WASHINGTON -
That's because the bill was written by Rep. Carolyn Maloney, the New York Democrat who chairs the House Financial Services Subcommittee on Financial Institutions, and it has strong support from Barney Frank, the Massachusetts Democrat who chairs the Financial Services panel. Support from the two are critical if the credit union lobby wants to move its pet priority, the CU Regulatory Improvements Act, through Congress. The two lawmakers will make the final decision on whether to hold a hearing on CURIA, then whether to vote the bill in committee.
Credit union lobbyists are cognizant of the difficulties in working in tandem with the banking lobby to defeat Maloney's bill. One long-time credit union lobbyist suggested one strategy could have been to allow the bankers to kill the bill without public credit union support, thereby allowing the banking lobby to bear the brunt of any acrimony created among the committee's powerful leaders. But another credit union lobby insisted the credit union opposition waged by NAFCU and CUNA are essential to defeating the measure and that the bankers can't do it without the credit unions.
The bill would, among other things, bring overdraft protection programs under the Truth in Lending Act, thereby requiring that fees be calculated in the annual percentage rate charged. The credit union lobby insists this would prevent credit unions from offering overdraft protection because such a calculation would bring the APR above the 18% interest rate cap set by NCUA for all credit union loans.
Both NAFCU and CUNA are working with lawmakers on a carve-out that would exempt overdraft protection from NCUA's 18% interest rate cap, if they fail to defeat the bill.
The bill would also require that credit unions and banks require that all consumers specifically ask for, or opt-in, to overdraft protection; and be notified when an ATM, credit or other transaction trigger an overdraft. Credit union representatives say this would be too costly and burdensome for them to implement.
Ironically, the driving force behind the effort to regulate overdraft protection is the credit union-backed Center for Responsive Politics, an affiliate of Self-Help CU. The Center has produced several studies that shows that both credit unions and banks are earning far more in overdraft protection fees than the amount of money they lend to cover actual overdrafts.
The credit union/bank lobby has succeeded so far in staving off a vote on the overdraft protection bill, but it's hard to determine what the cost will be. This is one of the first major consumer protection bills making its way through the Financial Services Committee and the leadership is counting heavily on credit union support for its agenda. The cost may be high if the credit union lobby kills this bill.
