WASHINGTON -- It happened one night.

No, not the unlikely triumph of Clark Gable's journalisticrascal over Claudette Colbert's heiress, but the House's finalpassage last Tuesday of a long-awaited measure to provideregulatory relief to credit unions.

While its fate in the Senate is unclear given the short timeleft for legislative action, the unanimous voice vote passage ofthe bill, pleases credit unions and doesn't displease theircounterparts in the banking community.

The Credit Union Bank and Thrift Regulatory Relief Act (H.R.6312) grandfathers existing approvals of underserved areas andallows federal credit unions to apply to serve underserved areasoutside their field of membership. Loans in those communities andto nonprofit, religious institutions would not count against theirMember Business Loan cap. It would also permit credit unions toprovide short-term unsecured loans to anyone in their field ofmembership.

After months of behind-the-scenes wrangling and despite stronginitial concerns by banks about giving their credit unioncompetitors additional business opportunities, the final vote wasuneventful. It took place around 8:00 p.m., with a handful ofmembers on the floor and no one spoke against it.

Rep. Paul Kanjorski (D-Pa.), one of the measure's key sponsorssaid during the House debate said that it is "an important stepforward in our legislative debates about how best to ensure thatcredit unions can better serve their members."

He and Rep. Dennis Moore (D-Kan.), the main supporter of themeasure for banking regulatory relief that was combined with thecredit union measure, had a friendly two-minute exchange. Duringtheir discussion, Kanjorski assured Moore that the measure allowsthe franchise of a successful national company owned exclusively byresidents of an underserved area to be eligible for a memberbusiness loan that is exempt from the cap.

Rep. Ed Royce (R-Calif.), the bill's leading GOP sponsor, saidthe bill "allows credit unions, banks and thrifts to devoteresources to better serve customers" but also expressed hope thatCongress would pass a more comprehensive reform measure--the CreditUnion Regulatory Improvements Act. That bill, which has 150co-sponsors in the House and four in the Senate, would raise theoverall business lending cap from 12.5% of a credit union's totalassets to 20% and modernizes credit union capital requirements byredefining the net worth ratio to include a risk-based assetapproach.

NAFCU and CUNA were both happy with the measure and madestatements praising Congress' action. By contrast, neither theAmerican Bankers Association nor the Independent Community Bankersof America issued a release after the vote.

A spokesman for the community bankers declined comment, while anABA spokesman said that its concerns were assuaged when Congresstightened some of the definitions of what constitutes anunderserved area.

Specifically, the definition only refers to census tracts thatare a low-income area as defined by Congress. Even census tractsthat meet that definition wouldn't qualify if more than half of theresident families have annual incomes of more than $75,000. Thiswill exclude 229 of the 25,000 low-income census tracts.

NCUA Chairman JoAnn Johnson praised the bill as "a positiveforward in the overall cause of updating the laws under whichcredit unions operate."

CUNA President/CEO Dan Mica and NAFCU President Fred Becker bothsaid they hoped the House's action was the first big step ineventual passage of more comprehensive legislation, either laterthis year or when a new Congress convenes next January.

"The enemy for us is time," Mica told reporters on a conferencecall. "We need to try to get this passed because it is good publicpolicy and good for our members."

Becker said in an interview with Credit Union Times that thebill "provides a good starting point in the Senate" and the grouphopes that the provisions passed by the House--as well as capitalmodernization and business lending expansions--will move forwardsooner rather than later.

The bill makes other changes in rules for credit unionsincluding: increasing the amount they can invest in CUSOs from 1%to 3% of their capital and surplus; allowing the NCUA to increasethe 12-year maturity limit on non-real estate secured loans to 15years; giving the NCUA board more flexibility to raise usuryinterest ceilings on federal credit union loans; providing federalcredit union boards the ability to expel a member who is disruptiveto the credit union's operations without the need for a vote bytwo-thirds vote of the membership. It would also allow federalcredit unions to limit the length of service of their boards ofdirectors to ensure broader representation.

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