter is more  
              attractive than the state charter for credit unions choosing  
              to operate in California.  Although several factors impact  
              each credit union's decision regarding whether to choose a  
              state or a federal charter, the amount of an institution's  
              regulatory assessment is a very significant one.  

           3.  Will Smaller Credit Unions Be Disproportionately Impacted By  
              The Proposed Assessment Changes?    This bill's author and  
              sponsor claim not.  According to CCUL, AB 1282 will slightly  
              increase the assessments paid by smaller state-chartered  
              credit unions to make up for the decrease in assessments on  
              larger state-chartered credit unions.  However, virtually  
              all small- and mid-sized credit unions will continue to pay  
              less in assessments than their federally-chartered  
              counterparts.




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           4.  Summary of Arguments in Support:   CCUL is sponsoring this  
              bill for the reasons stated above.

           5.  Summary of Arguments in Opposition:    None received.

           
          LIST OF REGISTERED SUPPORT/OPPOSITION
          
          Support
           
          California Credit Union League (sponsor)
           
          Opposition
               
          None received

          Consultant: Eileen Newhall  (916) 651-4102