Troubled Economy Makes Political Involvement All-Important
As we gather for NAFCU's 2008 Congressional Caucus, many of the issues facing credit unions have not changed dramatically since last year-but the market dynamics certainly have.
The 110th Congress has been defined by the subprime crisis, which has created a climate of extraordinary urgency to apply remedies to all things financial.
NAFCU has been instrumental in advancing the industry's concerns on the mortgage reform front. We were successful in restricting the impact of any mortgage bankruptcy bill only to sub-prime, non-traditional loans. Thanks to NAFCU's efforts, the Emergency Home Ownership and Mortgage Equity Protection Act of 2007 (H.R. 3609) now effectively excludes some 95% of all credit union mortgages from the bill's scope.
NAFCU also worked with Senate Majority Whip Richard Durbin, D-IL., to modify a similar Senate bill to come up with more acceptable language that somewhat mirrors the compromise passed by the House Judiciary Committee. NAFCU continues to work with Sen. Durbin and others to include a cap on the amount of 'cram-down' that a judge is able to mandate and we believe that adding this provision would make the package even better. No floor action has been scheduled on this measure but given the number of issues outstanding on this matter, it is altogether likely that Congress will revisit it.
Beyond housing/bankruptcy reform, our main concern continues to be the Credit Union Regulatory Improvements Act (CURIA). For many years, NAFCU has spearheaded the push for meaningful regulatory relief for credit unions, including such key issues as risk-based capital reform and raising the member business lending cap from 12.25% to 20%.
CURIA was introduced last year by Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-CA). On May 1, 2008, Senator Joseph Lieberman (I-CT) introduced companion legislation in the Senate in the form of S. 2957. This is a significant step in moving CURIA forward in the legislative process as it now allows credit unions to build support for these measures in both the Senate and the House.
To date, CURIA has 150 co-sponsors in the 435-member House and four co-sponsors in the 100-member Senate, the most ever since first being introduced six years ago. We are especially proud of the Hawaiian credit unions who helped us exceed the previous high of 126 co-sponsors during NAFCU's Congressional Caucus last year when Rep. Neil Abercrombie (D-HI) signed on to the bill.
Also, the Credit Union, Bank and Thrift Regulatory Relief Act (CUBTRRA), H.R. 6312, was recently passed by the House as a combined credit union and banking bill. We view that as a beginning, but our priority continues to be CURIA.
Mike Lussier, CEO of Webster First FCUin Webster, Mass., testified before the House Financial Services Committee on behalf of NAFCU. Lussier, who serves as NAFCU's vice chair, outlined the association's recommendations for regulatory relief and improvements for CUs.
Another proposal for financial reforms took aim at pocketbook issues. Financial Institutions Subcommittee Chair Carolyn Maloney (D-NY), introduced the Credit Cardholders' Bill of Rights Act, H.R. 5244. It would bar practices such as universal default, double-cycle billing and unilateral changes in credit card rates. H.R. 5244 would also require at least 45 days' prior notice of any card interest rate increases. Senate Banking Committee Chairman Chris Dodd (D-CT) also introduced the Credit Card Accountability, Responsibility and Disclosure Act (the CARD Act) to promote additional reforms.
Bill Spearman, CEO of Mid-Hudson Valley FCU, testified for NAFCU before the House Small Business Committee on the "role of credit card lending and small business perspectives." He promoted small business lending through credit union credit cards.
This year also brought some new legislative challenges. This year, a group of merchants successfully lobbied House Judiciary Committee Chairman John Conyers (D-MI) and Sen. Durbin to introduce the Credit Card Fair Fee Act, H.R. 5546 and S. 3086, in the House and Senate. Both proposals as originally introduced would have created a new three-judge panel authorized to determine "fair market prices" for interchange fees. During the vote on the bill before the House Judiciary Committee, the price control provision was struck from the proposal. The legislation, however, grants a blanket anti-trust exemption to merchants, enabling them to engage in collusion. In short, the proposal, as it currently is written, would allow merchants to decide among themselves what price they want to pay for accepting electronic payments and then dictate that price to credit unions, banks and others.
NAFCU has actively worked to defeat the bill, both on its own and as part of the Electronic Payments Coalition.
In May 2008, John Blum, vice president of operations of Chartway FCU, testified on our behalf before the House Judiciary Committee, clearing up many of the misunderstandings promulgated by the bill's proponents about interchange fee operations.
NAFCU's lobbying activities have been helped immensely by the outreach that many credit unions have undertaken to help their members during this challenging time, including letters and phone call campaigns to members; financial education seminars; and training for call center representatives to recognize members in need.
These efforts help crystallize the difference between credit unions and other financial institutions. This is particularly true given credit unions' outstanding record in serving minorities and low-income borrowers. They also serve to underscore the power of our community presence. As the former Speaker of The House Tip O'Neill said, "All politics is local." This is particularly true for credit unions.
Looking ahead, we know our competitors and the economic climate will continue to make our legislative battles very challenging. Political involvement will be a critical tool in the continued success and prosperity of credit unions.
Dan Berger is Senior vice president for government affairs of NAFCU in Arlington, VA. He may be reached at dberger