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110th CONGRESS, LEGISLATIVE ISSUES A - Z

CREDIT UNION REGULATORY IMPROVEMENTS ACT (CURIA)

ISSUE: The last major changes to the Federal Credit Union Act occurred in 1998. The past nine years have provided an opportunity to identify unnecessary and outdated provisions and recommend common sense improvements.

CUNA POSITION: Regulatory relief for credit unions will help improve productivity and efficiency in a competitive and dynamic marketplace, and will translate into better and lower-cost service to credit union members. Of particular interest for credit unions is raising the cap on member business lending, and implementing a risk-based capital approach.

OPPOSING VIEWS: The banking industry is strongly opposed to any efforts by Congress to ease burdens and restrictions on credit unions.

IMPACT ON CREDIT UNIONS: Credit unions remain the most highly regulated and restricted of all insured financial institutions. The Credit Union Regulatory Improvements Act (CURIA), H.R. 1537, seeks to undo burdensome requirements by allowing:

Title I: Capital Reform:
Title I seeks to modernize credit union capital requirements by redefining the net worth ratio to include a risk- based asset approach to Prompt Correction Action (PCA), thereby instituting a new measurement that would improve the safety and soundness of credit unions. Credit unions historically have had the lowest default/delinquency rates in virtually all categories of loans and have maintained average net worth ratios well in excess of those held by banks.

Title II: Economic Growth:
seeks to increase the current limit on credit union MBLs from 12.25% to 20%, and permit the National Credit Union Administration (NCUA) to increase the threshold for defining a MBL from $50,000 to $100,000 – opening a significant source of credit to small businesses. Title II would also enhance the ability of credit unions to assist underserved communities with their economic revitalization efforts by providing all Federal credit unions with an equal opportunity to expand services to individuals and groups working or residing in areas that meet the income, unemployment and other distress criteria identified by the Treasury Department.

Title III: Regulatory Modernization:

Investments in investment grade securities by federal credit unions
Increase in 1 percent investment and loan limits in credit union service organizations
Member business loan exclusion for loans to non-profit religious organizations
Voluntary mergers involving multiple common bond credit unions
Allowing certain member groups to be retained in conversions to community charters
Permitting certain governance charges in credit union bylaws
Providing the National Credit Union Administration with greater flexibility in setting loan maturities and maximum loan interest rates
Exemption from pre-merger notification requirement of the Clayton Act

STATUS/OUTLOOK: The Credit Union Regulatory Improvements Act was introduced on March 15, 2007 by Reps. Kanjorski (D-PA) and Royce (R-CA), and was referred to the House Financial Services Committee.

Four provisions of CURIA were included in the Regulatory Relief bill that passed Congress late September 2006. The provisions include: (1) increasing the current 12-year limitation term of unsecured federal credit union loans to 15 years; (2) leasing of land on federal facilities for credit unions; (3) check cashing and money transfer services offered to non-credit union members who otherwise fall within the field of membership; (4) clarifying the definition of net worth for the purposes of credit union mergers; and (5) clarifies notices that privately insured credit unions must make to members and potential members that accounts are not covered by federal insurance.

On February, 7, 2008, the House and Senate passed H.R. 5140, the Economic Stimulus Act of 2008. For several weeks prior to its passage, CUNA lobbied the Congress to include provisions from CURIA, namely PCA reform and lifting MBL limits, in the stimulus bill. CUNA’s efforts were well-received but Congressional negotiators were ultimately given specific instructions that all provisions in the stimulus bill would be temporary, thus no changes in permanent law would be permitted.

However, CUNA continues to lobby the Congress to act on CURIA. On a parallel track, CUNA continues to urge the House and Senate to pass these important regulatory relief provisions independently or attached to other pieces of legislation coming out of the House Financial Services Committee and the Senate Banking Committee.

On March 6, 2008, the House Financial Services Committee held a hearing entitled, “The Need for Credit Union Regulatory Relief and Improvements.” CUNA Chairman Tom Dorety testified on behalf of the association at this hearing.

CONTACTS: Ryan Donovan, 202-508-6750, rdonovan@cuna.coop,
John Hildreth, (202) 508-6724, jhildreth@cuna.coop,
Michele Johnson, (202) 508-6718, mgjohnson@cuna.coop

Additional CURIA information