Credit Unions Fend off DOJ Attempt to Block Pre-Merger Exemption in Reg Relief

WASHINGTON-In an eleventh hour maneuver, the Department of Justice sent a letter to the House Judiciary Committee expressing its strong disapproval for the credit union exemption from the Hart-Scott-Rodino pre-merger filing requirements as included in the regulatory relief bill. On the evening of July 10, the House Judiciary Committee began its markup of the provision of the Financial Services Regulatory Relief Act (H.R. 1375) that falls under its jurisdiction. While the bill passed by a voice vote with no amendments, the one credit union provision reviewed by the committee narrowly escaped potential amendment after DOJ penned its thoughts on the matter and sent them off to the committee the night before. An amendment was never even offered. “Justice’s arguments apparently did not hold much water on the Hill,” CUNA Senior Vice President of Government Affairs John McKechnie said. According to the letter from DOJ to the House Judiciary Committee obtained by CUNA, the department objected to the exemption for credit unions-banks are already exempt-because credit unions do not face any other pre-merger competitive review as the banks do. “Bank and bank holding company mergers that require banking agency approval are exempted from these HSR Act premerger requirements under 15 U.S.C. 18a(c)(7), but that is because the banking agency approval process already entails a full pre-merger competitive review, conducted in consultation with the Department’s Antitrust Division,” the DOJ letter read. Credit unions, by contrast, are not subject to competitive review. NAFCU Director of Legislative Affairs Brad Thaler explained that DOJ had raised the issue previously and that NCUA has been working with the committee on language so the agency would perform competitive reviews on mergers. In addition, he pointed out that credit unions are not open to the public, which should ease concerns over monopolies. McKechnie further stated that even if two large credit unions such as Navy Federal Credit Union ($18.6 billion in assets) and Pentagon Federal Credit Union ($5.8 billion in assets) merged, their combined assets still would not be enough to create antitrust problems in the marketplace in comparison with companies like Citigroup. In addition, DOJ pointed out that very few credit unions that merge are subject to HSR Act requirements anyway because institutions under $50 million are already exempt. Data supplied by CUNA to DOJ showed that of the 1,506 credit union mergers from 1995-2001, eight at the most would have been reportable under the new $50 million trigger and just two credit union mergers since the threshold was increased as of February 2001 to present have been reported. “It is very important, however, that these few large mergers remain subject to advance antitrust review under the HSR Act, in order to ensure that competition is protected,” DOJ wrote. Even though the number of credit union mergers exceeding the threshold is small, the costs of compliance with HSR are not. The filing fee for merging institutions with combined assets between $50 and $100 million assets is $45,000 and that amount increases the higher the value of the mergers climb. Thaler said he has not heard if the bankers put the word in Justice’s ear and added that the bankers have not stated specific opposition to the provision. [email protected]