Senate Rejects Bulk of House Reg Relief Proffer; Senate Bill Gives CUs Parity

WASHINGTON — Prior to the House adjourning for the August recess July 29, the Senate agreed to just one of the provisions in the financial services regulatory relief proffer sent over by the House. The House proffer included a number of provisions requested to be inserted into the Senate bill that contains significantly fewer items than the House version (H.R. 3505). S. 2856 includes the change in the definition of net worth for the merger accounting change fix; extension of loan maturities from 12 to 15 years; permitting check cashing and wire transfers to nonmembers within the field of membership; and allowing low- and no-cost land leases on military bases. The bill would also permit the Federal Reserve to decide whether or not to pay interest on Reg D reserves it holds. (See sidebar.) The proffer would also have authorized privately insured credit unions to join the Federal Home Loan Bank System and clarified disclosure rules for these credit unions. Additionally, for thrifts, the House proposed eliminating the small business lending cap, which raised strong objections from CUNA. President and CEO Dan Mica wrote a letter stating that if this provision were accepted without parity for credit unions, the trade association would oppose the entire bill. “We had a sense that [House Financial Services Committee Chairman Mike] Oxley was not fully involved in that proffer and once he learned all that was in it, he was concerned,” CUNA Vice President for Legislative Affairs Dean Sagar explained. As for the elimination of the thrift small business lending cap, he added, “I’m pretty certain it is off [the table].” What the Senate did accept were some fair debt collection items backed by consumer groups. The House has a few weeks to work on negotiations as it is in recess until Sept. 5. While the Senate bill is not as expansive as the House bill, there are still good items in there for credit unions to push for legislation this year, according to Sagar. The check cashing and wire transfers for anyone within the credit union’s field of membership is helpful to compensate for some people’s fear of the mainstream financial services. Credit unions currently can only provide these services to members, but the service to nonmembers could also serve as a gateway to bringing the unbanked into the financial mainstream and away from predatory and payday lenders. Despite the expansion of power here, the banks have been relatively quiet about it. “I think they realized they had lost it,” Sagar said. Not only are these the people banks have abandoned, he pointed out, but also the House has already passed stand-alone legislation to achieve this and Senate Banking Committee Ranking Member Paul Sarbanes (D-Md.) had introduced the same bill. The credit union provision that would change the definition of net worth in the Federal Credit Union Act would avoid unintended consequences of Financial Accounting Standards Board merger accounting changes that could put a damper on credit union mergers. “It’s good to have that even without the deadline looming,” Sagar said referring to FASB’s announced intention to delay the effective date of the changes another year. The loan maturities extension is particularly important for student lending and refinancing of student loans given the rising cost in education these days, as well as business lending. Additionally, the lease of land for credit union branches on military bases was a useful clarification. Even though it does not include as many goodies for credit unions and others as the House bill, the Senate bill could prove symbolic for credit unions. “The Senate regulatory relief bill was significant…What we saw in the Senate bill was an effort to treat credit unions equally,” Sagar emphasized. It places credit unions on equal footing with their for-profit brethren by providing an equal number of provisions for banks, thrifts and credit unions with approximately the same amount of relief. “We were finally given parity and we’re going to keep it,” he added. Credit unions were not “an afterthought.” They have certainly made their voices–or at least e-mail addresses–known on Capitol Hill after CUNA reported more than 10,000 communications sent to federal legislators recently on the bill. Sagar said he does expect regulatory relief to make it onto the books this year. “They’re tired of passing bills and having it languish in the Senate,” Sagar, a former Financial Services staff member for the minority, observed. He also said that if it does get signed into law this year, it does not hurt the chances of other regulatory relief efforts, including the Credit Union Regulatory Improvements Act (H.R. 3579)–a hearing for which is not likely to materialize this congressional session. But now that the Senate has dealt with the issues, it will be more familiar with them when they come up again. However, regulatory relief will not be as high a priority if the Democrats win back the House, Sagar said. Both of the likely next Financial Services chairmen Barney Frank (D-Mass.) and Spencer Bachus (R-Ala.) are more open to smaller bills over Oxley’s strategy of pushing through larger packages. He also said that CUNA is not expecting to get a provision permitting all types of credit unions to be able to adopt underserved areas onto the bill. “We’ve drafted something and talked to some people about it in case the opportunity arose,” Sagar said. If anything were to happen on that it would more likely occur during the anticipated lame duck session. He also noted that there is a lot of interest in reformulating CURIA for next Congress.