As we gather for NAFCU's 2009 Congressional Caucus, it seems that many ghosts of legislative reforms past are coming back to haunt us.
What began with the subprime crisis of last year has evolved into a full-fledged financial crisis that has prompted renewed interest in Congress for regulatory reform and tougher consumer protections.
Earlier this year, NAFCU worked diligently to defend our industry when cram-downs were considered as part of mortgage reform. The House version of the Helping Families Save Their Homes Act of 2009 (H.R. 1106) that passed on March 5 would have provided bankruptcy judges with the authority to unilaterally modify mortgage loan terms for consumers in bankruptcy proceedings. Continuing to offer a compromise of applying cram-downs to only subprime loans, NAFCU took the leadership in working to ensure that broad mortgage cram-down authority would not be in the bill introduced in the Senate. Sen. Richard Durbin, D-Ill., however, pushed for an amendment that would have included cram-down language.
Recommended For You
Ultimately, the Durbin amendment was defeated. Efforts to include the cram-down proposal during further congressional action were also thwarted. The final version of S. 896, which included the creation of a corporate credit union stabilization fund, passed both houses of Congress and was signed by President Obama on May 20.
Unfortunately, just a few weeks ago in early September, House Financial Services Committee Chairman Barney Frank announced that he might include mortgage cram-downs in a broader package of regulatory reforms.
The Community Reinvestment Act has also resurfaced on the legislative front. CRA was instituted in 1977 in response to banks' and thrifts' redlining during the 1960s and early 1970s. On March 13, Rep. Eddie Bernice Johnson (D-Texas) introduced H.R. 1479, the Community Reinvestment Modernization Act of 2009, which would extend CRA to various entities, including credit unions.
While no action was scheduled on H.R. 1479, recently the House Financial Services Committee scheduled a hearing to examine CRA and how it can be expanded. NAFCU has always adamantly opposed any application of CRA to credit unions because there is no evidence that credit unions have ever engaged in negative tactics, and this would only be a new regulatory burden.
For the second consecutive year, merchants are actively lobbying Congress to pass legislation that would artificially cap the fees merchants pay for the benefits they have through the electronic payment system (interchange fees). Rep. John Conyers (D-Mich.) introduced H.R. 2695, the Credit Card Fair Fee Act of 2009 on June 4, while Sen. Durbin introduced S. 1212, a similar measure, in the Senate on June 9. The proposals would exempt merchants from the nation's antitrust laws by allowing them to discuss and decide among themselves what price they will agree to pay to accept credit and debit cards.
Moreover, the Senate proposal would authorize merchants to bring the issue before a newly created three-judge panel if they were not able to negotiate a lower price. S. 1212 directs the three-judge panel to set the price for interchange fees "that most closely represent the rates and terms that would be negotiated in a hypothetical perfectly competitive marketplace."
NAFCU strongly opposes H.R. 2695 and S. 1212 and is actively working to defeat the bills. We are also participating in the activities of the Electronics Payment Coalition as it works to defeat the bills.
Member business lending is another important issue for credit unions. Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) in late July introduced legislation (H.R. 3380) that would raise the current statutory MBL cap of 12.25% to 25%. NAFCU has worked actively on lifting this cap for many years, and we welcome this proposal as a solution that can produce a bottom-line impact for small businesses and credit unions at no cost to taxpayers.
In addition, the administration has also put forth a proposal for a Consumer Financial Protection Agency that would have authority over all financial institutions. NAFCU believes that the administration's proposal is well-intentioned in its effort to protect consumers from the predatory practices that led to the current crisis. However, we do not believe such an agency should have authority over regulated federally insured depository institutions and would oppose extending that authority to credit unions.
Rather, we propose each functional regulator of federally insured depository institutions have a new or strengthened office on consumer affairs established. In fact, such an office has been proposed for the NCUA. We expect Congress to take up legislation to create a CFPA this session and we will continue to advocate our alternative vigorously.
Finally, we fully recognize the need for capital reform, whether risk-based, or secondary, that preserves mutuality, as CUNA and NASCUS agreed to last year. We think it is time to pick an approach and move forward.
While NAFCU will continue to advance credit unions in Washington, your continued community and political involvement is vital to help stave off anti-credit union legislation. The outreach and educational efforts you conduct during these difficult times speak volumes about credit unions' commitment to serving their members and the value you represent in your local communities. Thanks to you all.
Dan Berger is executive vice president of government affairs at NAFCU. He may be reached at 703-522-4770 or [email protected]
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
