WASHINGTON — Between continuing efforts for regulatory relief,potential for flight to safety, and field of membership legalchallenges, 2007 might look like more of the same, but there ismore to it than that according to the national credit uniontrades.

“In a general sense we have, by all outside sources, continuedto move the credit union agenda up in the eyes of Congress…andothers,” CUNA President/CEO Dan Mica said. He pointed to how CUNA'sfirst-ever step to block banker legislation caused “a jolt aroundWashington” when CUNA threatened to kill the regulatory relief billover a provision removing the cap on thrift business lending.

“We made it very clear to members of Congress and staff, we haveno intention of losing our White Hat,” CUNA Senior Vice Presidentof Legislative Affairs John Magill said. “We're not going to be theplayground bully but we're not going to be the playground patsy.”He added that the final regulatory relief law was limited, butbalanced where it had previously been lopsided in the banks'favor.

Mica said that helps set the tone for 2007 because a healthycredit union movement means keeping things that create problems forCUs out. He explained that everyone realizes now, “It has to befair for credit unions and banks or nothing's going to happen.”

NAFCU Senior Vice President of Governmental Affairs Dan Bergercommented, “First and foremost, we did get a little regulatoryrelief done this year. We talked with everyone about refilingCURIA, including Congressmen Kanjorski and Royce.” He said they areinterested in refiling the Credit Union Regulatory ImprovementsAct. NAFCU and CUNA have both asked to add a provision permittingall federal credit union charter types to adopt underserved areasand it could also be introduced as a stand alone. Additionally,Berger pointed out that Senator-elect Bernie Sanders (I-Vt.)promised at Congressional Caucus to introduce CURIA in theSenate.

CUNA's Magill also said they plan to approach the banking tradesabout working CURIA and the Communities First Act, providing taxand regulatory relief for community bankers, together. Regardingthe format of CURIA, he said, “We'll do whatever works.” Congresswill likely start with a flagship bill, but add on or breakoutitems where it can. CUNA will be adding a couple more lobbyists toits budget in 2007, he said.

The American Bankers Association publicized the substantiveresults of the Government Accountability Office's report on creditunion service to those of modest means, which found with thelimited data available that banks were serving more low-incomehouseholds. The group also said that the limited data out therecries out for Community Reinvestment Act-like requirements forcredit unions to demonstrate their service to those of low andmoderate incomes.

But, even with the Democrats taking control of Congress,Berger–a former lobbyist for America's Community Bankers–does notsee the CRA for credit unions getting much traction. “[FinancialServices Committee] Chairman [Barney] Frank [(D-Mass.)] is not onlyextremely smart, he's also very pragmatic,” he commented, alludingto the narrow margin of control the Democrats hold.

“Credit unions aren't trying to impose their regulatory burdenon banks. Why are banks trying to impose on credit unions theirregulatory burden?” NAFCU President/CEO Fred Becker askedrhetorically. He said if the banks want parity let them deal withthe field of membership and capital restrictions imposed uponcredit unions.

CUNA will be responding to GAO at length and plans to work “veryclosely” with NCUA's task force on its own recommendations, CUNAGeneral Counsel Eric Richard said. “You can see how quickly thebankers have shifted from tax issues to CRA,” he observed.

NAFCU Senior Counsel and Director of Regulatory Affairs CarrieHunt noted that the NCUA staff report to the board, which includeda recommendation to continue collecting member service information,is just a recommendation at this point. “It remains to be seen ifthe board is going to take any action on that,” she said.

CUNA and NAFCU ran a joint ad campaign immediately following therelease of the reports to get a broader group of eyes from CapitolHill on NCUA's numbers. The advertisements ran in several Hillnewspapers.

CUNA also did a mainstream media tour in New York City. “We didhave a media outreach campaign over several months leading up tothe release of the NCUA and GAO reports this year,” CUNA SeniorVice President of Communications Mark Wolff said, to help “bringall the facts to the attention of the reporters.” CUNA garneredcoverage in USA Today and by the Associated Press from it. “A lotof this is about building relationships with reporters in thenational media…We want to show how credit unions are helpingeveryday people,” Wolff stated.

