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PAST LEGISLATIVE EFFORTS
Below is a summary of issues resulting from the 111th Congress
2009 Credit Union Congressional Legislative Issues
Member Business Lending: Tax Payer-Free Solutions
On July 29, 2009, Reps. Paul Kanjorski (D-PA) and Ed Royce (R-CA) introduced H.R. 3380, the “Promoting Lending for America’s Small Business Act.”
H.R. 3380 would:
- Raise the current statutory limit on credit union member business loans (MBLs) from 12.25 percent of assets to 25 percent;
- Raise the minimum dollar amount for counting a loan toward the MBL ceiling from the current $50,000 to $250,000;
- Exempt from the ceiling member business loans made to qualifying underserved areas and to non-profit religious organizations; and
- Exclude non-profit religious loans from the cap.
A Senate companion bill has not yet been introduced. Senator Charles Schumer (D-NY) has stated he plans to introduce similar legislation. During a hearing of the Senate Banking Committee, Senator Schumer asked Federal Reserve Board Chairman Ben Bernanke if he supported the elimination of the MBL cap for credit unions; to which Chairman Bernanke agreed this would help current economic conditions.
Member business lending is key in this economic crisis, as credit unions have a more than 75-year history of strong underwriting and safe lending. Credit unions did not make the predatory loans which brought on current economic conditions. Prior to 1998, credit unions did not have a limitation on MBL.
In the past Congressional sessions, MBL extensions were offered under the “Credit Union Regulatory Improvements Act.” Many Members of Congress co-sponsored this legislation, as the goal was to allow credit unions to infuse more liquid capital into the economy, thus creating jobs and prosperity. This legislation will do the same.
Credit unions are currently battling legislation advocated by small businesses (see below: H.R. 2695, interchange fees). If Congress intends to pass legislation aimed at supporting America’s small businesses, they should co-sponsor H.R. 3380.
H.R. 3380 is supported by: the National Small Business Association, the National Farmers Union, the League of United Latin American Citizens, the National Association for the Self Employed, the National Cooperative Business Association, the National Cooperative Grocers Association, and the Ford Motor Minority Dealer Association, among others.
H.R. 3380 will be considered during the 2010 session of th 111th Congress.
CREDIT CARDS AND INTERCHANGE FEES
House Judiciary Committee Chairman John Conyers reintroduced H.R. 2695, the “Credit Card Fair Fee Act,” also known as interchange legislation.
The intent of H.R. 2695 is to force merchants and financial institutions to negotiate fees related to the acceptance of payments via plastic payment cards (credit and debit) as a benefit to the consumer. H.R. 2695 falls short of creating consumer protections and, in turn, favors the large retail chains while placing smaller financial institutions at a competitive disadvantage.
Chairman Conyers believes financial institutions do not offer competitive rates over the interchange fee that allows for the acceptance of payment cards. This statement is absolutely false. The payment system is indeed competitive because consumers have a vast variety of card choices, and merchants can choose from thousands of credit unions and banks to acquire services. Visa and MasterCard require that all issuers use the same interchange table; merchants could prefer cards offered by the largest banks rather than those from credit unions if this law were to pass.
Furthermore, merchants assert they will pass the savings to consumers in the form of lower prices. Again, this legislation fails to build any consumer protections and further shifts the cost of business from merchants to financial institutions. A GAO study was requested as part of the credit card legislation signed into law recently by the President. The GAO is required to study the impact of interchange fees on consumers and merchants—specifically, their disclosure, pricing, fee, and cost structure. This report is due in November 2009.
Credit unions are unique, as our not-for-profit structure differs from others in the financial services industry. Our mission is to provide our member-owners with competitive financial services and products, but this legislation will create a competitive disadvantage for credit unions by benefiting larger financial institutions that can mitigate the cost of interchange fees. Under the legislation, merchants will have the ability to offer discounted rates to consumers using plastic payment cards that opt-in to these negotiations. For credit unions, this translates to higher fees for participation in payment card programs, which will displace credit unions in the financial services marketplace.
