Groups Sue Illinois over Exam Fees

By Jackson, Ben | American Banker, December 16, 2004 | Go to article overview

Groups Sue Illinois over Exam Fees


Jackson, Ben, American Banker


Illinois banks and credit unions, angry with the governor for raising examination fees last year to help balance the budget, are fighting back.

Trade groups representing banks, thrifts, and credit unions filed suit Tuesday against Gov. Rod Blagojevich and three other state officials. The suit asked the courts to roll back the fee increase and block state revenue collectors from transferring money from exam fees to the state's general fund.

Keith Sias, the director of state governmental relations for the Illinois Credit Union League, said state-chartered banks, thrifts, and credit unions are also demanding that the state return the estimated $6 million of fees he says they have overpaid since the fee hike took effect in December of last year.

At issue is whether the governor had the authority to raise fees to combat a budget shortfall.

The Illinois Credit Union League, the Illinois League of Financial Institutions, and the Community Bankers Association of Illinois filed their suit in Sangamon County Circuit Court after three months of negotiations with the Blagojevich administration failed to produce a compromise.

In addition to the governor, John Filan, the director of the Illinois Office of Management and Budget, Michael Rumman, the director of Central Management Services, and Fernando Grillo, the secretary of the Department of Financial and Professional Regulation, were named as defendants.

(Both the Division of Financial Institutions, which regulates credit unions, and the Office of Banks and Real Estate, which regulates banks and thrifts, fall under Mr. Grillo's department.)

Gov. Blagojevich, a Democrat, raised the fees by 27.5% last year to help close an estimated $5 billion shortfall in the budget for fiscal 2004, which ended June 30. He was given the authority to do so by a law enacted last year that lets the governor transfer money from special funds -- like the Office of Banks and Real Estate's -- to the general fund.

But the plaintiffs claim that the law is unconstitutional, because it raises regulatory fees beyond the amount needed to cover regulatory expenses. In Illinois, as in many states, banking and thrift regulators are self-sufficient; they are funded by examination fees, not tax dollars.

"If fees are levied that turn out higher than cost of regulation, those fees are supposed to be paid back either through credit or rebates," Mr. Sias said.

The suit also alleges that the transfer of excess money from the dedicated funds to the general revenue fund violates laws that limit the way the money from the dedicated funds can be spent, according to a press release issued by the plaintiffs.

Gov. Blagojevich agreed to freeze the transfer of funds in the fall while negotiating a possible compromise with the trade groups.

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