CUNA alerts lawmakers of Renaissance Commission; ABA warns of taxation

WASHINGTON-As part of CUNA’s efforts with the Renaissance Commission, President and CEO Dan Mica penned a letter to his former colleagues on the Hill, explaining the commission and its goals. The letter explained that while the Gramm-Leach-Bliley Act helped to modernize other federal financial institutions’ laws and regulations, credit unions have been left in the 1930s’ dust. “Unlike other financial institutions that have been granted extensive regulatory relief and statutory modernization, credit unions continue to be constrained by the most stringent regulations in the industry,” the letter read. Mica noted that even with the passage of the Credit Union Membership Access Act (CUMAA), the law was not a modernization but a survival mechanism. “While this Act restores the ability of credit unions to serve multiple groups, it did not ensure that credit unions could remain up-to-date and vital members of the financial services industry. In fact, the new law imposed additional constraints that affect the ability of credit unions to fully serve their members,” according to CUNA’s letter. In fact, credit unions’ commercial lending activities were severely limited by the law. “Over the last year, [the Renaissance Commission] has embarked on the most comprehensive inventory of credit unions’ future ever taken,” the letter explained to the Congressmen. “This has been a careful, thoughtful and inclusive process with input from numerous focus groups and nationwide polls, the results of which have been communicated during the many hearings held across the country.” Mica explained that the commission had completed the information gathering process and formulated its recommendations to the CUNA board for approval. He expressed his hopes for an open dialogue with Congress throughout the process. CUNA Senior Vice President of Government Affairs John McKechnie noted that it’s always good to give lawmakers a heads up before pursuing an agenda, but he emphasized that CUNA was not announcing an attack on Washington. “The overall tone of the letter is one of a very level-headed, cool approach to this process, which is appropriate given that Renaissance has been a very deliberative, cautious, and introspective look by the credit union system at itself and where it wants to go,” he said. When CUNA’s Governmental Affairs Committee meets July 17 and 18, it will be busy prioritizing the commission’s recommendations. “I have asked them to put it to the test.is it plausible, possible, or realistic.” Mica explained. “There may be some things that may be plausible that are not realistic in today’s atmosphere but it may be that we have to create an atmosphere, to make it realistic and that could be a very long-term project. “Others may be plausible, possible, and realistic and we can do it in a very short time frame, [such as] a concerted effort at the regulatory level. It could be an amendment on a must pass piece of legislation,” Mica added. The GAC will also be looking for comments from credit unions, leagues, and others on the commission’s final recommendations. Unfortunately, the Renaissance Commission report did exactly what some in the credit union community feared: it sparked a new set of attacks by the bankers. According to the American Bankers Association (ABA), CUNA’s Renaissance Commission, providing a blueprint for the trade association’s future regulatory and legislative objectives, raises issues that would call into question the credit union community’s tax-exempt status. According to the commission’s “Vision Statements,” financial institutions that are cooperative, member-owned, and not-for-profit should be tax-exempt. The bankers contest this statement. “The bottom line is that the commission wants credit unions to be able to provide whatever service they want to whomever they want, wherever they want,” said ABA Executive Vice President Donald G. Ogilvie. He said that the tax “subsidy” credit unions enjoy would no longer be linked to serving people of modest means. Additionally, ABA noted a study by the Office of Management and Budget that estimated credit unions’ tax-exempt status would cost $10.1 billion over the next five years. Ogilvie added, theoretically, that a nationwide millionaire credit union could meet the new standard. The commission’s report urges the abandonment of “core provisions of the Federal Credit Union Act,” the ABA argued, particularly in the area of serving persons of modest means. The bankers’ organization also noted that the commission’s report would practically eliminate the common bond. Ogilvie welcomed debate on why credit unions without a “true” common bond should receive tax exemption. However, CUNA’s Mica countered, “The key is prudence but proactive review of our own future. My own view of this is we have taken control of our future by at least starting to define where we want to go and not let the bankers or others tell us where they think we should go or for the first time in many, many years, starting to layout an agenda of our own rather than to react to an agenda.” Sister trade association NAFCU said the Renaissance Commission concept of reflective self-evaluation is a good one. “We’ve been very supportive of it.” NAFCU Communications Manager John Zimmerman said. “When the CUNA Board approves it, that is when the two trade associations have to compare notes the most.” He added that while NAFCU does not expect CUNA’s agenda to be homogeneous with NAFCU’s, it is important to understand what is happening. [email protected]