Call to Order and Roll Call
The 1st meeting of the Interim Joint Committee on Banking and Insurance was held on Thursday, October 20, 2011, at 10:00 AM, at the Marriott Downtown, Louisville, Kentucky, in conjunction with the Kentucky Credit Union League Annual Convention. Representative Jeff Greer, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Tom Buford, Co-Chair; Representative Jeff Greer, Co-Chair; Senators Julie Denton, Dennis Parrett, Jerry P. Rhoads, Dan "Malano" Seum, and Brandon Smith; Representatives Dwight D. Butler, Will Coursey, Ron Crimm, Joseph M. Fischer, Danny Ford, Sara Beth Gregory, Mike Harmon, Dennis Horlander, Brent Housman, Dennis Keene, Michael Meredith, Brad Montell, Ryan Quarles, Jody Richards, Arnold Simpson, Tommy Thompson, and John Tilley.
Guests: Wendell Lyons, President and Debbie Painter, Director, Governmental Affairs, Kentucky Credit Union League; Jonathan Van Lahr, Owner, Brandenburg Pharmacy and Ralph Bouvette, American Pharmacy Services Corporation.
LRC Staff: Rhonda Franklin and Jamie Griffin.
Chairman Greer welcomed everyone to the meeting and noted that some members would not be in attendance due to a conflicting Tourism Committee meeting. Chairman Greer recognized Charles Vice, Commissioner, Department of Financial Institutions and his staff.
Chairman Greer recognized Wendell Lyons, President of the Kentucky Credit Union League. Mr. Lyons stated that he had a PowerPoint presentation regarding the history and philosophy of the Kentucky Credit Union League.
Credit Union Structure
Mr. Lyons stated that credit unions are member-owned, not-for-profit, financial institutions. Credit unions consist of volunteer boards, supervisory committees, and paid professional staff. Credit union capital is accumulated retained earnings, and the membership is single sponsor, multiple group and community.
Credit Union History in Kentucky
Mr. Lyons stated that Kentucky became the 13th state to enact a state credit union act on March 24, 1922. Credit union pioneers Edward Filene, Roy Bergengren and Dora Maxwell were instrumental in their efforts with the Kentucky General Assembly in the passage of this legislation. The Kentucky State Credit Union Act predates the Federal Credit Union Act by 12 years which was passed by Congress in 1934. The first credit union charter in Kentucky was granted in November 1923, to the Berea Credit Union, which still exists today with 511 members and $1.3 million in assets. The second charter was issued to the Louisville Federal Credit Union in 1924 and is still in existence with $35 million in assets. There are 280 credit unions in Kentucky and 22,600 nationwide. In 1985, there were 217 credit unions in Kentucky with 437,856 members, and $983,940,059 in assets, the largest being Commonwealth Credit Union with $118.1 million in assets. By the end of 2010, there were 86 credit unions in Kentucky, with 722,983 members and $6,030,908,551 in assets. He stated that as of March 2011 there were 7,431 credit unions in the United States, and 84 of those are in Kentucky, 60 of which are federally chartered and 24 are state chartered. The federally chartered credit unions are regulated by the National Credit Union Administration, and the state chartered credit unions are regulated by the Kentucky Department of Financial Institutions. He stated that all credit union deposits are federally insured up to $250,000 by the National Credit Union Share Insurance Fund (NCUSIF), and the National Credit Union Administration is the administrator of that fund.
Shared Branching
Mr. Lyons stated that credit unions have historically been cooperative with one another. The Credit Union Centers of Kentucky, LLC, is a prime example. He stated that 14 credit unions formed this shared branching organization in 1999. There are two stand-alone centers in Louisville, plus 19 other locations across Kentucky and 4,400 locations nationally. Credit union members can visit these locations and make transactions on their credit union accounts. Participating credit unions pay a transaction fee to the shared branching network, typically in the $2-$2.50 range.
Chairman Greer stated that there was now a quorum of members and the minutes of the November 12, 2010, needed to be approved. A motion was made by Senator Buford and seconded by Representative Montell. The minutes were approved.
Chairman Greer stated that there are two credit unions in his home community of Brandenburg, Kentucky, and they have always been outstanding community partners. He thanked Mr. Lyons for his presentation and opened the floor for questions.
In response to a question from Representative Harmon asking if credit unions offer a secured credit card, Mr. Lyons stated that some offer secured credit cards and some offer an alternative to payday lending.
In response to a question from Representative Ford asking how the economy is affecting the demand for loans and delinquency rates, Mr. Lyons stated that it is within the manageable range. He stated that federal regulation is a burden on small credit unions and credit unions have worked hard trying to get federal regulation repealed. Credit unions have money to lend and want to do business.
Reimbursement Practices on Independent Pharmacies
Chairman Greer recognized Jonathan Van Lahr, Owner, Brandenburg Pharmacy and Ralph Bouvette, Executive Director, American Pharmacy Services Corporation. Mr. Van Lahr and Mr. Bouvette addressed the challenges independent retail pharmacies across the state face with the advent of Pharmacy Benefit Management Companies. They stated that there are over 550 independent pharmacies in the state that are dealing with severe cuts in reimbursement rates and dispensing fees, or the abolition of dispensing fees. Many reimbursement amounts are less than the cost of the prescription to the pharmacy. They also raised the challenges they will face with Medicaid managed care.
In response to numerous questions from Senator Denton regarding the impact of the Medicaid managed care program on independent pharmacists, Chairman Greer requested that he and Senator Denton meet to discuss the issue.
With no further business, the meeting adjourned.