Colorado credit unions fight to expand services to public sector

DENVER — Public bodies such as municipal governments or the local community college are prohibited under Colorado law from conducting their financial business with credit unions, a prohibition that credit unions and their backers say results in fewer choices for public groups. 

To rectify this, the Mountain West Credit Union Association is backing House Bill 22-1277, known as “Authorize Credit Unions To Hold Public Money” and sponsored by Rep. Kyle Mullica (D-Adams), Rep. Patrick Neville (R-Douglas) and Sen. Julie Gonzales (D-Denver), a measure set to go before the House Business Affairs & Labor Committee on Thursday.

Under the existing Colorado Credit Union Act, credit unions are actually permitted to do business with public entities. However, those same entities are blocked from working with credit unions because a law passed in 1939 requires them to exclusively use institutions that are backed by the Federal Deposit Insurance Corp.

When the law was passed, there was no analogous insurance agency for credit unions. There is now, which has created a “disconnect in the law,” Mountain West Credit Union Association director of political financing and policy Daniel Diorio told BizWest.

On a practical level, local credit unions in the Boulder County area were recently blocked from working with public groups on Marshall Fire recovery efforts, he said. 

Furthermore, HB22-1277 would provide governments and similar groups with financial options that aren’t currently available.

“That’s the crux of our bill: choice,” Diorio said. “There’s nothing in the bill that says you have to use a credit union.”

Without a change in legislation, state officials are keeping their local counterparts “stuck in 1939,” he said. 

While Diorio said the bill has won support from a number of municipal groups around the state, the Colorado Bankers Association is not on board. 

“The bill is a good example of a credit union trying to be a bank without wanting to play by the same rules that a bank does,” CBA president Jenifer Waller told BizWest in an email.

Because credit unions pay no income tax, governments would see less revenue from profits earned by these institutions through their work with public groups, she said.  

The Mountain West Credit Union Association counters by arguing that while credit unions don’t pay income tax, they also don’t distribute profits to a small number of shareholders. Rather, profits are spread among the union’s membership, of which public groups would be included should HB22-1277 pass. 

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