ARLINGTON, Va. – NASCUS officials agree there are portions of the Credit Union Membership Act that need updating and that some provisions in the Federal Credit Union Service Expansion Act of 2002 (H.R. 5621), introduced by House Financial Services Ranking Member John LaFalce (D-N.Y.), bear further study (CU Times, Oct. 23). NASCUS though is adamant that curtailing the state credit union system, as LaFalce's bill would do, in the name of strengthening the federal charter, is not only the wrong tactic, it jeopardizes the dual-chartering system. "NASCUS has been saying for the past three years that the Federal Credit Union Act needs to be amended. We realize that the federal credit union system has disadvantages, but the LaFalce bill is not the approach to take to correct them," said NASCUS President Doug Duerr. In introducing his bill, LaFalce stated that the bill "attempts to preserve the integrity and attractiveness of the federal credit union charter in response to State efforts to encourage conversions with escalating promises of new powers and reduced regulation. It would prohibit a state chartered insured credit union from including any person or organization within its membership that is not a permissible member for a federal credit union, or to engage in any activity, or exercise any asset power, that is not authorized for a federal credit unions. It would authorize NCUA to provide exceptions on a case-by-case basis, provided that the exempted activity meets federal standards for safe and sound operation and is fully consistent with the mission and purpose of Federal credit unions." Jonathan Lindley, vice president, national advocacy for NASCUS, referred to LaFalce's remedy for strengthening the federal charter as "chartering down, instead of chartering up," referring to taking things away from the state credit union system as a way to improve the federal CU system, rather than just enhancing the federal system without diminishing the benefits of the state system. "The difficulty with the LaFalce bill is once it's introduced it becomes a reference or resource that can be used in the future," said Lindley. "Congress has a long memory," he added. "The fact that LaFalce is retiring at the end of this Congress is only partially relevant," said Duerr. "We consider this as a starting point." Lindley continued that, "The difficulty is when a piece of legislation like this gets into the Congressional domain, it becomes something referenced in the future." Lindley quoted remarks LaFalce made when he introduced the Federal Credit Union Services Expansion Act of 2002: "Mr. Speaker, I offer this legislation in the hope that my House and Senate colleagues would consider it as a starting point for a broader credit union bill next session. Just as the legislation I introduced in 1997 became the framework for the 1998 Credit Union Membership Access Act, I would hope that introducing this bill will encourage action on new credit union legislation next year." Lindley and Duerr agreed there are "many desirable features" for federal credit unions in LaFalce's proposed bill. But Lindley emphasized that, "The bill needs surgery to cut out the cancerous parts. NASCUS is not opposed to the bill in total, but there are parts of the bill that would be the death knell to the state-chartered credit union system were they to pass." Among the provisions of the bill they consider to be "desirable" are those pertaining to the expansion of member business lending and credit union investment authority. Lindley and Duerr also cited provisions pertaining to easing field-of-membership restrictions and allowing for check cashing and wire transfer services for non-members. "The way to deal with the inadequacies of the Federal Credit Union Act is not to downgrade the state credit union system," said Duerr. "We ought to be improving opportunities for both, not improving them for one at the expense of the other." On that point, Murray Chanow, senior lobbyist for NAFCU agrees. "NAFCU's goal has always been to enhance federal credit unions and to give federal credit unions the same ability to work within the business world as state-chartered credit unions have. NAFCU has never talked about scaling back state-chartered credit unions' powers." Chanow said NAFCU worked with LaFalce in crafting H.R. 5621, but he said, "LaFalce never led us to believe what would or wouldn't be in the bill. When we saw the piece of legislation, that was the first time we saw any language pertaining to state-chartered credit unions." NAFCU had recommended 12 provisions it considered important to be included in a piece of credit union legislation to enhance the federal charter, and Chanow said NAFCU is pleased LaFalce's bill includes some of those recommendations. He cited, for example, Section 4a, "Expansion of Credit Union Business Lending," that replaces the 12.25 % of CU net worth with 17% of CU net worth. Chanow said NAFCU would have preferred if the bill eliminated the cap altogether, as it was prior to H.R. 1151, but he added that "this is still a good provision." Some other examples of H.R. 5621 provisions NAFCU supports are: Section 2a which gives NCUA the authority to allow healthy FCUs to merge; Section 3 allows FCUs to offer check cashing and wire transfer services to non-members; Section 5 allows all types of federal credit unions, not just multiple-bond FCUs, to add underserved areas to their field-of-membership. "These are all things we've been working on with LaFalce and other members of Congress for a long time," said Chanow. Aside from these provisions, NAFCU spokesperson John Zimmerman said "at the current time, the NAFCU Board of Directors has no position on the LaFalce bill as a whole or sections." Chanow described LaFalce's bill as "a blueprint, a step forward for us," and he added that although there is no sign yet that any member of Congress will reintroduce the bill in the 108th Congress next year, "we hope the legislation does get introduced again, and we will work with whoever does that." Chanow emphasized that, "If the bill ever gets to the point where it makes it to committee and markup and a full floor vote, the chances are it will not look anything like what it does now." Asked whether NASCUS has targeted key legislators to lobby on its behalf on the proposed measure, Duerr responded that, "There's more than a handful of legislators who are supporters of 10th amendment, states' rights issues." Besides, with Congress scheduled to adjourn soon, Duerr said it was better to do something on the bill at a time when there were hearings scheduled or a legislative agenda. He noted though that he just finished a series of meetings with NASCUS' executive committee on LaFalce's bill and "the NASCUS leadership has already identified it as a priority," he said. "Our job is to sensitize the legislative leadership and senior staff people that there are provisions in the bill that NASCUS would vehemently fight," Duerr said. Duerr is confident there will be some sort of credit union legislation in the 108th or 109th Congress, and he said, "The bill creates fundamental premises that will ultimately have to be addressed. Anytime you have that type of exposure of the dual chartering system, you have to take this seriously. This is an issue that would dramatically reduce the value of the state credit union charter." -

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