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Regulatory Relief

Congress continues to recognize that insured financial institutions, including credit unions, are overburdened by antiquated, and sometimes unworkable, regulations. Credit unions remain the most highly regulated and restricted of all insured financial institutions, particularly after the passage of the Credit Union Membership Access Act, which imposed new, severe restrictions on credit unions in several areas. The House Financial Services Committee has considered legislation to ease that burden. This legislation is consistent with the needs of credit unions to help their ability to better serve their members in the 21st century.

Many of the provisions under consideration 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.

CURIA

The Credit Union Regulatory Improvements Act (CURIA) was introduced by Reps. Ed Royce (R-Calif.) and Paul Kanjorski (D- Pa.) to address many antiquated constraints. The main provisions of the bill include:

• More flexibility on capital and growth through reform of current constraints under prompt corrective action (PCA),
• An increase in the member business loan (MBL) cap to 20 percent of assets from 12.25 percent and an exemption from the cap for loans under $100,000,
• A requirement that 30 percent of a credit union’s members participate in a conversion vote, and
• A clarification to the 1998 Credit Union Membership Access Act to allow any credit union, regardless of charter type, to serve underserved areas.

Bipartisan support for CURIA has been building rapidly and has nearly one-third of the House as co-sponsors.

A Senate version of CURIA – nearly identical to the House bill (H.R. 1537) – was introduced by Sen. Joe Lieberman (I- Conn.) in May 2008.

CURRA

Rep. Kanjorski also introduced the Credit Union Regulatory Relief Act (CURRA), H.R. 5519, in March 2008 to ease some regulatory burdens on credit unions. It has some of what’s in CURIA, but also some new issues. For example, it would omit member business loans to underserved areas from counting toward the current cap. And it would let federal credit unions offer payday loan alternatives to nonmembers in their field of memberships.

CURRA, however, does not include PCA reform or raise the member business loan threshold, as CURIA would.

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, president and CEO of Suncoast Schools Federal Credit Union in Tampa, Fla., testified on behalf of the association at this hearing.

CUNA strongly supports efforts to provide credit unions with relief from unnecessary or unworkable regulations and encourages Congress to enact these important pieces of legislation this year. We will continue to urge the House and Senate to pass regulatory relief provisions independently or attached to other pieces of legislation coming out of the House Financial Services Committee and the Senate Banking Committee.

Financial Literacy

To help credit unions promote the importance of financial literacy, CUNA created the Financial Literacy Task Force.

The task force developed the “Long-Term Strategic Plan to Empower Member by Improving Financial Literacy” that addresses the financial education needs of three groups: young people, adult members, and the underserved. In it, they offer seven recommendations they feel will help elevate financial literacy to the level of a core value within credit unions to help sustain the movement’s ongoing philosophy of service to members and communities. Key recommendations included: hosting a national financial literacy event in 2008; developing an online financial resource center; developing national targets, goals, and measurement tools; and creating a “National Financial Literacy Champion” designation to recognize credit unions’ commitment to financial literacy in their strategic plans.

The CUNA board adopted this plan in September 2007, and CUNA moved forward on the recommendations. For example, CUNA’s online financial resource center (www.cunapfi.org) is live. This is a one-stop location for information, resources, best practices, research and policy, and an interactive financial literacy community where practitioners can discuss financial literacy issues. CUNA held its first Personal Finance Institute this past fall. It allows credit unions to work together to develop a financial literacy plan that focuses on educating and measuring the effectiveness of those educational efforts. And finally, CUNA is developing a national awards program that will draw attention to the credit unions that do the best job providing education to their members.

CUNA worked with National Endowment for Financial Education (NEFE) on a major update to its High School Financial Planning Program (HSFPP). The revised seven-unit curriculum, which became available March 2007, teaches the basics of money management to young people. More than half a million students have participated in credit union-assisted HSFPP between September 2007 and the 2000-2001 academic year – the first year CUNA began tracking credit unions' participation. Overall, the HSFPP has educated more than 4 million students since 2000-2001.

