House stymies banks' push for rent-free space on military bases

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Banks have lost a battle in the House that would have granted them access to no-cost land leases on military installations.

The House Armed Services Committee passed the National Defense Authorization Act for the 2020 fiscal year with a vote of 33-24. The legislation lacks a proposed amendment from Rep. Trent Kelly, R-Miss., that would have allowed banks to rent space at no cost for branches on military installations.

“We’re pleased that Chairman Smith, Ranking Member Thornberry, and the rest of the House Armed Services Committee recognized the inherent differences between the credit union mission and structure and the profit-driven model that banks operate under,” Jim Nussle, president and CEO of the Credit Union National Association, said in a statement. “We look forward to this bill passing the House, and we’ll continue engaging with the Senate to preserve credit unions’ ability to serve American servicemembers and their families.”

The current law allows credit unions who certify that their membership is at least 95% military personnel or federal employees to rent space on military bases at no cost.

Banks have argued that credit unions are monopolizing serving military bases and have pushed to also rent space at these locations for free. A past letter from Steve Lepper, president and CEO of the Association of Military Banks of America, notes that 53 bases have lost banks over the past 15 years, accounting for 40% of all installations.

Anthony Hernandez, president and CEO of Defense Council Credit Union, told Credit Union Journal that the recent bank exodus shows a profit-centered mentality rather than prioritizing serving the military. Hernandez also pointed out that banks are making record profits. Banks earned $60.7 billion in the first quarter, up almost 9%.

But Lepper argued that the bank departures are involuntary, and is attributed to the costs incurred from paying to rent space.

In an interview with Credit Union Journal, Lepper said that bases with both credit unions and banks have the best service because competition between the two drives rates lower for military members.

“I have never viewed this as a bank versus credit union issue,” Lepper said in reference to the no-cost land lease. Many of the installations are surrounded by payday and title lenders and pawnshops that are all “try[ing] to get their hands into the pockets of military members.”

Hernandez argued that if banks were to receive leases at no cost, it could be a slippery slope where other for-profit entities, such as defense contractors or convenience stores, to get the same deal.

Lepper rebutted that argument.

“[T]his notion that somehow giving banks the same benefits that credit unions enjoy will somehow open up the floodgates to other nonfederal entities operating on military installations is just a bogus argument,” Lepper said. “It just doesn’t fly.”

Still, the fight continues in Congress. On Wednesday the Senate released its own version of the National Defense Authorization Act that contains language that would grant banks the same rent-free access enjoyed by credit unions.

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