- The credit union’s political awakening began in 2005 when Congress considered imposing taxes on credit unions.
- After the tax issue, the credit also began a long process of improving the way it tracked political information.
- The credit union lobbied hard to get lawmakers to support the Credit Union Regulatory Improvements Act.
Since the earliest days of American history, concerns about tax policy have prompted individuals and groups to express their opinions, sometimes in dramatic ways.
The Pennsylvania State Employees Credit Union has never dumped tea into a harbor, but its political awakening began when Congress considered imposing taxes on credit unions.
In 2005, the House Ways and Means Committee held a hearing on credit unions’ tax-exempt status. PSECU Public Relations Manager Nate Muniz recalled that his group did an e-mail and phone campaign targeting area lawmakers to let them know what makes credit unions unique and why they deserve to be tax exempt.
"We made a major attempt to mobilize members and received a good response," he said. "We explained the crux of the issue to our members, and gave them suggested arguments to use, and they made their views known to members of Congress."
The 351,000-member Harrisburg-based credit union, which has members all over Pennsylvania, didn’t just focus on the members of the Ways and Means Committee, which is the panel responsible for writing tax bills. Instead, the $3.6 billion credit union reached out to lawmakers who had large groups of PSECU members in their districts and had them talk to committee members.
The hearing was one of the key political events for credit unions in the first decade of the 21st century.
At that session, then-NCUA Chairman JoAnn Johnson told lawmakers that because they aren’t taxed, credit unions could "provide Americans from all walks of life greater access to affordable financial services."
Then-Chairman Bill Thomas (R-Calif.) said he wouldn’t push to repeal credit unions' tax-exempt status but asked the Government Accountability Office, Congress' investigative arm, to examine how well credit unions were serving underserved areas and whether they were collecting and disclosing enough financial data.
A year later, the GAO concluded that "credit unions lagged behind banks in serving low- and moderate-income households." The report also concluded that credit union executive compensation is not transparent.
After the tax issue, Muniz had the credit union participate in other legislative battles but also began a long process of improving the way it tracked political information and relayed it to their employees, volunteers and members.
Every year, he compiles a report that chronicles and analyzes key state and federal legislative issues that relate to credit unions. These reports include profiles of members of the state’s congressional delegation, including their voting record on credit union-related matters. The report also includes data from Federal Election Commission reports on how much money the lawmaker has raised and how it was raised.
"It’s been a helpful tool to have everything in one place and has enabled us to guide our political work," said Muniz, a former aide to Rep. Tim Holden (D-Pa.), whose district includes Harrisburg.
The Pennsylvania congressional delegation has had several members in the past few Congresses who have played key roles–both favorable and unfavorable–on issues relating to credit unions.
Until his defeat last November, Rep. Paul Kanjorski (D-Pa.) was one of the strongest credit union supporters on Capitol Hill. He was a key sponsor of many pro-credit union bills, including HR 1151. That measure, passed in 1998, reversed a U.S. Supreme Court decision and gave credit unions broad authority to expand their membership. The bill, which was strongly opposed by the banking community, limited the new community charters for credit unions to well-defined local communities. It gave the NCUA the power to define what such a community is and what constitutes an immediate family member for purposes of membership eligibility.
Some of PECU’s members volunteered on Kanjorski’s campaign last year as they had in the past.
Rep. Bill Shuster (R-Pa.) is a key sponsor of legislation that would limit interchange fees. Muniz said even though they disagree with the congressman on that issue, they have a good relationship with him and he is receptive to their views on other issues.
And there has been no shortage of other matters for credit unions to be concerned about.
The credit union lobbied hard to get lawmakers to support the Credit Union Regulatory Improvements Act, which would have raised the cap on member business loans and allowed risk-based capital.
Although the bill never passed Congress, Muniz said their efforts did result in several members of the state’s delegation to be cosponsors.
The credit union really stepped up its efforts last year, as Congress was considering the financial overhaul bill, which had major ramifications for credit unions and other financial institutions.
It added a "Know More" page on its website, which contains information about several key aspects of the bill and other pending legislation. In addition, it increased the use of its quarterly bulletin to convey political and legislative information to their members.
The credit union really swung into action when the Senate passed an amendment to mandate the Federal Reserve to limit debit interchange fees.
They sent an email to more than 213,000 members and it resulted in 34,000 letters to members of the Pennsylvania congressional delegation. Several other credit unions used PSECU’s e-mail to members as the template for their communications with their members.
"That was a turning point for us because of the threat to our revenue," PSECU President/CEO Greg Smith. "Based on our 2010 numbers, debit interchange revenue accounted for $12 million of our $38 million in net income. And under the proposed rule we could lose $10 million."
PSECU chartered a bus and sent 27 employees to the Washington, D.C. fly in sponsored by CUNA to lobby House members to try to defeat the interchange amendment, which was sponsored in the Senate by Majority Whip Richard Durbin (D-Ill.). In Washington, the group rented a hall to serve as a base for Pennsylvania credit union representatives and served lunch there and heard from several members of the congressional delegation.
After the fly-in, the credit union sent e-mails to its members who had contacted their member of Congress to inform them of the member’s position on interchange.
Although the original House version of the bill didn’t contain an interchange provision, during House-Senate negotiations to reconcile the two bills the Senate negotiators insisted on keeping it in so it remained in the final bill.
The credit union is also writing a comment letter to the Fed on the proposed rule, which would cap card interchange at no more than 12 cents per transaction.
The credit union is taking additional steps to increase the political involvement of its employees. One of its employees will be attending the GAC as part of the Crash Network and three others will be attending on one-day passes. It has also invited elected officials to the headquarters to meet employees and hear their thoughts about issues relating to credit unions.
Although the credit union keeps an eye on state issues as well, Muniz said there haven’t been many issues impacting credit unions. However, when the state government had to furlough employees because of budget problems, the credit union used it as an opportunity to let its members know that it offered low-interest loans to tide them over until the government resumed paying them.
In addition, representatives of the credit union are involved in state and local government affairs organizations such as the Centre County Chamber of Business and Industry and the Pennsylvania Chamber of Business and Industry in addition to credit union organizations.
PSECU has focused on legislation and mostly shied away from campaigns. It doesn’t have a political action committee, and unlike other credit unions, it hasn’t mobilized members on behalf of or against certain candidates.
"We’ve deliberately stayed out of campaigns. We don’t see how we could win on that because we would make one person happy but another one angry at us," Smith said.
He said there has been a very passive effort to get people to give money to the political action committees of the state and national credit union associations.