Banks want the rent-free deal credit unions get on military bases

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Letters written by the Defense Credit Union Council and the Association of Military Banks of America are revitalizing the debate around no-cost land leases at military installations.

The current law allows credit unions who certify that their membership is at least 95% military personnel or federal employees to rent space on military bases at no cost. Banks now want in on this exemption.

"It's not necessary to have a law change, which is what the credit unions are saying,” said Chris Cole, senior regulatory counsel of the Independent Community Bankers of America. "We think that [the Department of Defense] has the authority to do this and put banks on parity with credit unions."

"The real reason that credit unions are opposing this is because they don't want any competition," he added.

During the last Congress, there was a proposed amendment that would have required the Department of Defense to allow all banks to operate rent free on military installations. The amendment did not pass.

However, Cole argued that the defense secretary possesses the authority to provide parity for both banks and credit unions without Congress acting.

Both letters were sent to the Senate and House Armed Services Committees. The DCUC letter requested to maintain the status quo for no-cost land leases, while the letter from the military bank group called for parity between banks and credit unions.

"We urge both the Senate and House Armed Services committees to study the full impact of specific statutory language which the banks seek to establish," Anthony Hernandez, CEO and president of the Defense Credit Union Council, wrote in his letter.

Though most military installations contain both banks and credit unions, banks have left some bases due to the costs of leases. Fifty-three bases have lost their banks over the past 15 years, which accounts for 40% of all installations, according to a letter from Steven Lepper, president and CEO of the Association of Military Banks of America.

“All AMBA asks is that Congress should require DoD to treat banks and credit unions equally: If DoD decides to waive lease costs for credit unions, it already can and should be required to do the same for banks," Lepper wrote. "If it decides to impose lease costs on credit unions, which it may already do under current law, it should do the same for banks."

The Defense Council Credit Union stated that it would be "very concerned with any legislative language that benefits banks by going beyond DoD's discretionary authority in this area," which would disadvantage credit unions.

There are other concerns about a potential slippery slope from allowing banks, which are for-profit entities, to operate on bases rent free, Hernandez argued.

"[W]hen you open up no-cost land at a profit-centered entity, what's to stop a defense contractor from opening up at this location?” Hernandez said in an interview.

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