Berger said NAFCU would continue its efforts to work with thebanking groups where they find common ground like data security.“No one dislikes credit unions. No one dislikes community banks,”he said.

Along the same vein, Mica sent his 10th annual letter to thelargest banks in the country asking them to work with creditunions. Each year he said he gets a couple more in agreement withhim, but would not disclose the number because Mica agreed not topublicize it. “I've been saying since the election,” he reiterated,“there will be gridlock unless traditional foes come together.”

Another issue where there is agreement between the banks andcredit unions is the kid gloves that must be used in implementingthe Department of Defense's new rules prohibiting interest ratesover 36% to military personnel. “We have a lot of members that tryto break that payday lending cycle of debt,” NAFCU Director ofLegislative Affairs Brad Thaler highlighted. However, they mightcharge $6 for financial counseling under credit rebuilder programsand do not want that fee included in the interest rate cap, heoutlined.

“They're kind of being asked to recreate the entire financialservices framework for military personnel in miniature,” CUNA'sRichard observed. Each noted that DoD must consult the financialregulators, though at this point, they have no authority;enforcement could be delegated. Public comment is being sought.

Credit unions and banks could also take similar stances on theInternet gambling legislation, which charges the credit cardcompanies with blocking the use of credit cards at online gamblingsites, Hunt said. She explained that NAFCU is watching to seewhether that is expanded to checks as well. “The credit cardcompanies have more information. A check may not be linked back toan illegal act,” she emphasized.

Other issues to consider: the Fed's Reg Z open-end creditproposal and minimum payment warnings and federal preemption thatthe Dems might take a different view of than the Republicans.

Despite commonalities and admissions of co-advocacy, there is nolove lost between the banking and credit union groups either. CUNAhas said it is looking into bringing litigation against bankerswhile both credit union organizations are preparing for legalattacks from the bankers.

First things first: credit unions are still awaiting the outcomeof the ABA lawsuit challenging NCUA's approval of a six-countycommunity charter for Member's 1st Federal Credit Union inPennsylvania. “The judge asked for briefs about her role in thecase,” Richard explained. Typically, he said that is accompanied bya request for draft motions, but she did not ask for that. There isno time limit for the judge to respond, but she also does not havea reputation for sitting on cases.

“In part, from the outcome of that case, the agency may considerrule changes,” Hunt offered. It is possible there would be newguidance issued on how “community” is defined.

Richard also pointed out a number of legal challenges going onat the state level in Pennsylvania, Missouri, and Kentucky. Thoughthey are in the states, the decisions could have federalimplications since much of state law is based on federal law. Henoted that the bankers apparently have no trouble spending a lot ofresources on litigation, adding that the ABA took the AT&T caseall the way to the Supreme Court. However, Richard said theirlitigious nature does seem to be subsiding some from a decade agowhen there were 20 cases pending in 14 states.

“I think they perhaps realize over-aggressive litigation canbackfire,” he said. A recent misstep, Richard believes, has beenthe lawsuit in Utah to stop non-multiple common bond credit unionsfrom adopting underserved areas. He concluded, “They suffer in thelong-run by working to keep people out of credit unions.”

Credit union groups have also acknowledged that NCUA's recentfinal rule on credit union conversions to mutual savings bankscould draw more litigation as threats mount.

But CUNA is weighing its options for mounting an offensive inthe courts. “We've had a number of options,” Mica said. “Somedidn't legally have the strength we would have liked.”

The credit union groups have been growing their political actioncommittees and expanding lobbying efforts on the Hill, looking toget the upper-hand with lawmakers over the bankers. “We've reallybeen humping it and wearing out the shoe leather there,” NAFCU'sBerger said, explaining their lobbyists are on the Hill virtuallyeveryday Congress is in session and even now as swearing-inceremonies and receptions are being planned.

CUNA has been rallying the troops through its popular Hike theHills, which are “paying huge dividends,” Senior Vice President ofPolitical Affairs Richard Gose said. According to CUNA Director ofGrassroots and Political Involvement Gretchen Drobnyk, 22 havealready been slated for 2007. “We have some plans for 2007, whichinclude a Project Zip Code month,” Gose announced and promised moreto come. Additionally, CUNA will be starting to put together itscampaign schools even earlier in the 2007-2008 election cycle; 14were held last election cycle.

