Week ahead: HEROES Act doesn't pass muster with credit unions
The latest round of stimulus, passed by the House on Friday, is missing key measures that credit unions have sought.
Trade groups praised certain aspects of the legislation — called the Health and Economic Recovery Omnibus Emergency Solutions Act or HEROES Act — such as an additional $1 billion for the Community Development Financial Institutions Fund. The bill would also dole out an additional $1,200 to Americans making less than $99,000 per year.
But the legislation didn't include items on credit unions' wish list, such as temporarily lifting the member business lending cap. Trade groups were also unhappy with the legislation's loan forbearance provisions and limits on debt collection, citing safety and soundness risks to lenders that could further threaten the economy.
The HEROES Act stops debt collection activities during the pandemic and 120 days after it ends. It gives an automatic forbearance on delinquent mortgages and extends the forbearance on federal student loans through September 2021. The legislation also requires the Treasury Department to cover payments for private student loans until September 2021. Borrowers are eligible for up to $10,000 in payments.
The Credit Union National Association lamented that some provisions were a "step backwards."
“[I]t was a mixed bag for sure,” Eli Joseph, CUNA's deputy chief advocacy officer, said on Monday during a press call. “There were other provisions that either encumbered credit union abilities to support their members and their communities, and still other provisions left out of the package entirely that would have greatly enhanced credit union abilities to serve those in need.”
“This was very much the first step,” Joseph said, adding that deliberations over the relief bill would be “a long process.”
The Senate is not expected to pass the $3 trillion stimulus bill as is, and instead the Republican-led chamber will advocate for its own priorities to be included in the coming weeks.
Besides the HEROES Act, trade groups are also working to clarify aspects of the Small Business Administration’s Paycheck Protection Program. In response to the SBA’s request for comments to an interim rule, the National Association of State Credit Union Supervisors urged the agency to make six changes or clarifications. The group is concerned about the definition of who is considered an eligible lender and asked the SBA to expand the definition to include non-federally insured credit unions.
“For credit unions, the fact that a loan is guaranteed even if not forgiven does not mitigate the full spectrum of risks the credit union is exposed to by participating in the PPP,” wrote Brian Knight, executive vice president and general counsel at NASCUS.
Some of these concerns around the PPP could be discussed during Tuesday’s Senate Banking Committee hearing. The virtual hearing will focus on a quarterly report on the CARES Act. Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell will testify before the Senate panel.
Finally, the National Credit Union Administration will hold its May board meeting on Thursday. The credit union regulator is expected to issue two interim final rules on overdrafts and prompt corrective actions. A proposed rule on joint ownership share accounts will be considered as well.
The board will also be briefed on the Share Insurance Fund's quarterly report.