New ICBA chair's plan to fight regulation, credit union tax exemption

Brad Bolton, incoming chairman of the Independent Community Bankers of America, plans to double down on the national advocacy group's long-running campaigns against excess regulation and credit unions’ tax exemptions.

Bolton, who is also president and CEO of the $182 million-asset Community Spirit Bank in Red Bay, Alabama, officially takes over the ICBA's lead role at the conclusion of the group’s annual convention that gets underway Sunday in San Antonio, Texas.

Ahead of the event, he delivered his — and the ICBA’s — top priorities for the year ahead in an interview with American Banker.

Credit union tax exemptions

The ICBA has long argued that many credit unions strayed from their core mission of serving people of modest means in limited geographic areas. Credit unions get tax exemptions because of that mission.

Bolton, however, said the trend is accelerating as more credit unions buy banks, adopt their business lines and tout the acquisitions as efficient steps toward an expansion of banking services. It is obvious “to anyone with a heartbeat” that these credit unions “are banks.”

For those credit unions that compete head-to-head with banks — and especially those that buy banks — taxes should apply, Bolton said.

The Credit Union National Association, the credit union industry's largest trade group, defends the tax exemption, noting that credit unions are nonprofits that pass along lower costs to their members.

But Bolton countered that banks would do the same if their tax burdens were lifted. He has no problem with tax breaks for small credit unions that stick to their core objectives. But he said the ICBA would lobby Congress to tax other credit unions — or, absent that, lift taxes on banks when they lend into underserved areas of their markets.

“All we ask is for a leveling playing field,” Bolton said.

Excessive regulatory burden

The ICBA has long complained that federal regulators, responding to problems that emerge on Wall Street, impose new rules on all banks. When this happens, Bolton said, it heaps greater burdens on small banks to comply with rules that are designed to correct issues they did not have.

At the moment, the ICBA is focused squarely on the Consumer Financial Protection Bureau’s proposal to require banks to collect data on the race, ethnicity and gender of small-business borrowers. Bolton said community bankers are worried the CFPB's proposed criteria are too broad, could overwhelm small lenders and force some to exit small-business lending entirely.

“This will just bog things down,” Bolton said, and ultimately hampers small businesses’ access to credit.

At the same time, the ICBA is bracing for what Bolton worries will be inevitable new proposals to limit lending to businesses that may have an impact on the climate. While environmental protection is a worthy government role, he said current discussions in the nation’s capital could result in banks’ being told to require customers to undergo climate risk assessments before they can obtain loans.

Bolton said this would “trickle down very quickly” and affect borrowers of all stripes — not just oil and gas companies but farmers and other small businesses that cannot afford to hire consultants and conduct extensive risk studies. “So we’ll be challenging that,” Bolton said, arguing that such measures are heavy-handed.

Cannabis banking

Bolton also said the ICBA this year would champion new avenues for business, most notably cannabis banking.

He noted that the federal Bank Safe Act — which would remove legal and regulatory barriers between banks and cannabis companies — had been adopted multiple times in the U.S. House but still must clear hurdles in the Senate.

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While Senate Majority Leader Chuck Schumer vowed to pursue full-scale cannabis legalization instead of the narrower pot banking reform, Bolton noted that cannabis is legal in an increasing number of states and both producers and sellers need access to the banking system now. They cannot wait for a potential future when cannabis is legal at the national level.

The ICBA would press senators to pass the Bank Safe Act this year, he said.

The cannabis industry presents its share of regulatory concerns, but it is a growing corner of the economy, “and those dollars are safest inside the banking system," Bolton said.