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WASHINGTON-The House Judiciary Committee July 17 passed a favorable report of the Financial Services Regulatory Relief Act (H.R. 3951) on to the full House. The bill was approved by voice vote with a credit union-backed amendment to exempt credit unions from costly pre-merger filing requirements under the Hart-Scott-Rodino Act. The amendment was introduced by Congressman Spencer Bachus (R-Alabama), who is also on the Financial Services Committee, for a broader credit union exemption from merger documentation requirements and fees. Under Hart-Scott-Rodino, a law passed in 1976, merging institutions that exceed certain thresholds must receive approval by the Federal Trade Commission (FTC), as well as the Justice Department. CUNA General Counsel Eric Richard noted that when the law was passed the thresholds for incurring Hart-Scott-Rodino filing were high for that time, but now, approximately 30 years later, they are artificially low. Fees for such merger activity start at $45,000 for mergers valued between $50 million and $100 million, $125,000 for mergers between $100 million and $500 million, and go up to $280,000 for mergers valued over $500 million, while the law also requires lengthy documentation, NAFCU Communications Manager John Zimmerman said. Transactions under $50 million are already exempt from Hart-Scott-Rodino filing requirements. Additionally, the merging entities must wait a certain amount of time while the FTC and Justice Department review the proposed transaction. NAFCU Senior Lobbyists Murray Chanow noted, “We’re not trying to take away oversight but we don’t think we need to regulate something twice,” pointing to NCUA’s merger oversight. This is the sole provision of the law governing mergers for which credit union lobbyists were seeking exemption, he emphasized. As the congressional calendar becomes evermore compressed with campaign season looming, Chanow said he would not be surprised to see House Financial Services Committee Chairman Mike Oxley (R-Ohio) try to attach H.R. 3951 to another bill before the full House. The chairman is well known for his strategy and ability to get bills pushed through quickly. According to Richard, no one thought credit unions would grow large enough for the law to apply, but a few years ago during a corporate merger transaction, outside counsel working the deal realized the law did apply. The purpose of the law is to make sure there is no reduction in competition, he explained, but the likelihood of a competition reduction due to a credit union merger is “fairly remote” given the relatively small slice of the financial services pie that credit unions serve. NCUA Chairman Dennis Dollar had written a letter to Bachus July 15, applauding the amendment. “Because credit unions by law may only serve a limited field of membership,” he pointed out, “credit union mergers have little adverse impact on consumer choice and are thus less likely to raise the anticompetitive issues that [Hart-Scott-Rodino] review was designed to monitor. With those statutory and regulatory membership restrictions in place, it is very rare that more than an incidental number of members would be eligible to join both the credit unions that are merging.” In February, the FTC issued a letter exempting most credit unions from the law’s filing requirements, but the law would provide a much broader carve out. The FTC’s letter simply states that most credit union assets do not have to be counted toward the thresholds. “It’s still conceivable you could have a credit union merger to which it would apply, so it’s still desirable to get a legislative exemption if that can be done. legislation would make it even more clear and put us on the same footing with the banks and the thrifts,” Richard said. Banks and thrifts already have exemptions from this law. The letter was in response to CUNA’s request that a number of consequential asset types being counted toward the threshold should be excluded, such as cash and investments, mortgages and leases, and other real estate owned. The Alabama Credit Union League, comprised of some of Bachus’ constituents, fortuitously happened to be `Hiking the Hill’ the day of the mark up. [email protected]

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