We are in a climate of pocketbook politics, with legislators eager to alleviate the financial distress of constituents and with regulators feeling the heat as well. Unfortunately, this has not produced a positive legislative or regulatory climate for credit unions.
Watching from Baton Rouge, I have been impressed by NAFCU staff's political acumen, protecting us from legislation that might have an adverse impact, while also ensuring that credit union interests and objectives are proactively advanced.
Here are just a few legislative items NAFCU has been receiving attention in Congress:
Credit card reform. The Credit Cardholders' Bill of Rights Act, H.R. 5244, introduced by Financial Institutions Subcommittee Chair Carolyn Maloney (D-N.Y.), would bar practices such as universal default, double-cycle billing and unilateral changes in credit card rates. It would also require at least 45 days' prior notice of any card interest rate increases. Additionally, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has introduced the Credit Card Accountability, Responsibility and Disclosure Act to promote additional reforms.
Credit unions have a very good story to tell about credit cards and have the interests of their members at heart. Bill Spearman, president and CEO of Mid-Hudson Valley Federal Credit Union, testified on our behalf in April before the House Small Business Committee. He addressed small-business owners' need to access credit and their need to use credit cards to finance their businesses.
Interchange fees. The Credit Card Fair Fee Act of 2008, H.R. 5546, introduced in the House by Judiciary Committee Chairman John Conyers (D-Mich.) and in the Senate by Majority Whip Dick Durbin (D-Ill.), is a price-control bill that would establish a three-judge panel to determine "fair market prices" for interchange fees. NAFCU is vigorously opposing, as part of the Electronic Payments Coalition.
Capping fees would have a disproportionate effect on smaller institutions, reducing credit unions' already-narrow operating margins, forcing some institutions to stop their card programs or fueling consolidation. On May 15, John Blum, vice president of operations, Chartway Federal Credit Union, testified before the House Judiciary Committee, dispelling many of the misunderstandings promulgated by the bill's proponents.
Regulatory relief. The House recently passed a combined credit union and banking bill, known as CUBTRRA (the Credit Union, Bank and Thrift Regulatory Relief Act). We view that as only a starting point in the Senate, where we will work to include risk-based capital and expanded member business lending authority.
Our main regulatory relief bill remains CURIA, the Credit Union Regulatory Improvements Act, introduced last year by Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.). As of this writing, it has garnered 150 sponsors, the most ever since it was first introduced six years ago.
The banking industry vehemently opposes CURIA, though the proposed risk-based capital regime would parallel that of banks and thrifts. Given the current tightening of the credit markets and banking industry pullbacks, now would be the perfect time for credit unions to provide small businesses with the access to financing they need.
NAFCU has opposed the data collection recommendations of the NCUA's Outreach Task Force. The availability of Home Mortgage Disclosure Act and other data that clearly reflect that credit unions do a much better job of serving their members--regardless of income level--than the rest of the financial services industry, we believe proves increased data collection is unwarranted.
Additionally, NAFCU has steadfastly opposed disclosure of executive compensation. Instead, NCUA should focus on regulatory relief based on proposed changes to CUSO and member business lending rules.
Ensuring that the Federal Reserve fully understands the impact of proposed changes to Regulations Z and DD, particularly with respect to unfair and deceptive credit practices is hard work.
The current economic turmoil, including ever-tighter margins and disorder in the mortgage market, has required increased vigilance on the part of credit unions Leadership in these and other instances serves to benefit and protect the entire credit union system.
This legislative and regulatory season is testing our mettle, though I am impressed at how well our members have fared.