WASHINGTON-CUNA sent a letter to the Federal Reserve last weekurging the regulator to create a strong guidance regarding the`tying' of banking products and not to make it easier for banks.The Fed's proposed interpretation and guidance notes that consumersare not harmed by banks taking advantage of loopholes in theBanking Holding Company Act Amendments of 1970, which prohibits thepredication of the availability or price of a product on thecustomer obtaining another product from the bank or an affiliate.It does exclude tying of “traditional bank products,” like takingdeposits or loans, from the prohibition. For example, an item thatmight be prohibited from tying would be life insurance, which somebanks have gotten into the business of since the passage of theGramm-Leach-Bliley Act. In fact, though, CUNA Assistant GeneralCounsel Jeff Bloch claims that consumers are harmed by bankscontinuing to “devise loopholes and tortuous interpretations” toavoid the `anti-tying' restrictions. CUNA said the tying ofproducts and services limits consumer choice and called tyingpractices “anti-competitive.” The credit union trade associationhas recently ramped up its efforts to raise awareness of thebankers' attacks on credit unions and their hypocrisies. However,Bloch confirmed, this is the first time CUNA's regulatory side hasactually come out against potentially allowing banks moreauthorities that does not directly involve credit unions. Blochexplained that individuals and small business owners “typicallyhave less bargaining power and are less financially sophisticatedthan the large corporate customer.may be more susceptible to bothovert and subtle pressures from banks to require them to purchaseadditional, unneeded products and services from banks or theiraffiliates.” He indicated that credit unions, as non-profits with amission of serving their members, do not use these tactics to gainmarket share. “This is consistent with the bank's continued attackon any attempts by credit unions to improve their services fortheir members and by the constant attacks on the credit uniontax-exempt status, all in an effort to further expand marketshare,” CUNA's letter read. “These attacks continue even in lightof the spate of recent news articles that have described a varietyof schemes that certain financial institutions have developed inorder to avoid paying the legitimate taxes that all for-profitentities must pay.” Bloch added in the letter, “Credit unions arenot-for-profit financial institutions that provide financialproducts and services for their members. The product and servicesprovided are based on the needs of the members. Unlike banks,credit unions have no incentive to devise complex tyingarrangements that pressure consumers to purchase additionalproducts and services that they may not want or need.” Bloch alsopointed out that Congressman John Dingell (D-Mich.) has requested aGeneral Accounting Office study on the matter about a year ago.CUNA urged the Fed to review the upcoming report before making itsfinal decision. -


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