Credit union hopes fade for major legislative victory

Credit unions aren’t hopeful that they will see their priorities become law as the 2020 presidential election heats up.

The industry has a long list of items they would like addressed, including data breaches, cybersecurity and the upcoming Current Expected Credit Losses standards.

But Congress has become even more hyper-partisan with experts describing the current political climate as something that they have never seen before. Because of that, it will be difficult for credit unions to make headway on most of their major concerns.

“It’s very, very divided,” said Geoff Bacino, a former National Credit Union Administration board member. He doesn't “see a whole lot of agreement on anything” when it comes to passing laws.

Washington is no stranger to conflict, but the next 18 months will be tumultuous with the 2020 election already underway. Two dozen Democratic candidates are contending to become the party’s presidential nominee. Furthermore, a third of the Senate and the entire House will be up for re-election.

Bacino described the current legislative atmosphere as poisonous and argued that both parties are often trying to undercut the other, even if there are areas where they agree. Neither party wants to see their opponent tout a potential legislative accomplishment heading into the election; that is partly responsible for the congressional gridlock.

Generally, industry trade groups try to achieve their objectives by Memorial Day before elections in the fall begin to heat up. For example, last year the industry got a victory when Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act in May before the midterm elections. That gives the industry just under a year right now to accomplish its legislative goals.

“Nothing is going to move for credit unions this Congress,” said Paul Gentile, CEO of Merck Employees Federal Credit Union, who would like to see more regulatory relief pass.

However, industry trade groups were more optimistic about their chances of making progress on key issues. For one, despite elections happening every two years, Congress is still able to pass some legislation.

“I don’t get discouraged by the fact … that this time next year, we’ll be running out of legislative time because we have a lot of time until then, and if we set things up properly, we still have an opportunity at the end of the year,” said Ryan Donovan, chief advocacy officer at the Credit Union National Association.

In particular, credit union trade groups believe they can make headway on issues that already have bipartisan support, including reforming Bank Secrecy Act and anti-money-laundering laws and addressing financial institutions banking marijuana companies.
The House Financial Services Committee unanimously passed a bill that would require companies to disclose their true owners at the time of incorporation, which is known as beneficial ownership. A mark-up on that legislation is scheduled for this week.

Following months of negotiation on AML reform, a bipartisan Senate group rolled out its own draft legislation that also establishes a new beneficial ownership standard and makes other updates to AML requirements. However, it doesn’t change suspicious activity report and currency transaction report thresholds, something that has been sought by financial institutions.

“[W]hile there’s a hyper-partisan environment, there’s still a desire to get things done and have a record of accomplishments,” said Brad Thaler, vice president of legislative affairs at the National Association of Federally-Insured Credit Unions.

The Secure And Fair Enforcement, or SAFE Banking Act, which would allow financial institutions to serve legal marijuana companies without fear of prosecution, also received generous bipartisan support. Attorney General William Barr has previously expressed support for another bill that would exempt states where pot is legal from the federal prohibition of the drug.

“It’s possible that the House might try to attach a cannabis-related bill to an appropriations bill later this year,” Donovan said.

If congressional gridlock impedes progress, then credit unions will focus on working with regulators on reform. But this can be problematic as well since it leaves some legislative items up to President Trump to handle through executive orders, Bacino said. Trump may not address issues important to the industry if he is focused on other priorities, such as negotiating trade deals and the Mueller report findings.

Regulators also have less capacity to make changes compared with Congress.

“You have 435 members of the House, 100 members of the Senate. Any one of those people can advance your cause or they can derail it,” Bacino said. “At NCUA, you have three.”