Texas Credit Union Legislative Coalition Builds Buffer as Tax Threat Simmers

FORT WORTH, Texas – Texas credit unions are all too aware of just how close they came earlier this year to being taxed. But some may not know that the defeat of the initiative was partly due to the efforts of an unusual lobby group that runs alongside, but independent of, the Texas Credit Union League – the Credit Union Legislative Coalition. The coalition represents 19 credit unions, a law firm, an accounting firm, three companies specializing in lending forms and software, and an insurance company. It’s getting credit for a few other changes, including the right to charge late fees on indirect loans and a wholesale rewrite of the state’s credit-union laws in 2003. It won a substantial pay hike for Texas Credit Union Commissioner Harold Feeney during the 2005 session. But the coalition’s better known for an awareness and effectiveness campaign and what didn’t make the law books. “We built our relationship with the (legislative staff) and we educated them on the differences,” Melodie Stegall said. In 2003, Stegall became CULC’s executive director – and its only fulltime employee – after serving as chief staffer for veteran former House Appropriations Chairman Robert Junell. The campaign ran from September to March as the debate over school funding began to boil over. “People see the credit union on the corner, etc., but they don’t really understand the differences between banks and credit unions,” she said. “We were educating legislators and staffers one-on-one, very simply. I think that went a long way for this session.” When Texas lawmakers began last session’s mad scramble for new taxes to shore up school funding, the state’s bankers were quick to suggest one miracle cure. In a letter to House Speaker Tom Craddick, the powerful Texas Bankers Association proposed taxing the state’s more than 637 nonprofit credit unions and ending a years-long standoff among some of Texas’ financial power houses. Following two failed special sessions and a firestorm of vitriolic finger-pointing that has spilled into the 2006 governor’s race, lawmakers went home and the fight over Texas’ embattled “Robin Hood” method of financing schools went back to the courts. When the smoke cleared, none of the carcasses among lawmaker’s funding proposals contained tax language for credit unions. That threat could return if Gov. Rick Perry summons lawmakers to Austin for a third try. For now, Stegall and the executives of some of the state’s largest credit unions say the Credit Union Legislative Coalition and the awareness and effectiveness campaign it launched in 2004 are a part of the reason they’re tax free. CULC has hired three of the state’s better-known lobbyists. Stegall came on board when the Texas Bankers Association was launching “Operation Credit Unions.” Warning that 32% of the state’s credit unions were making business loans, TBA created a task force, formed a special political action committee, and vowed to “aggressively wage war against the `morphed’ credit unions of Texas.” Taxation skirmishes with bankers are plaguing credit unions nationwide. But Texas executives say the difference is that the Coalition is on the front lines and operating beyond the scope of the state association, the 614-member Texas Credit Union League. “It’s something that sprung up much to our surprise,” said Richard Ensweiler, CUNA chairman and TCUL’s president and CEO. “We work alongside them, but I’m the wrong one to ask about that. They’ve got their own reasons to be.” TCUL operates out of Farmers Branch, a bustling business center abutting Dallas on the glitzy east side of what North Texans have dubbed the “Metroplex.” The coalition was born on the western side of the Metroplex in the boardroom of EECU in Fort Worth – which still calls itself “Cowtown.” Robert Rogers, EECU’s president and CEO, said the state’s largest credit unions had specific issues that the league was too broad and diverse to address. “We’re not here to bash the league,” he said. “We have differences of opinions at times, but we’re not at cross purposes.” Unlike the league, Rogers says, the coalition has a “laser-like direction.” He contends that individuals in the coalition routinely contribute more to TCUL PAC than their non-coalition counterparts. Buddy Schroeder, an Austin credit union executive and former coalition chair says the late-fee imitative wasn’t of interest league members too small to offer the programs with the coalition first make its legislative mark in 2001. There are other differences. Ensweiler has stepped into the fray over conversions to mutual savings banks with a call from the Texas Credit Union Department to revise its rules to require more extensive disclosure. The two major credit unions whose pending conversions have attracted national attention and controversy are Metroplex based. By contrast, CULC has stayed out of the debate. Community Credit Union, of Plano, and Omni American Credit Union, of Fort Worth, are two of the coalition’s larger members. Neither renewed their membership for 2005 “Dick can’t win on that. He’s got people on both sides of the issue,” Rogers said. “If a credit union wants to do it, we may object to it. But it’s not what we were formed to deal with.” Hal Thomas, the coalition’s current chair, calls conversions a matter of free choice. “Two of our member credit unions are converting, but it hasn’t been a split position,” he said. “In my tenure, I haven’t seen an issue that has split us. We recognize that from time to time the larger credit unions might have different needs.” Stegall and Thomas weighed in during the 2005 session and sided with the banks in helping draft the state’s first identity-theft law. The coalition also played a role in passing the state’s new financial literacy law. Thomas says the need for the coalition to police new tax bills is heightened because Texans don’t yet pay a state income tax. That was rejected by the 2005 Legislature along with a spate of new gambling proposals. “Bankers will always be a threat,” Stegall said. “We had to be proactive.” Although the coalition remains unusual among credit-union lobbies, she said, individual credit unions are starting to hire their own lobbyists. “You never know what’s coming down the pike,” Thomas said. [email protected]