The fifth annual National Youth Savings Challenge, held in conjunction with National Credit Union Youth Week set a new record in 2008 of more than $12 million deposited by 76,500 kids in one week. That’s up from $1.6 million in 2004.

Small Business Lending

There are 26 million small businesses in America today. These businesses create the majority of our nation's new jobs. Unfortunately, the current credit crunch is making it increasingly difficult for America’s small businesses to obtain credit.

Credit unions want to be of greater help during the country's current credit crunch and stand ready to support small businesses with more capital. In order to do so, Congress needs to remove the arbitrary barriers that severely restrict the ability of credit unions to provide loans to small businesses, namely the statutory lending limits imposed by Congress in 1998 and the burdens associated with many of the Small Business Administration (SBA) lending programs.

Current credit union member business lending (MBL) activity includes:

• Credit union MBLs are relatively small loans; at the end of 2007, the average credit union MBL originated was $193,394;
• Nationally, credit union business lending represents less than one percent of the depository institution business lending market; credit unions have about $28 billion in outstanding business loans, compared to $3.1 trillion for banking institutions; and
• In general, credit unions do not finance skyscrapers or sports arenas; they make loans to credit union members who own and operate small businesses.

Under current law, credit unions are restricted from member business lending in excess of 12.25 percent of their total assets. This cap has no basis in either actual credit union business lending or safety and soundness considerations. In fact, a subsequent report by the U.S. Treasury Department found that business lending credit unions were more regulated than other financial institutions, and that delinquencies and charge-offs for credit union business loans were "much lower" than that for either banks or thrift institutions.

The current cap severely restricts the ability of credit unions to provide loans to small businesses at a time when small businesses are finding it increasingly difficult to obtain credit from other types of financial institutions, especially larger banks.

CUNA is asking Congress to support legislation with provisions that would restore more MBL authority for credit unions, including:

• The Credit Union Regulatory Improvements Act (H.R. 1537), which would increase the current MBL limit from 12.25 percent to 20 percent of total assets, and permit the National Credit Union Administration to increase the threshold for defining a MBL from $50,000 to $100,000;
• The Credit Union Regulatory Relief Act (H.R. 5519), which contains several provisions that would permit credit unions to make more small business loans available, although it does not address the overall cap; and
• The Credit Union Small Business Lending Act (H.R. 1849), which recognizes the need to enhance credit union business lending through SBA programs.

CUNA strongly supports SBA's 7(a) loan program, which provides America's 26 million small business owners with the capital and technical assistance needed to start and expand their businesses. Several important factors, including the statutory MBL cap and SBA policies that, until 2003, limited credit union eligibility to participate in the 7(a) program, have discouraged many credit unions from participating.

The message is clear: Many small businesses are struggling with high-cost, inaccessible service from for-profit firms. Credit unions' not-for-profit, member-focused services are exactly what these businesses need.

Serving people of modest means

CUNA has an ongoing commitment to helping credit unions serve the unbanked and people of modest means. Here are a few examples:

To help credit unions better serve the financial needs of the growing Hispanic community, CUNA created a comprehensive Hispanic Resource Center on its Web site. The center – which receives nearly 4,000 page views per month - helps credit unions to bring the growing immigrant and international communities into the financial system and give them access to credit, mortgages, and other financial products.

CUNA also spearheaded the development of a billion-dollar mortgage lending initiative to help lower-income homebuyers afford their first home. The Home Loan Payment Relief (HLPR, pronounced "helper") program for the nation's credit unions makes below-market-rate mortgage loans available to borrowers with household incomes at or below the median in their markets. Participating credit unions have voluntarily committed $1.4 billion in mortgages to the program as part of their commitment to serving people of modest means.

CUNA and its member credit unions are committed to providing a safe and affordable alternative to predatory payday lenders. CUNA supports congressional provisions that would allow credit unions to offer check cashing services to non- members within their field of membership, which, in turn, would also afford the opportunity to bring the unbanked and underserved communities into a mainstream financial institution, providing access to other services such as savings and lending.

Additional credit union initiatives include, but are not limited to: financial education, shared branches as a convenient vehicle to the underserved, and working with credit union service organizations for more flexibility in offering services to those who need it.

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