Credit Union Bill Means One Thing - Better Services for Members

Over time, credit unions have made a name for themselves as trusted providers of low-cost, quality consumer financial services. They have a commitment to their 86 million consumer/members, and the next generation of consumers they will be serving. That’s why credit unions have helped to develop legislation that will give them more flexibility in the coming decades to continue quality services to consumers – including those of modest means. On May 12, Reps. Ed Royce, R-Calif. and Paul Kanjorski, D-Pa. – along with 14 of their colleagues in the House – introduced the “Credit Union Regulatory Improvements Act,” (HR 2317) legislation aimed at assisting credit unions to more effectively serve all of their members – whether they are trying to establish their own businesses, or are just trying to get into the financial main stream – with the flexibility today’s consumers of financial services need. The measure is a cousin of a bill introduced in the previous Congress, HR 3579, which was the first-ever stand-alone credit union regulatory relief bill. Unveiled in late 2003 by Reps. Royce and Kanjorski, the bill over the next 13 months earned the support of 67 other House members from both sides of the aisle as co-sponsors, and the House financial institutions subcommittee held a hearing on the bill. Credit unions learned much from that experience. With the advice and counsel of Rep. Royce, and guidance by Rep. Kanjorski, credit unions suggested some important tweaks to the measure, which are reflected in this latest version of the bill and which we think will go a long way to convincing even more lawmakers to co-sponsor the measure in this Congress. Yet, credit unions are mindful and proud of their traditional role as not-for-profit, member-owned, democratically controlled, volunteer-directed financial cooperatives. The credit union bill just introduced in no way changes these fundamentals of credit unions. Nor will implementation of the measure serve to alter the fundamental nature of credit unions. The result will, however, improve credit unions’ ability to serve all of their members. We recognize and accept that the banking industry is not enthusiastic about this legislation. In fact, in a statement submitted last year to the financial institutions subcommittee, the American Bankers Association in particular opposed giving credit unions more flexibility to better serve consumers. They argued if any credit union wants to modernize its service, let it change its charter to a mutual savings bank. From our point of view that is akin to telling banks “you want to sell insurance or real estate? Become insurance companies – or join the National Association of Realtors.” In fact, over the past several years, bankers have successfully developed and fostered a variety of legislative vehicles to improve their own operating environment. Among them: the Financial Services Modernization Act of 1999 (Gramm-Leach-Bliley); expansion of tax preferences for banks under “S Corporation” status (the American Jobs Creation Act of 2004), and attempts to expand the definition of “limited liability company” (LLC) to include banks – again to reap tax benefits. In the face of persistent banker demands that credit unions be taxed, not to mention record profits posted by banks for four years running, we find these efforts to be hypocritical. Unfortunately, the bankers’ hypocritical stance will not likely abate any time soon. As Somerset Maugham observed: “like gluttony, hypocrisy cannot be practiced at spare moments – it’s a whole time job.” Significantly, credit unions have chosen not to block any of these initiatives by the bankers. Nor have credit unions chosen to stand in the way of the “Community Banks Serving Their Communities First Act,” introduced in early May – even though the bill offers billions of dollars of tax benefits to banks, which far exceed revenue any imagined if credit unions’ tax status were changed. With 86 million credit union members/consumers behind us, and a well-earned reputation for generating meaningful grassroots support, that is no small statement. Rather, we prefer to focus on efforts that will benefit those millions of consumers who have chosen to be credit union members, particularly in offering them better services, or providing greater access to the financial mainstream. This latest version of a regulatory improvements act for credit unions is designed to do exactly that.