Reg Relief Passes, But Many Sought-After Items Not Included

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The regulatory relief bill being backed by credit unions and banks for the past five years turned out to be only half a loaf, if that.

The Senate Banking Committee last week approved its version of the bill, which was radically cut back from a version passed by the House in March, with just four provisions for credit unions, down from the 15 included in the House version. Banks and thrifts also took similar cutbacks.

The bill passed by the Senate panel, which now goes for a vote by the full Senate, included provisions that would allow federally chartered credit unions to provide check cashing and wire transfers to non-members within their fields of membership; fix a new accounting rule to allow credit unions to continue 'pooling,' or aggregating their capital after merging; extend the maturity on member business loans from 12 years to 15 years, and allow credit unions to retain their discounted leases on military bases and other federal property.

It does not contain the major credit union priorities in the House version, including allowing federal credit unions to retain their select employee groups after converting to community charters, increasing the permissible investments in CUSOs, allowing NCUA, instead of Congress, to determine proper investments for credit unions, and allowing privately insured credit unions to join the Federal Home Loan Bank System.

The two different versions of the bill must now be reconciled, but Rep. Michael Oxley (R-OH), chairman of the House Financial Services Committee, indicated he would accept the scaled-back Senate bill.

Neither the Senate or House version includes the top two credit union priorities of enacting a risk-based capital system for credit unions or increasing the current 12.25% of assets limit on member business loans. Both provisions are included in the CU Regulatory Improvements Act, better known as CURIA, which will not be voted in this Congress, even as the credit union lobby succeeded in collecting a 120th House sponsor on the bill last week.

Sen. Michael Crapo (R-ID), who drafted the Senate bill, said in trimming down the House's version, he tried to put together a bill that has the best chances of passing this year.

"This legislation is a compromise for all sides," said Sen. Crapo. "There are issues on both sides that members have forgone in order to get a bill passed this year."

The credit union lobby was sanguine about the trimmed-down version of the Reg Relief bill. "Clearly, we would have liked to have had more in it, but we'll take any pieces we can, and we'll take it step-by-step," said CUNA President Dan Mica.

"While we wish that it would have been a more robust bill for credit unions, we're pleased to see several important provisions moving forward," said Brad Thaler, senior lobbyist for NAFCU. He cited the accounting rule change and the leases on federal properties, as two provisions championed by NAFCU for several years.

This is the fifth year for regulatory relief. The House passed versions in each of the last two Congresses but the Senate has yet to act on its version. In fact, one Capitol Hill source said last week that Senate President Bill Frist has said he won't move the bill to a vote by the full Senate in this Congress.

The Senate bill has several provisions that will affect all financial institutions. They include the long-sought measure requiring the Fed to pay banks and CUs interest on the so-called sterile reserves they have on deposit with the Fed. Another provisions will create a uniform privacy notice for banks and credit unions, while yet another will create a diversion program for recidivist check bouncers.

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