House Panel OKs Reg Relief Package; Banks Pull Support

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A key House panel last week approved a regulatory relief bill with numerous provisions aimed at helping credit unions, including several that would roll-back the restrictive portions of HR 1151, the 1998 CU Membership Access Act.

"This has been a good week for credit unions," said CUNA lobbyist Gary Kohn.

The bill, overwhelmingly approved on a voice vote by the House Financial Services Financial Institutions Subcommittee, now goes to the full committee, which is expected to take it up next month. However, the Senate has yet to introduce its version of a regulatory relief package, casting doubt on the bill's prospects for this year.

The subcommittee action came a day after the American Bankers Association sent a letter to Rep. Spencer Bachus, (R-AL), chairman of the panel, saying it will not support the measure due to the credit union provisions. Kohn downplayed the gesture, even though the opposition by the powerful banking lobby could make for rough sledding. "The ABA letter is not worth the paper it's printed on," he said. "Most people have been disgusted by the ABA. There's wide-spread recognition in the committee that they're being arrogant and disruptive."

"We believe the bill passed today is a good first step," said NAFCU lobbyist Brad Thaler. "Obviously, this is going to be a long process."

The bill passed by the subcommittee last week includes several provisions that would ameliorate several parts of HR 1151. Those provisions would: exempt religious-based loans from HR 1151's cap on member business loans (MBLs); allow voluntary mergers of credit unions without having to go through HR 1151's mathematical calculation requirements, and allow federal credit unions to retain their select employee groups (SEGs) after converting to community charters, which was prohibited by HR 1151.

The bill also includes provisions allowing privately insured CUs to join the Federal Home Loan Bank System; extends maturity limits on loans from 12 years to 15 years tripling the amount a federal credit union may invest in a CUSO to 3% of shares and undivided earnings, and expands the permissible FCU investments.

A measure expected to be introduced that would allow federal credit unions to offer secondary capital instruments and to count them as net worth under NCUA's minimal capital rules, or prompt corrective action, was held back because the credit union lobby has yet to agree to the details. The prohibition on counting secondary capital as net worth under PCA was also set out in HR 1151.

Added to the bill last week at CUNA's behest were several governance provisions for credit unions, including one that would allow federal credit unions to set term limits on directors for the first time. Another would allow federal credit unions to expel members who cause a disruption to the credit union, without the two-thirds vote currently required. Another would allow federal credit unions to reimburse directors for wages forfeited while attending CU functions. Kohn said CUs have expressed a desire to gain more control over governance issues. "The preference is that much of this stuff be left up to the individual credit unions."

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