After Converting to a State Charter in 2018, Cobalt CU to Switch to Federal Charter

Cobalt Credit Union (Council Bluffs, IA) is seeking to switch from an Iowa state chartered credit union to a federal credit union charter.

The credit union will hold a vote on the proposed charter change on May 1.

In 2018, the credit union had converted from a federal credit union to a state chartered credit union.

The credit union stated several factors have influenced its decision to pursue a federal charter:

The credit union pointed out that federal credit unions do not pay state income taxes, but Iowa state chartered credit unions do. The credit union noted that the Iowa legislature has considered bills in recent years that would impose a higher taxes on Iowa state chartered credit unions.

As a federal credit union, Cobalt would be able to offer small dollar loans thru the Payday Alternative Loan program. Iowa law limits the fees that the credit union can charge on these small dollar loans, as a result the credit union loses money when it makes such loans.

Cobalt further stated that by becoming a federal charter it can offer its membership more competitive rates and fees. The credit union noted that it costs the credit union $708,440 more annually to be an Iowa state chartered credit union compared to a federal credit union.

The credit union estimated that the proposed cost of converting from a state charter to a federal charter would be $48,760. When the credit union converted to a state charter in 2018, the cost was $38,678.03.

The credit union pledged that at the time of the conversion to a federal charter and for a period of five year thereafter, it will not convert to a mutual savings bank or savings association or a stock institution.