Revamping the way credit unions and other financial institutions are regulated and possibly including credit unions in the Community Reinvestment Act.
Those are among the topics that lawmakers will consider when they return from their recess this week.
Credit unions dodged a bullet on the financial restructuring plan when President Obama's original proposal called for the NCUA to remain as an independent agency and that seems to be the sentiment in the House, which plans to begin marking up the measure in the middle of September. In the Senate, Banking Committee Chairman Christopher Dodd (D-Conn.) has spoken of his support for one regulator for all financial institutions, though his staff has told CUNA and NAFCU lobbyists that it plans to keep the NCUA an independent agency. But the political landscape in the Senate could change because at press time it wasn't clear whether Dodd would stay at the helm of that panel because he is in line to take over the chairmanship of the Health, Education, Labor and Pensions Committee-a vacancy created by last month's death of Sen. Edward M. Kennedy (D-Mass.).
For credit unions, the other key part of the restructuring proposal has been Obama's proposal to create a new agency to regulate consumer financial products, which the administration suggests should be called Consumer Financial Protection Agency.
NAFCU has offered a proposal to exempt all depository institutions, which are already regulated by other federal agencies, from the purview of the new agency. A CUNA spokesman said it could support a new agency if it doesn't preempt the enforcement powers of the NCUA, is allowed to preempt state rules and is required to streamline and modernize consumer regulation.
The House Financial Services Committee was supposed to begin discussions on the bill in July, but, due to opposition from some financial services lobbyists-including the American Bankers Association and the Independent Community Bankers of America-Chairman Barney Frank (D-Mass.) postponed consideration to give supporters of the new agency a chance to use the recess to lobby lawmakers.
CUNA and NAFCU used the recess to have their members discuss their concerns about the measure and plan to redouble their efforts this fall. CUNA and state leagues are sponsoring 32 “Hike the Hills” in September and October. And during NAFCU's Congressional Caucus in September, participants will meet with their senators and representatives.
CUNA Vice President of Legislative Affairs Ryan Donovan said the group wants “to be sure that examination and enforcement are kept at NCUA and there is one rule for the road so that credit unions aren't subject to conflicting federal and state regulations.”
NAFCU Director of Legislative Affairs Brad Thaler said it has “received receptive feedback to our approach because we address many of the concerns raised by people on all sides and it shows a willingness to talk about the issue, rather than just oppose it.”
A source of concern is how the new agency would be funded. Among the ideas that are being considered are a surcharge on each transaction, an appropriation by Congress and an assessment on financial institutions.
Lawmakers are also likely to begin consideration at the committee level of a bill that would subject credit unions and other nonbank institutions to the Community Reinvestment Act, which was passed in 1976 to remedy red lining by certain banks.
The House Financial Services Committee hasn't announced a hearing date, though several sources told Credit Union Times that it could happen in September or October, though full consideration might not happen until next year.
Rep. Eddie Bernice Johnson (D-Texas) introduced a bill mandating that credit unions be included with independent mortgage companies, mortgage company affiliates of banks, insurance companies and securities firms as part of a group of nonbank institutions to which the act applies.
It would expand CRA to require that CRA exams consider how well a financial institution serves minorities as well as how well it serves low- and moderate-income groups. It would also require small business loan data to include information on the race and gender of the small business owner.
Both Dodd and Frank have expressed support for expanding CRA and both represent states in which state-chartered credit unions are required to comply with the act.
Donovan and NAFCU Executive Vice President for Government Affairs Dan Berger said that the positions of the chairmen on CRA will make it more of a challenge for the credit union movement but that credit unions have a good story to tell on their record of serving the underserved.
“Credit unions are the one sector of the financial services sector that is doing things right in this area,” Donovan said.
Berger said he has spoken to many lawmakers who don't think CRA is needed, and they are “aware that there is no evidence that credit unions are the bad actors that the original bill targeted.”
Congress may also take up a measure to raise the cap on member business lending from its current level of 12.25% of a credit union's assets to 25%. Rep. Paul Kanjorski (D-Pa.) has introduced the bill in the House, though a comparable bill hasn't yet been introduced in the Senate.
The change would likely be attached to another measure rather than proceed as a standalone bill. The NCUA, SBA and Treasury Department will likely be asked to weigh in on the measure.
Lawmakers could also revisit the issue of interchange fees. House Judiciary Committee Chairman John Conyers (D-Mich.) has introduced a measure allowing merchants to negotiate interchange with card issuers. It is similar to a bill passed by Conyers' committee last year but never considered by the full House. The bill specifically exempts federally chartered credit unions and all financial institutions that have less than $1 billion in assets.
Sen. Richard Durbin (D-Ill.) has introduced a similar bill, though under his measure, if an agreement between a card issuer and merchant cannot be reached, both sides would have to submit their final offers to binding arbitration.
This battle has set up a clash of the titans, with credit unions, banks and card issuers on the same side lining up against merchants.
CUNA and NAFCU are also hoping to attain a legislative fix to change a provision of the Credit Accountability Responsibility and Disclosure Act, which took effect on Aug. 21, that requires statements on open end accounts be delivered 21 days before they are due. Some credit unions say they are facing logistical and other obstacles that are making compliance difficult.
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