NAFCU: Working For the Nation’s Credit Unions

Summary of 2006 Accomplishments

REGULATORY RELIEF

On October 13, 2006, President Bush signed the Financial Services Regulatory Relief Act (S. 2856), a bill containing 12 key relief measures for credit unions, banks and thrifts. The credit union provisions are similar to some contained in H.R. 3505, a comprehensive regulatory relief package introduced in 2005 by Rep. Jeb Hensarling (R-TX) and Rep. Dennis Moore (D-KS). Introduced by Sen. Mike Crapo (R-ID), S.2856 eases credit unions’ regulatory burdens in the following ways:

• It permits credit unions to provide check-cashing and electronic money transfer services to anyone in their membership fields.
  
  
• It authorizes NCUA to raise a 12-year maturity limit on loan to 15 years.
  
  
• It restores military commanders’ authority to assess nominal land rents (proposed by NAFCU) to credit unions with facilities on military installations.
  
  
• It revises the statutory definition of net worth (proposed by NAFCU) to clarify that, in the case of merging credit unions, the net worth of both institutions is counted for regulatory prompt corrective action purposes.

TAX EXEMPTION

NAFCU worked diligently in 2006 to preserve credit unions’ federally tax-exempt status—making it the top priority in its government relations efforts.

In the wake of the House Ways and Means hearing on credit unions’ tax exemption in late 2005, NCUA moved forward on a data-collection pilot on credit union service and the Government Accountability Office reviewed related issues. The pilot program report and GAO’s own analysis contained good news. NCUA’s report provided evidence of the many ways in which credit unions reach out to members with convenient, low-cost services tailored to their needs. The GAO report, meanwhile, suggested no need to tamper with the exemption or to subject credit unions to bank-like rules such as those implementing the Community Reinvestment Act.

NAFCU raised questions regarding the data used in GAO’s final analysis, noting that the report omitted some key data—including that collected under the Home Mortgage Disclosure Act—that show credit unions tend to provide lower-cost services to people of low-to-moderate incomes. On the other hand, it welcomed GAO’s finding that credit unions are indeed offering their services at lower cost than other financial institutions.

RESPONDING TO THE BANKERS

NAFCU worked in numerous ways in 2006 to respond to bankers’ attacks on credit unions and their ability to serve members, particularly those in underserved areas.

From early January, NCUA has had a final rule in place codifying a late 2005 ban on underserved-area expansions by credit unions with single-group or community fields of membership. The rule responded to banker suits contending that the 1998 Credit Union Membership Access Act only permitted multiple-group credit unions to add such areas. Even so, NAFCU worked successfully to ensure that those federal credit unions already serving underserved areas continue to be able to do so. NAFCU is also considering how a long-term legislative solution may be put into place on this issue.

As a result of NAFCU’s lobbying efforts to “turn the tables” on the banks, in July, then-Rep. Bernie Sanders (I-VT) requested a GAO study of the banking and thrift industries. NAFCU expected that study would show that banks and thrifts are benefiting enormously from tax breaks and government aid in amounts that dwarf any supposed advantage to credit unions stemming from their tax-exempt status.

DATA SECURITY

NAFCU pressed continually for legislation to protect credit unions from the high cost of data security breaches. The May 2006 NAFCU Flash Report showed that 36 percent of credit unions experiencing a data security breach in 2005 were required to pay between $10,000 and $100,000 to address it.

NAFCU’s legislative focus has been on a uniform national standard to protect financial information, a safe harbor for financial institutions in compliance with section 501(b) of Title V of the Gramm-Leach-Bliley Act and assurance that those responsible for data breaches pay the associated costs and not pass those on to a third parties. Legislation addressing these issues died with the 109th Congress but was expected to resurface in 2007.

PREDATORY LENDING

NAFCU helped facilitate two important developments aimed at protecting military service members. The Department of Defense adopted an instruction in July that, as long urged by NAFCU, tightens the rules for solicitations of military personnel on base, in some cases barring such solicitations, and acknowledges the vital role of on-base credit unions. DoD also issued a report on predatory lending that recognizes the efforts of several on-base credit unions to ensure that their members have access to low-cost, convenient products that negate the need to turn to predatory lenders.

On September 29, 2006, the president signed the Military Personnel Financial Services Protection Act, a NAFCU-backed measure that bars the sale of mutual fund contracts to military service members and strengthens oversight of the sale of insurance products. An anti-predatory lending measure was also enacted that, among other things, sets a 36 percent cap on the annual percentage rate charged on all lending to military service members.

NAFCU/PAC

NAFCU works to ensure that credit union-friendly candidates are elected to Congress through its political action committee, NAFCU/PAC. NAFCU was busy in the mid-term elections, raising some $397,596 during the 2005-2006 election cycle and paying out more than $213,000 in 2006 alone for lawmakers’ election campaigns (split 49 percent/51 percent to Republicans and Democrats). More than 90 percent of the 153 candidates contributed to won in November.

INFORMING MEMBERS ON BSA COMPLIANCE ISSUES

NAFCU stepped up its usual efforts to educate credit unions on Bank Secrecy Act issues in 2006, holding two webcasts on the topic and unveiling a new newsletter, BSA Blast, providing members with the latest information available to aid their compliance efforts. Education sessions on BSA also were incorporated into most of NAFCU’s conferences last year, including the Annual Conference and Exhibition in Toronto, Canada.

NAFCU/FANNIE MAE ALLIANCE

Enhancements to the NAFCU/Fannie Mae alliance in 2006 made it easier for NAFCU members to provide more affordable mortgage services to credit union members. Now, association members receive better pricing in the secondary market for fixed-rate mortgages, including biweeklies, and a 40-year mortgage for credit unions that elect to deliver a set percentage of their secondary market sales to Fannie Mae. More than 120 credit unions have participated in the alliance since 2002.

NAFCU TESTIFIES ON CAPITOL HILL

On March 1, 2006, MAX Federal Credit Union President and CEO Greg McClellan testified on behalf of NAFCU before the Senate Banking Committee, asking committee members to include credit union proposals in the Senate’s regulatory relief bill.

On May 11, 2006, Marcus Schaefer, President and CEO of Truliant Federal Credit Union, testified on behalf of NAFCU before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit. Schaefer outlined the association’s specific recommendations designed to ensure transparency and full disclosure when a credit union converts to a mutual thrift institution.

On June 29, 2006, Edwin Collins, president and CEO of Lockheed Georgia Employees Federal Credit Union, testified on behalf of NAFCU and CUNA befpre a House Financial Services Oversight and Investigations Subcommittee hearing to examine the potential economic consequences of a pandemic influenza. Collins updated the panel on credit unions’ past experiences in disaster preparedness and the key issues they are addressing now, including business continuity, communications, health and safety, and budgets and administration.

On September 28, 2006, Frank Pollack, president and CEO of Pentagon Federal Credit Union, told the House Financial Institutions Subcommittee of the efforts of NAFCU and his own credit union to help improve Americans’ financial literacy, including a foundation program being unveiled soon to assist service members and their families.