REGULATORY RESTRUCTURING: MAINTAINING AN INDEPENDENT CREDIT UNION REGULATOR
As part of President Obama’s regulatory restructuring blueprint, he calls for the creation of the Consumer Financial Protection Agency (CFPA). Chairman Barney Frank (D-MA) introduced this as H.R. 3126.
While credit unions did not cause the financial services/housing crisis, we fear that the creation of such an agency would be overly burdensome and duplicative to credit unions, particularly in this economy. Furthermore, H.R. 3126 calls for a five member board appointed by the President, but there is no guarantee that one of the board members must have credit union expertise.
The House Financial Services Committee plans on marking-up H.R. 3126 in early September. Credit unions continue to work with Chairman Frank (Financial Services) to find viable solutions that will benefit the 90 million credit union members nationwide.
Credit unions have made recommendations to Congress that included: retaining examination, supervision and enforcement authority at the prudential regulator; eliminating any requirement on financial institutions to offer “plain vanilla” products; including in the agency’s mandate to reduce and streamline regulation; and providing for the preemption of state consumer protection law.
COMMUNITY REINVESTMENT ACT
On March 12, 2009, Rep. Eddie Bernice Johnson (D-TX) introduced H.R. 1479, the “Community Reinvestment Act Modernization Act of 2009.” This legislation would extend the Community Reinvestment Act (CRA) to all financial institutions, insurance companies, hedge fund investors, bank-holding-companies, and credit unions. Low-income credit unions are exempt from the bill.
CRA—which was originally enacted in 1977 in response to discriminatory credit practices in low-income neighborhoods by bank and thrift institutions—requires these financial institutions to demonstrate that their deposit facilities serve the financial service needs of all parts of the communities from which they draw deposits and are chartered.
The Leagues strongly oppose this legislation. Credit unions did not participate in the redlining activities that provided the impetus for CRA and should not be subjected to additional regulatory burdens. Credit unions remain the most highly regulated depository institutions. The regulatory burden associated with the implementation of this bill would undoubtedly distract credit unions from their core mission of serving their members.
Credit unions serve members of all income levels, offer affordable products, and continue to lend when others have reduced credit availability. We have been asking Congress for nearly a decade to permit all credit unions to serve the underserved and restore credit unions’ ability to serve members who own small businesses. In these difficult economic times, credit unions are ready and able to do more; however, this legislation is a step in the wrong direction. We urge Members of Congress to oppose this bill.
JUDICIAL MORTGAGE MODIFICATION, AKA “CRAM-DOWN”
Across the country, foreclosure rates have increased as the financial crisis has impacted not only Wall Street, but Main Street as well. Credit unions did not make the types of mortgage loans that triggered the mortgage crisis, but credit unions and their members are certainly being affected.
In March, credit union advocates successfully halted the progress of H.R. 1106, which would have allowed bankruptcy judges to reduce the principle mortgage balance to current market levels. After considerable deliberation by both the Senate and House, this title was finally voted down in the Senate, leaving the provision 15 votes short of passage.
Long before President Obama’s call for financial institutions to modify and restructure loans, credit unions were working with their members to do just that. Credit unions remain opposed to all efforts that would allow for judicial mortgage modification.
To date, a bill has not been introduced; however, Members of Congress in support of cram-down legislation are working to find “common ground” and gain credit union support. In response, the Leagues and the Credit Union National Association (CUNA) have advocated the position of opposing any attempt to apply judicial mortgage modification, but welcome the opportunity to return to the negotiating table to discuss all possible options.
CORPORATE CREDIT UNION STABILIZATION FUND, S. 896
On May 20, 2009, President Obama signed S. 896 into law. The “Helping Families Save Their Homes” Act included provisions that would allow National Credit Union Share Insurance Fund (NCUSIF) premium costs to be spread out over eight years, or such longer period as the National Credit Union Administration (NCUA) Board may determine under extraordinary circumstances. Costs related to replenishment of the 1 percent NCUSIF deposit could be spread out over seven years through the new Temporary Corporate Credit Union Stabilization Fund. The NCUA has begun implementation of this program. Click here for more details on this law
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