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WASHINGTON – NASCUS Chairman Roger Little, deputy commissioner of the Michigan Office of Financial and Insurance Services didn’t mince words when he spoke to GAC attendees about the challenges facing state credit unions and state regulators. He told them federal preemption of state laws is “one of the greatest threats to the viability of state system that we have ever experienced.” Addressing attendees at the general session on Feb. 23, Little said, “Federal preemption of our state laws has not crept, but rather has leaped into the forefront, presenting a challenge that has the power to undermine the balance between state and federal chartering authority. The right of state legislatures to effectively represent their constituents is at risk. This statutory prerogative must be protected.” Little said the effect of the “federal preemption juggernaut” is already apparent – it has “wiped away protections against predatory lending in several states.” He explained that, “Overriding state law and concentrating power at the federal level present a dangerous potential to state autonomy, and I believe it also threatens consumer protections, most especially for lower income consumers of financial products and services. I am here today to draw your attention to this growing threat, and to seek your help in facing it down.” Another issue Little discussed which he said also has “the potential to fracture our unity because federal credit unions are exempted as `instrumentalities’ of the federal government,” is the Unrelated Business Income Tax 9 (UBIT). “Imposing UBIT liability on state-chartered credit unions, while exempting federal credit unions providing exactly the same products and services, is fundamentally unfair, and understandably, could result in conversions to federally chartered credit unions. And that could inevitably lead to a single charter, one-size-fits all system,” Little said. “And, we most definitely do not subscribe to the theory that all wisdom resides within the federal government,” he added. Little said “NASCUS will guard against this discriminatory avalanche.” The association also intends to speak out on the need for credit unions to be able to generate alternative capital, a capability Little said whose “time has come.” Further enumerating initiatives NASCUS has taken to protect the state credit union system, Little spoke about the study NASCUS has put out concerning making the federal credit union regulatory and chartering authority of the NCUA “distinct and separate from its responsibility to administer the National Credit Union Share Insurance Fund. “It must be clarified, finally, exactly what it costs to supervise federal credit unions and what it costs to underwrite the liability of federally insured credit unions,” said Little. -

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