Congressional Briefing

CUNA 2007 LEGISLATIVE BRIEFING PAPER

CREDIT UNION REGULATORY IMPROVEMENTS ACT (CURIA)
Credit unions remain the most highly regulated and restricted of all insured financial institutions, particularly after the passage of CUMAA in 1998, which imposed new, severe restrictions on credit unions in several areas. Though four technical provisions were enacted last Congress as part of the Regulatory Relief Act, there are several key issues that would help eliminate some of the worst examples of statutory micromanagement that have placed unreasonable constraints on the ability of credit unions and their boards to function efficiently and in the best interests of their members. CUNA is working with the Congress on the reintroduction of a new and enhanced version of CURIA, focusing on the following issues:

Prompt Corrective Action (PCA) Reform
CUNA is working closely with the NCUA and the Treasury Department to develop revised language that will modernize credit union capital requirements by reducing net worth ratio requirements and including a risk-based asset approach to PCA, thereby instituting a new measurement that would improve the safety and soundness of credit unions and the safety of the National Credit Union Share Insurance Fund.

Underserved Areas
CUNA is working to include language in the new CURIA legislation that would restore the ability of single common bond and community chartered credit unions to add underserved areas to their field of membership (FOM). As a result of a lawsuit filed by the American Bankers Association (based on a misinterpretation of CUMAA) the NCUA was forced, in July 2006, to issue a regulation that prohibits these credit unions from adding underserved The ability for all credit unions to serve underserved areas is part of the core mission of credit unions. CUNA urges Congress to provide the technical fix that is necessary to allow all credit unions to continue to serve underserved areas, and strongly urges the banking industry to put an end to their hypocrisy.

Member Business Lending (MBL)
CUNA supports provisions that will provide a substantial increase in the current limit of 12.25 % of assets on credit union member business (prior to CUMAA there were no limitations), and allow the NCUA to raise the loan cap from $50,000 to $100,000 and index for inflation. The Small Business Administration issued a study in March 2005 and found that the growth in bank consolidations was leading to a decline in access to credit for small business owners. Credit unions are uniquely positioned to fill the niche that is not being served by many banks.

FEDERAL FEE STUDY / BUSINESS CHECKING BILL
Rep. Velazquez (D-NY) introduced legislation, H.R. 41, the Business Checking Fairness Act, on the opening day of the 110th Congress that would renew, on a permanent basis, the requirement that the Federal Reserve Board conduct an annual survey of retail financial services fees, and include credit unions as a part of the study. Including credit unions in the Fed’s annual retail bank fee survey will document the differences in costs between banks, thrifts and credit unions in a way that helps consumers and enhances competition in the marketplace. CUNA urges swift action on this important provision.

DATA SECURITY
CUNA supports legislation that would prohibit the retention of sensitive, identifying information by merchants and certain non-financial companies from plastic card magnetic strips that could be obtained in connection with financial transactions, including the imposition of fines for failure to comply. CUNA also supports the requirement that the breaching party (i.e., the merchant) reimburse the consumer or financial institution for any losses incurred, as well as a uniform national standard. CUNA urges Congress to incorporate credit union backed provisions in any data security legislation that moves forward this year.

CREDIT UNION TAX EXEMPTION
The credit union federal tax-exemption is bound by the not- for-profit, cooperative nature of credit unions, not by the size of the credit union, those it serves, or the products and services that are offered. This rationale for the tax-exempt status has been ratified several times by Congress, the most recent in 1998 as part of the Credit Union Membership Access Act (CUMAA).

Although the bank lobby claims credit unions are “growing beyond their means” and should therefore pay taxes, the credit union share of total assets has remained virtually unchanged. From 1992 to 2006, credit unions’ market share has remained at a constant 6% of total assets in America's financial depository institutions. Most importantly, credit unions exist to serve their members, providing financial literacy counseling, short-term loans and other unique services when members are in need. CUNA opposes all attempts to subject credit unions to taxation, as well as efforts to use the tax debate to prevent credit unions from gaining regulatory relief.

FINANCIAL SERVICES APPROPRIATIONS
The House and Senate Appropriations Committee created a new subcommittee in the 110th Congress: the Financial Services Committee. This subcommittee will have jurisdiction over CUNA supported programs such as the Community Development Financial Institutions (CDFI) Fund at the Treasury Department, the Community Development Revolving Loan Fund (CDRLF) and the Central Liquidity Facility (CLF) under the NCUA, as well as funding for Small Business Administration (SBA) programs. The FY2007 appropriations are operating on a continuing resolution until February 15, 2007, and will likely be rolled into another continuing resolution to carry through October 1, 2007. Once the Administration’s 2008 budget is released, CUNA will advocate for the highest levels of funding for the FY2008 cycle.

INTERNATIONAL ISSUES
The World Council of Credit Unions (WOCCU) is the international trade association and development agency for credit unions, representing the interests of 43,000 credit unions in 91 countries. WOCCU is primarily funded by the US Agency for International Development (USAID) through microenterprise funding, and also receives contributions from US credit unions through CUNA, CUNA Mutual, and the National Credit Union Foundation (NCUF). Additionally, WOCCU is one of eight cooperative groups that receive funds from the Cooperative Development Program (CDP) at USAID. WOCCU uses CDP funds to expand low-cost transaction services for members (including remittances), create enabling regulatory environments, train credit union managers and directors, and extend credit union operations to difficult operating environments.

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