Letters to Congress

CUNA’S REGULATORY RELIEF RECOMMENDATIONS

CREDIT UNION FIELDS OF MEMBERSHIP

ISSUE
Amend the Federal Credit Union Act (FCUA) to permit credit union boards of directors to decide how and when to expel members.

CITE
Section 118 of the FCUA (12 U.S.C. §1764), which requires that a member may be expelled by a two-thirds vote of the members present at a special meeting called for this purpose.

DESCRIPTION
The federal government should not determine the manner in which a member is expelled. Each credit union’s board of directors should have the authority to develop a reasonable procedure in this area. The manner of expelling members simply does not raise supervisory issues to the extent that a specified procedure should be mandated.

CREDIT UNION GOVERNANCE

ISSUE
Amend the Federal Credit Union Act (FCUA) to increase to $50,000 the borrowing threshold for volunteers before the credit union board of directors needs to approve the loan.

CITE
Section 107 of the FCUA (12 U.S.C. §1757), which requires that the credit union board of directors approve loans to a director or member of the credit union’s supervisory committee that exceed $20,000 plus pledged shares.

DESCRIPTION
The $20,000 threshold is very low (for example, a moderately priced new car would often exceed this amount). The threshold should be raised so that credit union boards of directors will not have to continue to devote significant resources to review such loans. A reasonable increase of this very low threshold will not raise supervisory issues, as the loan file will be subject to examiner review.

CREDIT UNION GOVERNANCE

ISSUE
Amend the Federal Credit Union Act (FCUA) to provide more flexibility in reimbursing volunteers for the direct expenses (lost work time, childcare, etc.) of their credit union work to permit more volunteers of modest means to serve.

CITE
Section 111 of the FCUA (12 U.S.C. §1761 (c)) provides that members of credit union boards and committees shall not be compensated for their official role, except for reasonable health, accident, similar insurance protection and the reimbursement of reasonable expenses incurred in the execution of the duties of the position.

DESCRIPTION
Credit unions are directed and staffed by committed volunteers. No member should be discouraged or precluded from serving simply because it would be financially difficult for them to do so without being compensated for their work. Credit unions include service to people of modest means in their business activities because of the inherent dedication of the institutions to such service. It is important for people of modest means to be able to become involved in the running of the credit union.

CREDIT UNION GOVERNANCE

ISSUE
Amend the Federal Credit Union Act (FCUA) to allow for regular quarterly, rather than monthly, meetings of the credit union board.

CITE
Section 113 of the FCUA (12 U.S.C. §1761b) requires credit union boards of directors to meet at least once a month.

DESCRIPTION
Credit union boards are well aware of the activities and overall condition of their credit union. Boards should have the flexibility of meeting only once a quarter if credit union business does not require them to meet every month. This is more efficient and can provide cost savings, thereby enhancing the safety and soundness of credit unions.

CREDIT UNION GOVERNANCE

ISSUE
Amend the Federal Credit Union Act (FCUA) to permit federal credit unions to limit the number of times an individual may be elected to their boards of directors.

CITE
Section 111 of the FCUA (12 U.S.C. §1761), which requires that the credit union board of directors be elected annually by the members.

DESCRIPTION
Credit unions should have the right to limit the length of service of their boards of directors as a means to ensure broader representation from the membership base. Credit unions, rather than the federal government, should determine term limits for board members. Providing credit unions with this right does not raise supervisory concerns and should not, therefore, be denied by the federal government.

BUSINESS LENDING

ISSUE
Amend the Federal Credit Union Act (FCUA) to provide a clear exemption for faith-based lending from the member business loan restrictions.

CITE
Section 107 of the FCUA (12 U.S.C. §1757 (5)) and Section 107A (12 U.S.C. §1757a) place significant restrictions on the kind and amount of member business loans which credit unions are legally permitted to make – to their members, to other credit unions, and to credit union organizations.

DESCRIPTION
Faith-based lending should not be subject to the member loan restrictions for a variety of reasons, including the nature of the borrower and limited, if any, safety and soundness concerns. Credit unions are dedicated to serving the communities in which they are located. With an exemption for faith-based lending, credit unions could provide additional funding to faith-based organizations in their communities to combat problems such as poverty, addiction, abandonment and abuse.

