WASHINGTON – The House easily approved the credit union regulatory relief bill last night, after sweetening it with some goodies for the banks and thrifts, and sent the measure on to the Senate for its consideration.
"It’s an important step for credit unions," said NAFCU President Fred Becker, of the newly styled CU, Bank and Thrift Regulatory Relief Act "We’re disappointed that risk-based capital and the member business loan cap were not addressed, but we hope that Congress will continue to consider these issues as the bill moves along."
The bill would ease credit union restrictions in a number of ways: by allowing credit unions that convert to community charters to retain their select groups; by increasing the amount a credit union can invest in a CUSO; by authorizing NCUA to allow longer maturities on certain loans, like student loans; by giving NCUA more flexibility in setting the annual interest rate cap; by allowing NCUA, instead of Congress to determine allowable investments for credit unions; and by easing the way for credit unions to participate in the Small Business Administration’s Section 504 guaranteed loan program.
Though it does not raise the member business loan cap, as credit unions asked, it does ease the current restrictions in several ways, first by exempting religious based loans from the cap, and by exempting small business loans made in underserved areas from the cap.
The bill would also expand the power to expand into underserved areas to community chartered credit unions, but it tightens the definition of underserved areas. As a result, huge areas, like entire city’s of San Francisco, Washington, D.C., Philadelphia, Miami, Baltimore and Houston, would no longer qualify as underserved areas.
The new definition of undeserved areas would not be applied to those areas already qualified by NCUA, thereby grandfathering previously approved underserved expansions.
Last night’s uncontested vote was only made possible because House leaders joined the credit union bill-dubbed CURIA-Lite–with the reg relief bill for banks and thrifts.
So the bill would also doubled the cap on small business loans for thrifts, and would also raise the limits for making commercial loans, commercial real estate loans and auto loans for thrifts.
It would also allow banks and thrifts to pay interest on business checking accounts, something credit unions already do.
"In developing this bill, we have sought to maintain an appropriate balance between competing interests," said Pennsylvania Rep. Paul Kanjorski, the chief sponsor of the credit union bill.
NCUA Chairman JoAnn Johnson said after the vote that the House action represents a positive step forward in getting regulatory relief for credit unions. "Several improvements are made, most notably regarding the ability of credit unions to provide an alternative to predatory lenders for consumers in low-income areas," she said. Johnson urged the Senate to continue consideration of risk-based capital and other measures that are included in CURIA–the CU Regulatory Improvements Act.
In a prepared statement, CUNA President Dan Mica said, "We are not done, however, in seeking more flexibility for credit unions in serving their members. We will continue to push for risk-based capital through reform of prompt corrective action requirements. And we strongly believe credit unions should have the power to offer more business loans to their members."