Drobnyk also revealed that CUNA would begin offering a Web-basedtraining module on political involvement in conjunction with CUNA'sCenter for Professional Development, which will include how to dograssroots and member communications, as well as advocacytraining.

And if a show of grassroots support is No. 1 in politicaladvocacy, financing is not far behind. Both CUNA and NAFCU's PACshad record election cycles for 2005-2006. The Credit UnionLegislative Action Council of CUNA upped its $3.48 million raisedin 2003-2004 to more than $3.6 million as the 2005-2006 cycle drewto a close. “The goal next year is just to better that. We're notputting a number on that,” Gose said.

CULAC also increased contributions from $2.4 million in the2003-2004 election cycle to just under $2.9 million as of earlyDecember plus an additional $300,000 in independent expenditures,an area in which CULAC is looking to get more involved, CUNAPolitical Director Trey Hawkins said. CULAC is consistently rankedamong the top 10 PACs by contributions made and in a virtual tiewith the ABA's PAC.

Gose explained that the group understands it will reachsaturation at some point, but continues to work all levels of thecredit union movement.

NAFCU has placed greater emphasis on NAFCU/PAC in the last fewyears, achieving a record more than $380,000 in the 2005-06 cycle,Becker said, placing it in the top 16% of PACs. NAFCU/PAC also hasmore member solicitation approvals than ever before.

As part of CUNA's mainstream media efforts, Wolff explained, thegroup has held Chief Economist Bill Hampel out as an expert inconsumer finance and economic trends. “Our story and we're stickingto it, though we haven't seen it, is just naturally becausenon-financial markets events, lending will be slowing next year andsavings will begin to pick up,” Hampel said for 2007. But this isnot as rosy an outlook as it sounds, he cautioned, because consumerdebt, at best, will stabilize. He said he expects 2006 to end with3% credit union savings growth and 8% loan growth, but in 2007,credit unions can expect to see 7% savings growth and 5% loangrowth.

However, Hampel added, “Credit unions will still have to workhard to get savings.” While mutual funds have done well withinverted yield curve, other depositories will be the competitors inthe future.

NAFCU Chief Economist Tun Wai provided a quite differentforecast. He predicted for now that credit union loan growth wouldcontinue to outpace savings, saying double-digit loan growth waspossible and savings would hover around 4%.

Becker said that NAFCU would continue to try to stay one stepahead of member needs into 2007. “In 2002 in The Federal CreditUnion magazine we noted the importance of credit unions being ableto show how they serve their members and how that's different fromother financial institutions.” That has come true, he said.

Also in 2002, NAFCU initiated its alliance with Fannie Mae toposition members as interest rates rose, which has also come true.Now NAFCU Services Corp. is signing a number of new PreferredPartners early in the New Year.

To help deal with multifactor authentication compliancechallenges, NSC has just signed a deal with BioPassword, whichemploys a keystroke biometric to verify online member access. NSCPresident David Frankil explained the for-profit arm of NAFCU hasbeen taking a more “solutions-oriented mind-set than we've had inthe past. It's resonated well with our members and with ourpartners.” NSC is also looking to Cyveillance to help monitor chatrooms for fraud; Hudson & Keyse for charge offs; AllianceFinancial for front-end card program consultation; andXpresscredit.net to help speed lending decisions.

Regarding member service, Becker admitted, “There's a perceptionthat NAFCU doesn't serve its smaller members and that's absolutelyfalse.” He said NAFCU is working to overcome that. The trade groupis also offering free six-month trial memberships. “Most of thosein the trial membership end up staying with us,” Becker said.

NAFCU is looking to fill some spots in its staff as well, mostrecently with the exit of Executive Vice President Diane Swenson.“We're building here a terrific group of people…More importantlyyou've got to step back and look at the results and I wouldchallenge anybody to come up with something we've missed,” hechallenged. –[email protected]