SALT LAKE CITY – Credit unions’ booth at the National Conference of State Legislatures’ 2004 annual meeting of standing committees was not the largest, nor was it necessarily the flashiest. But that didn’t stop legislators and their staff and others among the approximate 5,000 attendees from finding their way to the booth. In fact, said one credit union spokesperson, credit unionists at the conference held July 19-23 were hard pressed to find an attendee who wasn’t carrying around the laptop-style bag with the “America’s Credit Unions” logo that was distributed at the booth. Even the local daily newspaper The Deseret News called the booth the “most popular.” CUNA’s VP of State Government Affairs Colleen Kelly described the event as “a real magnet for lobbying organizations. Groups involved with every issue you can think of that goes through a state legislature are represented at the conference, such as pharmaceuticals, the medical field, AARP, environmentalists.” Kelly said over 20 credit union leagues were represented, which is more than attended last year. She attributed that to events at the 2003 annual meeting in San Francisco which saw some bank representatives attempt to get an amendment to NCSL policies passed calling for the taxation of credit unions. Their attempt was defeated. “That initiative wasn’t a surprise for us, we knew they were going to try to do it which is why we were able to get it defeated,” said Kelly. “Credit unions always have to be vigilant and prepared, but this year we were especially well covered. We did a full year’s worth of preparation, and credit unions definitely had a presence at this year’s meeting.” If credit unions needed any proof they are on legislators’ radar screen they only had to observe the attendance at a session held on July 21 by the NCSL Standing Committee on Financial Services, “What Does Financial Modernization Mean for Credit Unions?” which featured three representatives from the credit union movement – Dave Chatfield, president/CEO, California Credit Union League; NASCUS Chairman Roger Little, Deputy Commissioner, Office of Financial and Insurance Services, Michigan; and Melinda Love, director, Region V, NCUA, Arizona – and from the American Bankers Association, Keith Leggett, senior economist. Close to 70 conferees attended the session that Kelly said was “standing room only.” The debate lasted one hour, followed by a 30-minute Q&A. Kelly pointed out that the session wasn’t intended to be a credit union vs. bank debate, but the ABA requested that Leggett be added to the panel. However, CUNA didn’t think it was relevant that Leggett be included on a panel about the impact of financial modernization on credit unions, and Kelly said even some lawmakers questioned Leggett’s presence. It was Little’s first time at a NCSL conference, and he said it was “what I expected.” As a state regulator, Little told Credit Union Times that he defines his role as “determining the parameters of safety and soundness we think can accommodate modernization and interpret the law as wet by the state legislature. We’re not an advocate for the institutions we regulate, which include credit unions. Instead, our role is to provide objective information.” That was why, he told attendees of the conference session, he was concerned with giving affect to the public policy decisions of the Michigan state legislature that the citizens of Michigan have access to the alternative of financial services provided by CUs, and that the state regulator, in order to give that legislative intent meaning, sought to provide credit unions with the powers they need to remain competitive in an evolving financial services industry in a safe and sound manner. The NASCUS Chairman discussed his experience as a state regulator that recently saw a rewrite of its state’s Credit Union Act, and prior to that the state’s banking code. He pointed out that when the banks were going through their state modernization exercise, credit unions offered no impediment or objections. However, when it was credit unions’ turn, the banks actively opposed their efforts, objecting to 78 provisions in the proposed Credit Union Act, half of which had been existing law since 1925. The Michigan Credit Union Act eventually was passed by both houses of the state legislature unanimously, but it took three years and a two-step process for that to happen. For many credit unions, said Little, modernization equals viability – if CUs are not modern financial services providers they would in many cases cease to be relevant to the needs of their members. In addition, if this happens, they CUs cease to be viable and this creates serious safety and soundness concerns for the state regulator. Little also addressed the state’s concerns with federal preemptions and cited the OCC’s usurpation of authority on the banking side. He opined that federal banking preemption could set a precedent that could result in increased federal credit union preemption. Chatfield also addressed the 20 years worth of effort from the banking industry to modernize federal banking law that culminated in passage of the Gramm-Leach-Bliley Act. Citing the reasons the ABA gave for modernizing outdated laws – “to provide more choice to consumers, more innovative products and more competitive prices in the financial marketplace” – the California League president said CUs agree “these are important reasons to support financial modernization for all financial institutions. These are some of the same reasons credit unions in many states are working to update state credit union acts, and it’s very important for consumers (non-credit union members as well as members) that there be a robust credit union system in the marketplace.” He continued to state that: “While credit union modernization has not encompassed such expansive changes as the Gramm-Leach-Bliley Act did for the banking industry, it is just as critical to our 85 million members that credit unions be progressive in the ever-changing financial industry to offer services our members demand.Whether a state chooses to undertake a significant overhaul of its credit union act or updates specific provisions periodically, the modernization of all the nation’s financial services laws and regulations, including banks and credit unions, is critical to maintaining a progressive, competitive global market place.” While Leggett’s remarks mirrored the bankers’ rhetoric concerning credit union taxation status large CUs and field-of-membership, Kelly said the Q&A portion of the session was “monopolized” by Utah state Rep. David Clark, an employee of Zions Bank who was also the lawmaker last year who proposed the amendment to repeal FCUs’ tax exemption. Clark directed his questions to NCUA’s Love and Kelly said “he seemed to be asking the same questions over and over again in a different way to get the answers he wanted from her.” Having had time to digest what she took away from the conference, Kelly said 2004 “is going to continue to be an active year” for credit unions and bankers. She said bankers are going to continue to try different tactics to garner legislators’ support against credit unions, and she cited by example a reception that Marty Stephens, Utah Speaker of the House who quit his position as president of Zions Bank to run as the Republican candidate for governor and subsequently lost that race, held at his hotel suite during the conference which lawmakers were invited to. Kelly learned afterwards from legislators who attended that the event was in fact a credit union bashing reception, and that many lawmakers who went thought it was inappropriate that Stephens used his position at NCSL to hold the reception – Stephens is the immediate past president of the organization. “Salt Lake City has been such a battle ground for credit unions. We knew we had to have a high profile at the conference, and we succeeded at it,” said Kelly. – [email protected]

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