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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowRick Rice’s ascension to chairman of the Indiana Department of Financial Institutions typically would be the type of lowkey government appointment that invokes nary a murmur of opposition.
Why would it when current affairs facing the sevenmember panel are as harmless as allowing state-chartered financial institutions to charge patrons who wish to skip a loan payment?
Yet, Rice’s selection in late January as head of the DFI board has the credit union community gushing with pride, and the banking industry a bit perplexed.
Credit union leaders are touting Rice as the first non-traditional banker in the nation to lead such a board with a scope similar to Indiana’s agency.
The DFI, created by the Indiana Financial Institutions Act of 1933, regulates the state-chartered financial services industry, meaning an out-of-state behemoth such as Chase is out of its jurisdiction. Its regulatory reach has broadened in recent years, though, to include the burgeoning business of pawn brokerages and check cashers.
“To have a credit union leader rise to that type of position is very significant,” said John McKenzie, president of the Indiana Credit Union League. “It’s further reinforcement of the role credit unions play in the financial services industry.”
Rice, 57, is president and CEO of the South Bend-based Teachers Credit Union, where he has spent his entire 35-year career. With 225,000 members and $1.6 billion in assets, the institution is the largest credit union in the state. Local assets rank it as the fourth biggest in Indianapolis.
But whether the Indiana Bankers Association supports Rice’s appointment is unclear. Its CEO, Jim Cousins, declined to comment on the hiring.
That’s understandable, said Mike Renninger, a principal of Renninger & Associates LLC, a banking consulting firm based in Carmel.
“It’s an interesting choice because I would have expected the person serving in that capacity to be one with broad and deep experience in a number of financial institutions that are facing the competitive aspects that the DFI is responsible for overseeing,” Renninger said. “Having said that, he may prove to be an excellent choice who will bring a fresh perspective.”
For its part, the Governor’s Office cited Rice’s experience. Rice, who is up for reappointment in 2008, is one of two members with the most seniority. Most of the others resigned following an ethics policy introduced by Gov. Mitch Daniels that prohibits his donors from sitting on state boards.
“All of the other appointees have been on the board for a year or less,” said Jane Jankowski, the governor’s spokeswoman. “He really and truly has the most experience on the board. It was a logical move to name him to the position.”
Often overshadowed by banks, credit unions are not-for profit, member-owned cooperatives that historically offered only savings accounts and loans. To have a veteran of the industry lead the board that oversees the state’s financial institutions is momentous, Rice admitted.
“Certainly, it gives more credibility that credit unions are more professional than they were,” he said. “We have to be.”
As in any business, credit unions need to stay competitive. During the past few decades, some have expanded their offerings to include credit and debit cards, checking accounts and individual retirement accounts. The types of loans have grown as well and include mortgages, and home-equity, small-business and student loans.
The DFI now is in the process of granting credit unions the authority to provide short-term loans similar to those available from the payday lending offices abundant throughout the state, without the costly lenders’ fees.
The additional services have prompted the banking industry to charge that state- chartered credit unions have an unfair advantage, especially since they aren’t subject to federal income taxes. They do pay a franchise fee, however, like the statechartered banks do. Rice said if banks think the credit unions have a competitive edge, they should convert.
One of Rice’s chief concerns is the number of acquisitions involving Indianabased banks. Most recent, Sky Financial Group Inc. purchased locally based Union Federal Bank, which it quickly resold to another Ohio bank, Huntington Bancshares Inc.
“Our role is to encourage and do whatever we can to make our state charter attractive, without sacrificing consumer rights,” Rice said, “because it brings revenue to the state.”
Members of the DFI board are appointed by the governor and represent a wide spectrum of lenders, from banks to savings and loan associations.
Former Gov. Frank O’Bannon appointed Rice to the board in 1996. After a stint on the State Board of Education, Rice returned to DFI in 2004. Members, including the chairman, are paid $4,000 annually and serve four-year terms.
Rice is an Evansville native who studied to be a priest for a year at the Saint Meinrad seminary in southern Indiana before graduating from Indiana University in 1971. In the meantime, he enlisted in the Army Reserves for fear of being drafted. As a history major with a minor in Southeast Asian history, he didn’t object to the Vietnam War but questioned some of his country’s motives, he said.
In 1972, he accepted a job with TCU in South Bend, from where his then-fiancee hailed. Rice became CEO in 1987, and through the years witnessed the changes to the industry.
One that would have a major impact is the introduction of expensive accounting demands like those required of public companies and banks. The stricter internal controls would be similar to those of the Sarbanes-Oxley accounting rules for public companies passed in 2002.
The agency that regulates credit unions, the Alexandria, Va.-based National Credit Union Administration, is holding off proposing rules that would tighten accounting controls on credit unions. Yet many in the industry who think the changes are coming argue they shouldn’t have to comply, since credit unions aren’t public and don’t deliver stock options to shareholders.
Rice’s credit union, TCU, already complies with some of the regulations. But costly accounting mandates could force smaller credit unions out of business, he said. His banking brethren at least might agree with his belief that the financial services industry in general is the most regulated of all.
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