The State House's golden dome looks down on the Boston Common on Oct. 4, 2023. State House News Service photo

A bill that would allow for Massachusetts credit unions to take over mutual banks passed its first hurdle yesterday: Getting a committee hearing.

On Tuesday, the Legislatures’s Joint Committee on Financial Services heard Chicopee state Rep. Shirley Arriaga’s bill (H.1079), which would let credit unions and mutual banks merge, with the credit union being the surviving entity.

Credit union leaders would welcome this change as both credit unions and community banks face cost and consolidation pressures. 

“As nearly three decades of consolidation have left the financial sector split between a handful of national corporate banks and small community institutions, this legislation offers a timely solution,” said Robert Lockett, chief revenue officer of Workers Credit Union. “It empowers local banks and credit unions to pursue strategic partnerships that enhance efficiency, improve technology investment, and create long-term value for members and stakeholders. At a time of growing economic uncertainty, this bill provides a critical tool to ensure a stable, community-focused financial system in the commonwealth.”

Pittsfield Cooperative Bank applied to absorb Springfield-based Arrha Credit Union last year, sparking concern in the state’s credit union industry.

Robert Cashman, president and CEO of Chelsea’s Metro Credit Union, noted that the Massachusetts state charter for credit unions is one of the weakest in the nation. Additionally, the head of one of the state’s most prominent credit unions said he thinks this bill could create more mergers if the bill were to pass.

“If you think about it, the whole idea is to keep banking local, and if you allow local institutions to merge together, especially small cooperative banks, credit unions that are in the communities, they can remain local,” he said. “If not, what will happen is you’ll continue to have outside influence from outside, larger institutions coming into the marketplace and when you get large, national, regional institutions coming in, to me, that’s problematic.” 

Brad Papalardo, a vice president at the Massachusetts Bankers Association, told lawmakers Tuesday that his trade group “strongly opposes” the bill.

“These bills would already make an uneven playing field more tilted by allowing credit unions to purchase, merge or acquire the assets of a community bank and be the surviving entity,” he said. “It appears that credit unions are just set on trying to recieve all the same banking powers of our community banks without having to pay the taxes. It’s a huge blur of the line for us and a big problem for us.”

Papalardo said his group would be willing to drop its opposition if a credit union buying a bank was willing to drop its tax-exempt status following the merger.

American Banker reported that there were 22 proposed deals across the nation that saw credit unions acquire banks in 2024.