The Rundown

• The credit union's political awakening began in 2005 whenCongress considered imposing taxes on credit unions.
• After the tax issue, the credit also began a long processof improving the way it tracked political information.
• The credit union lobbied hard to get lawmakers to supportthe Credit Union Regulatory Improvements Act.

Since the earliest days of American history, concerns about taxpolicy have prompted individuals and groups to express theiropinions, sometimes in dramatic ways.

The Pennsylvania State Employees Credit Union has never dumpedtea into a harbor, but its political awakening began when Congressconsidered imposing taxes on credit unions.

In 2005, the House Ways and Means Committee held a hearing oncredit unions' tax-exempt status. PSECU Public Relations ManagerNate Muniz recalled that his group did an e-mail and phone campaigntargeting area lawmakers to let them know what makes credit unionsunique and why they deserve to be tax exempt.

“We made a major attempt to mobilize members and received a goodresponse,” he said. “We explained the crux of the issue to ourmembers, and gave them suggested arguments to use, and they madetheir views known to members of Congress.”

The 351,000-member Harrisburg-based credit union, which hasmembers all over Pennsylvania, didn't just focus on the members ofthe Ways and Means Committee, which is the panel responsible forwriting tax bills. Instead, the $3.6 billion credit union reachedout to lawmakers who had large groups of PSECU members in theirdistricts and had them talk to committee members.

The hearing was one of the key political events for creditunions in the first decade of the 21st century.

At that session, then-NCUA Chairman JoAnn Johnson told lawmakersthat because they aren't taxed, credit unions could “provideAmericans from all walks of life greater access to affordablefinancial services.”

Then-Chairman Bill Thomas (R-Calif.) said he wouldn't push torepeal credit unions' tax-exempt status but asked the GovernmentAccountability Office, Congress' investigative arm, to examine howwell credit unions were serving underserved areas and whether theywere collecting and disclosing enough financial data.

A year later, the GAO concluded that “credit unions laggedbehind banks in serving low- and moderate-income households.” Thereport also concluded that credit union executive compensation isnot transparent.

After the tax issue, Muniz had the credit union participate inother legislative battles but also began a long process ofimproving the way it tracked political information and relayed itto their employees, volunteers and members.

Every year, he compiles a report that chronicles and analyzeskey state and federal legislative issues that relate to creditunions. These reports include profiles of members of the state'scongressional delegation, including their voting record on creditunion-related matters. The report also includes data from FederalElection Commission reports on how much money the lawmaker hasraised and how it was raised.

“It's been a helpful tool to have everything in one place andhas enabled us to guide our political work,” said Muniz, a formeraide to Rep. Tim Holden (D-Pa.), whose district includesHarrisburg.

The Pennsylvania congressional delegation has had severalmembers in the past few Congresses who have played key roles–bothfavorable and unfavorable–on issues relating to credit unions.

Until his defeat last November, Rep. Paul Kanjorski (D-Pa.) wasone of the strongest credit union supporters on Capitol Hill. Hewas a key sponsor of many pro-credit union bills, including HR1151. That measure, passed in 1998, reversed a U.S. Supreme Courtdecision and gave credit unions broad authority to expand theirmembership. The bill, which was strongly opposed by the bankingcommunity, limited the new community charters for credit unions towell-defined local communities. It gave the NCUA the power todefine what such a community is and what constitutes an immediatefamily member for purposes of membership eligibility.

Some of PECU's members volunteered on Kanjorski's campaign lastyear as they had in the past.

Rep. Bill Shuster (R-Pa.) is a key sponsor of legislation thatwould limit interchange fees. Muniz said even though they disagreewith the congressman on that issue, they have a good relationshipwith him and he is receptive to their views on other issues.

And there has been no shortage of other matters for creditunions to be concerned about.

The credit union lobbied hard to get lawmakers to support theCredit Union Regulatory Improvements Act, which would have raisedthe cap on member business loans and allowed risk-basedcapital.

Although the bill never passed Congress, Muniz said theirefforts did result in several members of the state's delegation tobe cosponsors.

The credit union really stepped up its efforts last year, asCongress was considering the financial overhaul bill, which hadmajor ramifications for credit unions and other financialinstitutions.

It added a “Know More” page on its website, which containsinformation about several key aspects of the bill and other pendinglegislation. In addition, it increased the use of its quarterlybulletin to convey political and legislative information to theirmembers.

The credit union really swung into action when the Senate passedan amendment to mandate the Federal Reserve to limit debitinterchange fees.

They sent an email to more than 213,000 members and it resultedin 34,000 letters to members of the Pennsylvania congressionaldelegation. Several other credit unions used PSECU's e-mail tomembers as the template for their communications with theirmembers.

“That was a turning point for us because of the threat to ourrevenue,” PSECU President/CEO Greg Smith. “Based on our 2010numbers, debit interchange revenue accounted for $12 million of our$38 million in net income. And under the proposed rule we couldlose $10 million.”

PSECU chartered a bus and sent 27 employees to the Washington,D.C. fly in sponsored by CUNA to lobby House members to try todefeat the interchange amendment, which was sponsored in the Senateby Majority Whip Richard Durbin (D-Ill.). In Washington, the grouprented a hall to serve as a base for Pennsylvania credit unionrepresentatives and served lunch there and heard from severalmembers of the congressional delegation.

After the fly-in, the credit union sent e-mails to its memberswho had contacted their member of Congress to inform them of themember's position on interchange.

Although the original House version of the bill didn't containan interchange provision, during House-Senate negotiations toreconcile the two bills the Senate negotiators insisted on keepingit in so it remained in the final bill.

The credit union is also writing a comment letter to the Fed onthe proposed rule, which would cap card interchange at no more than12 cents per transaction.

The credit union is taking additional steps to increase thepolitical involvement of its employees. One of its employees willbe attending the GAC as part of the Crash Network and three otherswill be attending on one-day passes. It has also invited electedofficials to the headquarters to meet employees and hear theirthoughts about issues relating to credit unions.

Although the credit union keeps an eye on state issues as well,Muniz said there haven't been many issues impacting credit unions.However, when the state government had to furlough employeesbecause of budget problems, the credit union used it as anopportunity to let its members know that it offered low-interestloans to tide them over until the government resumed payingthem.

In addition, representatives of the credit union are involved instate and local government affairs organizations such as the CentreCounty Chamber of Business and Industry and the PennsylvaniaChamber of Business and Industry in addition to credit unionorganizations.

PSECU has focused on legislation and mostly shied away fromcampaigns. It doesn't have a political action committee, and unlikeother credit unions, it hasn't mobilized members on behalf of oragainst certain candidates.

“We've deliberately stayed out of campaigns. We don't see how wecould win on that because we would make one person happy butanother one angry at us,” Smith said.

He said there has been a very passive effort to get people togive money to the political action committees of the state andnational credit union associations.