WASHINGTON – A bill which would strip the NCUA of some of its authority to regulate credit union-to-bank charter conversions arrived on the House of Representatives' agenda last week, courtesy of Representative Patrick McHenry (R-N.C.), the legislator who has taken NCUA Chairman JoAnn Johnson to task for her agency's stance toward the $1.4 Community Credit Union (See related story on this page). McHenry was joined in sponsoring the legislation by three other Republicans – Sam Johnson (Texas), Paul Gilmore (Ohio), and Peter King (N.Y.) – as well as one Democrat, Ed Towns (N.Y.). Significantly Johnson represents the district where Community Credit Union is headquartered and is a Community member who is on the record as favoring Community remaining a credit union. A call to Johnson's office for a comment about the apparently differing position was not returned as of press time. "Our central aim with this legislation is to protect the rights of our constituents to choose a financial institution that fits our needs," said McHenry. "This legislation is not anti-credit union. It is pro-consumer, and once passed will not alter in any way the services offered to constituents or the day-to-day operations of any credit union." The bill reads like it was tailored to complaints from advocates of credit union-to-bank charter conversions who have long chafed under what they have complained are NCUA's unreasonable disclosure and voting regulations. The measure would require a converting credit union to make very few statements to its members about why it is seeking a charter change and what the charter change would mean to members, but it would largely strip out the boxed statement that NCUA's regulations currently requires. It would also preclude the agency from invalidating the votes of a credit union whose disclosures and voting process it had previously approved, except in circumstances where the credit had deviated from the approved plan and/or made statements which were "knowingly false." The measure would retain NCUA's requirements that the balloting should be conducted in secret and that the ballots counted by an independent third party and it appears to retain the requirement that a converting credit union has to disclose to its members the cost of the conversion in the disclosure documents. It would also allow credit unions that are converting to communicate freely with the media, something which they have argued they have not been allowed to do. Reactions Divide Along Bank-CU Lines John McKechnie, CUNA's senior vice president for governmental affairs, called the legislation "the wrong bill at the wrong time." "Rather than reducing the amount of oversight authority a federal regulator has, more consideration should be given to ensuring that consumer/owners of credit unions receive all the information they need to reach a conclusion on if or how a credit union should convert from its cooperative state of ownership," McKechnie said. "Regulators have an obligation to protect the consumer owners of credit unions by ensuring they receive all of the information they need regarding the transformation of the institution," McKechnie argued. "Removing that obligation – with the only result that a certain class of individuals becomes unjustly enriched – flies in the face of a responsible regulators' role. This bill offers no choices to consumer/owners of credit unions – but it certainly hampers their ability to make a choice about the future of their cooperatively owned financial institutions." "When a rogue regulator tramples on the rights of credit union members to choose their charter, it threatens the strength and diversity of our financial system," said Diane Casey-Landry, ACB's CEO "Credit unions that have recently converted or attempted to convert to a mutual savings institution report that uncertainty in the conversion process and unnecessary restraints on communication with credit union members, the public and the media are the largest impediments to conversion," she added. "The NCUA has imposed a number of restrictions on how a converting credit union must communicate with its members," Casey-Landry said. "Because the NCUA arbitrarily dictates the content of information that must be presented to credit union members before the conversion vote, credit unions are prevented from freely communicating with their own members and the public," she added. The Roots of the Bill McHenry's bill and comments made to NCUA Chairman JoAnn Johnson during a recent hearing have led some to speculate that McHenry may be an "anti-cu" lawmaker, but Marcus Schaefer, CEO of the $1 billion Truliant FCU, headquartered in Winston-Salem North Carolina, argued that this is not the case. McHenry grew up in a household where one of his parents was a credit union manager, Schaefer said, and the Congressman has maintained an open door to credit union concerns, he added. "I will admit that I am a little disappointed to hear that the bill had dropped already when I understood that the Congressman was planning to consult with all interested parties, including the NCUA," Schaefer said. Schaefer, who supports NCUA's position in the Community controversy, speculated that McHenry's position could have arisen in part from getting only one part of the story in the ongoing debate. "Certainly, if I thought that NCUA's position was all about how something was folded I might support the legislation too," Schaefer said, "but that's not what it's about." Schaefer, who received a Community disclosure package, pointed out that the way the disclosures had arrived, recipients were left reading Community's statements that began `contrary to NCUA's position' before they even had a chance to read the NCUA statements. He also noted that in the third mailing, which was packaged the way the agency intended, the voting pattern appeared to change. Seventy-one percent of the credit union's membership voted in favor of Community's conversion though NCUA maintains that 51% of members voting on the basis of the third (and from its perspective proper) disclosure mailing voted against it. Schaefer acknowledged that McHenry had not been the favorite of credit union supporters, who had initially favored his opponent, David Huffman, in the Republican primary for the open tenth district seat. According to the Federal Election Committee, political action committees tied to CUNA and the $1 billion Truliant Credit Union, gave $7,000 to David Huffman, McHenry's chief primary opponent, in July of 2004 to help in a run-off against McHenry. Truliant also supported McHenry in the run-off, but only to the tune of $500. By contrast CUNA gave $10,000 to McHenry, but only in September of 2004, after the August run-off and Truliant also chipped in an additional $2,100. NAFCU's political action committee gave McHenry $1,000 toward his general election. But Schaefer pointed out that McHenry called him on the day after the run-off to thank him for his support and maintained that he considered McHenry's door open to credit union concerns. "I look forward to continuing to work with the Congressman," he said. McHenry won the general election with 64% of the vote but was involved in a very tough primary fight that was close enough to require a run-off which he won by only 85 votes after a recount. [email protected]