GENERAL CREDIT UNION LENDING

ISSUE
Amend the Federal Credit Union Act (FCUA) to eliminate the requirement that credit unions must maintain at least a ten percent interest in a participation loan.

CITE
Section 107 of the FCUA (12 U.S.C. §1757), which requires that credit unions retain at least a ten percent interest in a participation loan with other credit unions, credit union organizations, or financial organizations.

DESCRIPTION
The federal government should not impose a numerical threshold with regard to interests in participation loans. Credit unions are under an obligation under the FCUA to operate in a safe and sound manner, and the government has sufficient authority under these safety and soundness provisions to ensure that participation loans are structured in an appropriate manner.

GENERAL CREDIT UNION LENDING

ISSUE
Amend the Federal Credit Union Act (FCUA) to allow credit unions to purchase general obligations (loans) even if the aggregate balance of these notes exceeds five percent of the paid in capital and surplus of the credit union.

CITE
Section 107 of the FCUA (12 U.S.C. §1757), which prohibits a credit union from purchasing general obligations (loans) if the aggregate balance of these notes exceeds five percent of the paid in capital and surplus of the credit union.

DESCRIPTION
The federal government should not impose a numerical limitation with regard to the purchase of general obligations. Credit unions are under an obligation under the FCUA to operate in a safe and sound manner, and the government has sufficient authority under these safety and soundness provisions to ensure that credit unions are purchasing loans in an appropriate manner.

INVESTMENTS

ISSUE
Amend the Federal Credit Union Act (FCUA) to permit federal credit unions to invest in fixed assets, without limitation.

CITE
Under Section 107 of the FCUA (12 U.S.C. §1757 (7)(C)), credit unions are empowered to invest their funds in accordance with rules and regulations prescribed by the National Credit Union Administration (NCUA) Board.

Under current NCUA rules regarding ownership of fixed assets (12 C.F.R. §701.36(c)(1)), federal credit unions with $1,000,000 or more in assets are not permitted to invest in fixed assets if the aggregate of those investments exceeds 5 percent of shares and retained earnings unless they receive prior approval from NCUA.

DESCRIPTION
CUNA envisions that NCUA would put in place supervisory guidelines regarding investment in fixed assets to replace its current stringent regulations. Alleviation from this restriction would allow federal credit unions to make investments in offices and branches in low income areas as well as purchase property to house their other offices and branches.

CHECK CASHING SERVICES

ISSUE
Amend the Federal Credit Union Act (FCUA) to permit credit unions to offer check cashing and wire transfer services to non-members.

CITE
Section 107 of the FCUA (12 U.S.C. §1757 (12)) permits federal credit unions to cash checks and money orders for members for a fee.

DESCRIPTION
Low income and other unwary individuals needing access to financial services are often at the mercy of unscrupulous check cashers or wire transfer services. Providing check cashing and wire transfer services to non-members would enable credit unions to further serve underserved individuals in their field of membership and to bring such persons into the credit union who are need of traditional finder services at affordable cost.

MERGERS

ISSUE
Amend the Federal Credit Union Act (FCUA) to facilitate voluntary mergers of federal credit unions in a manner similar to that of other financial institutions, in order to enable credit unions to successfully compete in the rapidly evolving financial marketplace.

CITE
Section 109 of the FCUA (12 U.S.C. §1759 (d)(2)(C)) provides an exemption for voluntary credit union mergers that were consummated within 180 days after the enactment of the Credit Union Membership Access Act.

DESCRIPTION
The relaxation of this restriction would facilitate the ability of federal credit unions to merge voluntarily in order to better serve their membership. Mergers are a vital way for financial institutions to enhance their competitive position in the financial marketplace; and there is no public policy reason to deny this mechanism to credit unions. In addition, through mergers credit unions can achieve greater economies of scale so they can continue to serve their members through favorable rates and investment in technology for electronic financial services. CUNA recommends that the cited provision be revised so that any group transferred in connection with a voluntary merger be exempted from the FCUA’s merger requirements.

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