CUNA Opposes Easement of "Anti-Tying" Interpretation and Guidance

WASHINGTON-CUNA sent a letter to the Federal Reserve last week urging the regulator to create a strong guidance regarding the `tying’ of banking products and not to make it easier for banks. The Fed’s proposed interpretation and guidance notes that consumers are not harmed by banks taking advantage of loopholes in the Banking Holding Company Act Amendments of 1970, which prohibits the predication of the availability or price of a product on the customer obtaining another product from the bank or an affiliate. It does exclude tying of “traditional bank products,” like taking deposits or loans, from the prohibition. For example, an item that might be prohibited from tying would be life insurance, which some banks have gotten into the business of since the passage of the Gramm-Leach-Bliley Act. In fact, though, CUNA Assistant General Counsel Jeff Bloch claims that consumers are harmed by banks continuing to “devise loopholes and tortuous interpretations” to avoid the `anti-tying’ restrictions. CUNA said the tying of products and services limits consumer choice and called tying practices “anti-competitive.” The credit union trade association has recently ramped up its efforts to raise awareness of the bankers’ attacks on credit unions and their hypocrisies. However, Bloch confirmed, this is the first time CUNA’s regulatory side has actually come out against potentially allowing banks more authorities that does not directly involve credit unions. Bloch explained that individuals and small business owners “typically have less bargaining power and are less financially sophisticated than the large corporate customer.may be more susceptible to both overt and subtle pressures from banks to require them to purchase additional, unneeded products and services from banks or their affiliates.” He indicated that credit unions, as non-profits with a mission of serving their members, do not use these tactics to gain market share. “This is consistent with the bank’s continued attack on any attempts by credit unions to improve their services for their members and by the constant attacks on the credit union tax-exempt status, all in an effort to further expand market share,” CUNA’s letter read. “These attacks continue even in light of the spate of recent news articles that have described a variety of schemes that certain financial institutions have developed in order to avoid paying the legitimate taxes that all for-profit entities must pay.” Bloch added in the letter, “Credit unions are not-for-profit financial institutions that provide financial products and services for their members. The product and services provided are based on the needs of the members. Unlike banks, credit unions have no incentive to devise complex tying arrangements that pressure consumers to purchase additional products and services that they may not want or need.” Bloch also pointed out that Congressman John Dingell (D-Mich.) has requested a General Accounting Office study on the matter about a year ago. CUNA urged the Fed to review the upcoming report before making its final decision. -