WASHINGTON - The House approved the regulatory relief bill for credit unions last week, but not before combining it with a bill for banks and thrifts.
Prospects for the measure, however, remain dim because of the waning days of the Congress, as the Senate, which must now pass the bill, grapples with weightier issues.
“The enemy for us right now is time,” asserted CUNA President Dan Mica after the vote, saying there are only 28 days left of legislating for the Senate.
The bill passed by the House, now called the CU, Bank and Thrift Regulatory Relief Act, includes provisions from the CU Regulatory Relief Act, which represented a slimmed-down version of CURIA – the CU Regulatory Improvements Act that has languished in Congress for five years.
Because the bill was modeled after CURIA it was dubbed “CURIA-Lite” in some quarters.
Mica and other credit union leaders conceded disappointment in not getting the two main credit union priorities included in the bill–enactment of a risk-based capital system for credit unions and raising the cap on member business loans–but said they will continue to work for those two provisions as the bill moves over to the Senate.
“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,” said Fred Becker, president of NAFCU.
“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,” said NCUA Chairman JoAnn Johnson. She urged the Senate to continue consideration of risk-based capital and other measures that are included in CURIA.
The bill would provide some relief from the current 12.25% of assets cap on member business loans by exempting religious-based loans (for churches, etc.) and all loans made in underserved areas from the cap.
The bill would also extend the ability to expand into underserved markets to community charters. The 1998 credit union bill, known as HR 1151, was supposed to allow all credit unions to add underserved areas to their FOMs, but the bankers convinced a federal court that those powers were only meant to apply to multiple group credit unions.
But here’s the hitch, in agreeing not to oppose the bill’s underserved provisions–expansions for community charters and unlimited small business loans in underserved areas–the bankers convinced lawmakers to severally scale back the definition of underserved areas. As a result, NCUA will no longer be able to approve vast areas–including large cities like San Francisco, Miami, Houston, Philadelphia, Washington and Baltimore.
Not Your Grandfather’s FOM
The new definition of undeserved areas would not be applied to those areas already qualified by NCUA, thereby grandfathering previously approved underserved expansions.
Last week’s House vote was only made possible by joining the credit union bill with a bank and thrift measure, lawmakers said. “In developing this bill, we have sought to maintain an appropriate balance between competing interests,” said Pennsylvania Congressman Paul Kanjorski, the chief author of the CU bill.
As a result, the bill would also increase powers for thrifts to make small business, commercial, commercial real estate and auto loans.
It would also allow banks and thrifts to pay interest on business checking accounts, something the banks and thrifts have been seeking for many years and something credit unions can already do.
It would also give banks and thrifts some relief from annual privacy disclosures to be mailed to customers.
Mica conceded the House action–joining the credit union bill with the bank and thrift measure–has forced the traditional rivals to work together for a common goal. Both CUNA and the American Bankers Association have sent separate letters to Senate leaders urging action on the bill, and the competing lobby groups are working together through informal channels to get the bill enacted, said Mica.
The Senate Banking Committee must now schedule a hearing on the bill, then schedule a mark-up of the bill. After the committee gives its OK, the bill finally gets sent to the Senate floor for a full vote in that chamber, which is mired in negotiations on much weightier issues, like the mortgage rescue package and the budget.
WHAT’S IN BILL
WASHINGTON–The CU, Bank and Thrift Regulatory Relief Act, would provide relief sought for years for credit unions from a number of restrictions. It would:
* Allow multiple group credit unions converting to community charters to retain their select groups.
* Allow credit unions to make payday loans to anyone–even non-members–within their fields of membership.
* Increase the amount a credit union can invest in a CUSO from 1% of assets to 3%.
* Authorize NCUA to allow longer maturities on certain loans, like student loans.
* Give NCUA more flexibility in setting the annual interest rate cap.
* Allow NCUA, instead of Congress to determine allowable investments for credit unions.(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com http://www.sourcemedia.com
