Although many are frustrated with the lack of action in the U.S. Congress in 2013 and worry that 2014 threatens much of the same, the Credit Union National Association (CUNA) is already keenly focused on several issues for the year ahead in the legislative and regulatory arenas. They include tax policy reform, housing finance reform, patent law changes, member business lending increases, supplemental capital reform, risk-based net worth, examination issues and minimization of credit unions' regulatory burdens to the greatest extent possible.
Maintaining the credit union federal tax status remains our top legislative advocacy issue. Recent news that Senate Finance Committee Chairman Max Baucus-a key player in tax policy debate-will be nominated as ambassador to China could possibly delay efforts in Congress to overhaul the tax code. However, the issue is far from dead. Indeed, as new leadership comes into place, it is as important as ever to continue the national conversation about the value credit unions bring to the financial marketplace, and how our tax status helps support good public policy.
Through our grassroots efforts, CUNA will continue to educate members of Congress on the importance of the credit union exemption from corporate income tax and how that exemption benefits American consumers to the tune of nearly $8 billion annually. In 2013 alone, credit union advocates sent over one million messages to members of Congress to tell them with a unified voice, "Don't Tax My Credit Union."
As Congress also considers comprehensive reform of the housing finance system, CUNA is prepared to fully engage in any legislative action. Credit union access to the secondary market must be maintained. Credit unions have real concerns about a world in which the secondary mortgage market is occupied by a handful of very large banks. We know it is imperative that any new system facilitate credit union lending so we can continue to be a source of reliable mortgage credit for members.
The federal government has a very important role to ensure the secondary market operates efficiently, effectively and fairly for borrowers and lenders alike. Credit unions create much-needed competition in the secondary marketplace, which in turn, helps to keep rates low and allows more options to consumers. CUNA will be deeply engaged in this discussion through our advocates on Capitol Hill, through testifying at key hearings on housing reform issues, and through meetings with individual members.
Patent Reform Will Be On Tap
In the next year, Congress also will likely be enacting patent reform legislation. CUNA is teaming up with a variety of other trade organizations, uniting to call on Congress to pass legislation that combats patent abuse. These patent trolls use low-quality patents to make frivolous accusations against financial institutions in order to extract settlement money from credit unions and other entities. CUNA has already provided testimony to Congress regarding the abuse of patent trolls, and will continue working to ensure that other credit unions do not fall victim to this predatory business.
We are also working hard to increase limits on member business lending. CUNA is encouraging Congress to enact the Credit Union Small Business Jobs Creation Act, which would allow well-capitalized credit unions operating near the business lending cap to increase their business loan offerings to 27.5% of total assets, an approach that has been endorsed by the Obama administration.
CUNA is equally hopeful that Congress will see the need for capital reform. Capital is king for all financial institutions. As credit unions still battered by the financial crisis recover in the coming years, rebuilding capital ratios will be paramount. Congress should modify the definition of credit union net worth to include supplemental forms of capital for credit unions and allow the regulator to develop risk based capital standards for the purposes of prompt corrective action (PCA).
CUNA continually pursues a multitude of regulatory relief efforts, including doing our best to shape the National Credit Union Administration's approach to risk-based net worth requirements. We also continue to seek significant improvements in the credit union examination process while working to curtail any new rules from any agency.
Wide Range Of Tools
Regarding risk-based net worth, CUNA is urging NCUA to be mindful that it already has a wide range of supervisory tools to deal with issues case by case, which minimize the need for new rules. In other words, NCUA should focus on addressing problems at the individual institution level rather than under a broader rulemaking approach. The very low number of credit union failures throughout the financial crisis demonstrates that credit unions generally were not undercapitalized going into the recession and the current approach has worked fairly well from the standpoint of managing losses. Moreover, the current approach is efficient and far less intrusive and costly than imposing additional net worth requirements that all covered credit unions would have to meet or at least regularly analyze.
CUNA is also urging NCUA to work with the credit union system to continue to support statutory capital reform. This approach could appropriately address risk management but in the context of a system that also accommodates well-managed credit union growth.
With regard to credit union examinations, CUNA will be enhancing its efforts to address the ongoing concerns that often relate to examiner directives that seem arbitrary and highly subjective. We have reissued our national examination survey for state and federal credit unions to let us know how they feel their last examination was conducted, and we will share the aggregate results of the survey, which will capture negative and positive comments, with NCUA and state regulators, as part of our ongoing regulatory advocacy.
We are also urging that NCUA assemble a credit union working group on examination and appeals issues, in order to evaluate examination practices more objectively and to make recommendations for improvements in the assessment process, communications to and from examiners, and appeals under which credit unions can pursue disagreements with examiners.
We also will continue to encourage NCUA to refrain from imposing National Corporate Credit Union Stabilization Fund assessments, as it has indicated will be the case for 2014, or National Credit Union Share Insurance Fund premiums for the foreseeable future.
Overall, CUNA will continue to help contain any new unnecessary or burdensome regulation from any agency. Additionally we will work to ensure that credit unions are fully prepared for the new regulations set to take effect in 2014.
Despite Washington's ineffective reputation, we hope that through our efforts we can make 2014 a year of quality improvements for credit unions and their 98 million members.
Bill Cheney is president and CEO of Credit Union National Association.
