WASHINGTON (6/25/08)--The full House of Representatives last night passed a comprehensive financial regulatory relief bill which eases field of membership and member business lending (MBL) restrictions in underserved areas for credit unions. The bill, known as the Credit Union, Bank and Thrift Regulatory Relief Act (CUBTRRA, H.R. 6312), passed by a voice vote after it was placed on the House Suspension Calendar. Such action is reserved only for non-controversial legislation. CUNA President/CEO Dan Mica thanked U.S. Reps. Paul Kanjorski (D-Pa.), Ed Royce (R-Calif.), Financial Services Committee Chairman Barney Frank (D-Mass.) and Ranking Member Spencer Bachus (R-Ala.) for “working with us to attain regulatory relief for the nation’s credit unions.” “This measure holds a number of substantive elements that will serve our members well,” said Mica this evening. “Now it is on to the Senate to ask for its consideration of the package.” As its name suggests, the bill contains measures that would benefit credit unions, as well as banks and thrifts. Among provisions for credit unions, the bill proposes to:
* Allow all federal credit unions to apply to serve underserved areas, reversing the effect of a banker lawsuit that has prevented community and single-sponsor credit unions from reaching out to underserved areas; * Provide increased MBL ability by exempting MBLs made in underserved areas from a statutory 12.25%-of-assets cap; CUNA estimates more than 40% of the nation's census tracts are located in underserved areas; * Grandfather previously approved underserved fields of membership for credit unions; * Allow short-term payday loan alternatives within a credit union's field of membership; * Raise the current investment limit in credit union service organizations (CUSOs) and to 3% of unimpaired capital and surplus, up from 1%; * Enhance the 2006 regulatory relief provisions that allowed the National Credit Union Administration (NCUA) to increase the 12-year maturity limit on non-real estate secured loans to 15 years, Section 104 would further permit the agency to issue regulations providing for loan terms exceeding 15 years for specific types of loans; * Give the NCUA greater flexibility to respond to market conditions; and * Clarify existing law that permits credit unions to participate in loan programs secured by the insurance, guarantees, or commitments of State or Federal governments, such as the Small Business Administration's 504 program.
H.R. 6312 was introduced just last week by Reps. Kanjorski, Royce, and Dennis Moore (D-Kan.) and was backed by Chairman Frank. Just as the credit union provision of the newly introduced legislation were based on the Credit Union Regulatory Relief Act (CURRA), the bank and thrift provisions also were based on a currently pending bill, the Bank and Thrift Regulatory Relief Act of 2008 (H.R. 5841), introduced in April. Bank and Thrift Provisions
For commercial banks, the House bill proposes to allow the payment of interest on business checking accounts. For thrifts, CUBTRRA would remove the current caps on auto and business lending. Left behind from that bill, however, were sections that would have allowed banks and thrifts to reorganize more easily as LLC or Subchapter S entities. Some provisions benefit credit unions, as well as banks and thrifts. One example is the proposed change in Gramm-Leach-Bliley privacy notification requirements, according to CUNA Legislative Affairs Vice President Ryan Donovan. Under this bill, financial institutions would not be required to send annual privacy notifications under certain circumstances if it has not changed its policies and practices with respect to disclosing nonpublic personal information since its last disclosure. Next Steps
The bill faces a tougher road in the Senate, according to Donovan. "The Senate just is not as far along in the process as was the House, but we will continue to make our case there," the CUNA lobbyist said. Both the House and Senate adjourn at the end of this week for a July 4 District Work Period and will return to session the week of July 7. Despite the positive development, Mica emphasized CUNA was not finished in seeking more flexibility for credit unions in serving their members. “We will continue to push for risk-based capital through reform of prompt corrective action (PCA) requirements,” he said. “And we strongly believe credit unions should have the power to offer more business loans to their members.” The CUNA leader said the association would pursue----both in this Congress and the next--provisions contained in the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537), which propose a higher cap on member business lending, as well as prompt corrective action reform. NCUA Reaction
After the vote, NCUA Chairman JoAnn Johnson encouraged the Senate to build upon the solid start made by the House and consider “reasonable and important enhancements such as reform of the system of Prompt Corrective Action coupled with the institution of a Risk-Based Capital regime.” She also urged the Senate to “increase consumer protections for credit union members during their consideration of a proposal to convert to another type of financial institution, and the modernization of credit union merger procedures covered by the Clayton Act.” Use the resource links below for the official text and bill summaries.